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DuPont delivers strong earnings growth in third quarter 2007

Published on 2007-10-25. Author : SpecialChem

"DuPont generated solid operating leverage and 20 percent earnings per share growth in the third quarter," said Charles O. Holliday, Jr., DuPont chairman and chief executive officer. "We increased sales outside the United States 11 percent and grew worldwide Agriculture & Nutrition segment sales 21 percent. Our performance reflects the concentrated actions of our employees to execute our growth strategies and productivity initiatives, which overcame the challenges of higher cost ingredients and lower U.S. demand."

Highlights

  • Third quarter 2007 earnings per share were $0.56 versus $0.52 in the third quarter 2006. Excluding significant items, earnings per share increased 20 percent to $0.59 in the current quarter from $0.49 in the third quarter 2006.

  • Sales rose 6 percent to $6.7 billion. Excluding portfolio changes, sales grew 7 percent, reflecting 3 percent volume growth, 2 percent higher local selling prices and 2 percent currency benefit.

  • Strong revenue growth in all segments outside the United States more than offset lower U.S. demand.

  • Fixed costs as a percentage of sales improved 90 basis points from the prior-year quarter.

  • Segment pre-tax operating income margin increased to 14.2 percent from 13.3 percent in the prior-year quarter, excluding significant items.

  • DuPont now expects full year 2007 earnings to be $3.15 to $3.20 per share versus its previous outlook of about $3.15 per share, excluding significant items.

Global Consolidated Sales

Consolidated net sales increased 6 percent to $6.7 billion in the quarter. Excluding portfolio changes, sales grew 7 percent and sales generated outside the United States were 64 percent of total consolidated net sales. Volume rose 6 percent outside the United States, with significant growth in Latin America, led by the Agriculture & Nutrition segment.

Net Income and Earnings Per Share

Net income for the third quarter 2007 was $526 million, or $0.56 per share, including a $0.03 per share litigation charge. Third quarter 2006 net income was $485 million, or $0.52 per share, including a $0.03 per share benefit for insurance recoveries. The $0.03 per share variance in fixed costs, includes about $0.04 per share from growth investments to accelerate biotech research and development, expand global sales coverage in seeds, and increase future production capacity, partially offset by a $0.01 per share benefit from cost reduction projects in excess of inflation. The $0.03 per share variance in other, noted above, is principally related to a benefit of $0.02 in the Agriculture & Nutrition segment resulting from a contract termination payment received in 2007.

Business Segment Performance

Segment pre-tax operating income (PTOI) for the third quarter 2007 grew 2 percent to $916 million from $900 million in the third quarter 2006. Excluding significant items from the prior-year third quarter, segment PTOI increased 12 percent from $850 million.

Agriculture & Nutrition

  • Sales grew 21 percent to $1.1 billion due to strong performance in international seeds. Volume grew 11 percent and USD selling prices increased 10 percent. Significant global gains in seed corn, soybeans and canola, as well as strong fungicide sales in Latin America and Europe, more than offset weak chemical sales in North America.

  • PTOI improved 38 percent to a seasonal loss of $96 million. Excluding $25 million of income resulting from a contract termination payment received in 2007, PTOI improved 21 percent with strong sales in Latin America and Europe and restructuring benefits offset by reinvestments in the company's seed business.

Coatings & Color Technologies

  • Sales increased 2 percent to $1.6 billion. Excluding the impact of a divested business, sales grew 3 percent. Titanium dioxide and coatings sales growth in Asia Pacific and Latin America was largely offset by continued weak U.S markets.

  • PTOI was $204 million, compared with $281 million in the prior-year quarter. Excluding a $43 million insurance recovery in the prior year, PTOI declined 14 percent. Improved earnings in automotive OEM coatings were more than offset by lower sales into the U.S. markets.

Electronic & Communication Technologies

  • Sales grew 5 percent to $935 million primarily due to volume growth in fluoroproducts and packaging graphics and pass-through of higher metals prices. Demand for electronic materials, particularly for the cell phone and semiconductor supply chains, improved in the latter part of the quarter.

  • PTOI increased 5 percent to $138 million reflecting revenue growth and fixed cost control, partially offset by higher variable costs. Earnings growth was led by packaging graphics.

Performance Materials

  • Sales grew 6 percent to $1.7 billion. Excluding a portfolio change, sales grew 5 percent primarily due to higher USD selling prices. These gains were partially offset by lower volume, principally related to the automotive market, effects of Hurricane Humberto at the company's Orange, Texas, facility and ingredient supply constraints. Sales were strong in Europe and Latin America.

  • PTOI increased 16 percent to $196 million reflecting broad-based strength across the segment's primary product lines.

Safety & Protection

  • Sales grew 2 percent to $1.4 billion. Excluding a portfolio change, sales grew 6 percent reflecting strong sales in the Kevlar®, Nomex®, Tyvek® and specialty chemical products in spite of a weak U.S. residential housing market.

  • PTOI was $313 million, compared to $293 million in the prior-year quarter. Excluding a $7 million insurance recovery in the prior year, PTOI increased 9 percent reflecting the strength in Kevlar® and Nomex® product lines and solid demand for Tyvek® in multiple markets.

Share Repurchase Program Update

In the third quarter 2007, the company repurchased 22.9 million shares of its stock for $1.1 billion as the final step in completing the $5 billion share repurchase program announced in October 200. Under this program, the company repurchased 112.8 million shares, or about 11 percent of the diluted shares outstanding in October 2005.

Outlook

DuPont updated its outlook for full-year 2007 earnings per share from about $3.15 to a range of $3.15 to $3.20, excluding the $0.09 per share charge for significant items in the year-to-date results. For the fourth quarter 2007, the company expects strong sales growth outside the United States will continue to exceed the effect of lower demand from U.S. housing and auto markets. The company anticipates PTOI to grow substantially from last year's fourth quarter, reflecting continued execution of its growth strategies and productivity initiatives partially offset by higher ingredient costs. Net income growth is expected to be tempered by a much higher base tax rate in the fourth quarter versus the prior year.

DuPont's 2008 outlook is positive. The company expects strong revenue growth in emerging markets and anticipates significant earnings growth in its Agriculture & Nutrition segment. New product acceleration efforts and continued cost and capital productivity gains across the company are expected to be additional contributing factors. This positive outlook is moderated by potentially lower demand from U.S. housing and automotive markets and the uncertainty of ingredient costs. The company's current outlook is to grow 2008 earnings per share about 5 to 10 percent from its anticipated 2007 earnings of $3.15 to $3.20 per share before significant items. The company generated 11 percent earnings per share growth before significant items in the first nine months of the year.

"This performance places us firmly on track to achieve our 2007 outlook and sets the stage for continued growth in 2008," Holliday said. "While uncertainties remain in the global economy, we are confident in our ability to deliver solid earnings growth next year. "Looking beyond 2008, DuPont is well-positioned to capitalize on exciting growth opportunities in markets such as energy efficiency, agriculture productivity, renewable energy, and safety and security," Holliday said. "We have aligned our research and development investments with these growth opportunities and are positioned to deliver attractive returns in these fast growing markets with a strong pipeline of new technologies and products."

Use of Non-GAAP Measures

Management believes that measures of income excluding significant items ("non-GAAP" information) are meaningful to investors because they provide insight with respect to ongoing operating results of the company. Such measurements are not recognized in accordance with generally accepted accounting principles (GAAP) and should not be viewed as an alternative to GAAP measures of performance. Reconciliations of non-GAAP measures to GAAP are provided in Schedule D.

DuPont is a science-based products and services company. Founded in 1802, DuPont puts science to work by creating sustainable solutions essential to a better, safer, healthier life for people everywhere. Operating in more than 70 countries, DuPont offers a wide range of innovative products and services for markets including agriculture and food; building and construction; communications; and transportation.

Forward-Looking Statements: This news release contains forward-looking statements based on management's current expectations, estimates and projections. All statements that address expectations or projections about the future, including statements about the company's strategy for growth, product development, market position, expected expenditures and financial results are forward-looking statements. Some of the forward-looking statements may be identified by words like "expects," "anticipates," "plans," "intends," "projects," "indicates," and similar expressions. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, including those discussed more fully elsewhere in this release and in documents filed with the Securities and Exchange Commission by DuPont, particularly its latest annual report on Form 10-K and quarterly report on Form 10-Q, as well as others, could cause results to differ materially from those stated. These factors include, but are not limited to changes in the laws, regulations, policies and economic conditions, including inflation, interest and foreign currency exchange rates, of countries in which the company does business; competitive pressures; successful integration of structural changes, including restructuring plans, acquisitions, divestitures and alliances; cost of raw materials, research and development of new products, including regulatory approval and market acceptance; seasonality of sales of agricultural products; and severe weather events that cause business interruptions, including plant and power outages, or disruptions in supplier and customer operations.

Source: DuPont


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