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DuPont Reports Q3 - Coatings Flat

Published on 2003-10-23. Author : SpecialChem


WILMINGTON, Del., October 22, 2003 - :


Third quarter earnings before special items were $.13 per share, compared to $.40 per share before special items in the third quarter of 2002.

Current quarter earnings include non-cash charges totaling $1.04 per share taken in connection with the anticipated separation of INVISTA, formerly DuPont Textiles & Interiors (DTI).

Reported third quarter 2003 earnings per share were a loss of $.88, compared to earnings of $.47 per share in the prior year.

Consolidated net sales were $6.1 billion, up 12 percent compared to the prior year.

Worldwide segment sales volumes increased 4 percent.

Higher raw material costs reduced earnings by $200 million after-tax, or $.20 per share, while non-cash pension and stock option expense reduced earnings by an additional $.10 per share.

"Our businesses increased volume and significantly improved the top line performance of the company in a still challenging and difficult economy," said DuPont Chairman and Chief Executive Officer Charles O. Holliday, Jr. "We held, and in some cases improved, our competitive position by focusing on productivity and meeting the needs of our customers. We are confident that we will meet our growth objectives as the economy improves," Holliday said.

Global Consolidated Net Sales and Net Income

Third quarter consolidated net sales totaled $6.1 billion compared to $5.5 billion in third quarter 2002, up 12 percent. Third quarter net income before cumulative effect of changes in accounting principles was a loss of $873 million, or $.88 per share, including non-cash after-tax charges totaling $1,039 million or $1.04 per share, taken in connection with the anticipated separation of INVISTA. This compares to third quarter 2002 earnings of $469 million or $.47 per share. In addition to the INVISTA separation-related charges, the decrease in income reflects higher raw material costs, higher taxes, increased non-cash pension expense and a reduction in benefits from other special items versus the third quarter 2002 as shown below.

Business Segment Performance

Comments on individual segment sales and after-tax operating income (ATOI) for the third quarter 2003 compared with the third quarter 2002 are summarized below. All segments had a benefit to sales ranging from 2-5 percent resulting from the currency effect of the weaker dollar. Additional segment information is available to investors and the public via the earnings data section of the Investor Center on dupont.com.

Agriculture & Nutrition - Third quarter sales of $0.8 billion were 32 percent higher reflecting 4 percent higher U.S. dollar selling prices, 10 percent higher volume, and an 18 percent benefit attributable to additional sales from The Solae Company, a newly formed venture with Bunge Limited. ATOI was a loss of $142 million versus a loss of $91 million. After-tax losses, which are typical in the seasonally low third quarter, increased versus last year principally because of a lower effective tax rate on seasonal losses, higher non-cash pension expense, and higher raw material costs.

Coatings & Color Technologies - Sales of $1.4 billion were up 8 percent principally reflecting 7 percent higher U.S. dollar selling prices and 2 percent added through an acquisition, partly offset by 1 percent lower volume. ATOI declined 29 percent to $120 million, as the benefit of higher revenue was more than offset by less favorable product and geographic mix in coatings and non-cash pension expense across the segment.

Electronic & Communication Technologies - Sales of $0.7 billion were up 13 percent, reflecting 11 percent higher volumes, 3 percent lower prices and 5 percent acquisition-related sales growth. ATOI was $32 million versus $67 million last year. Earnings declined as a result of pricing pressure in Fluoropolymers; start-up costs for Displays; and non-cash pension expense, which more than offset the benefits of higher revenue. Commercialization of Organic Light Emitting Diode (OLED) displays has been delayed due to technical difficulties with start-up.

Performance Materials - Sales of $1.3 billion were up 4 percent reflecting 3 percent higher volume and 2 percent higher U.S. dollar selling prices partly offset by a 1 percent reduction due to the divestiture of the DuPont™ Clysar® shrink film business. ATOI was $55 million compared to $181 million last year. In addition to significantly higher raw material and non-cash pension costs, the earnings decline reflects the absence of a $51 million gain on the sale of the Clysar® business in the third quarter 2002.

Pharmaceuticals - ATOI was $100 million versus $72 million last year. The current quarter ATOI includes a $15 million one-time benefit from a favorable arbitration ruling.

Safety & Protection - Sales of $1.0 billion were up 17 percent due to 2 percent higher prices, 9 percent higher volumes, and 6 percent from acquisitions. Increased revenue was largely offset by higher non-cash pension expense and raw material costs. ATOI declined 1 percent due to absence of a $3 million restructuring benefit in third quarter 2002.

Textiles & Interiors - Sales were $1.7 billion, up 3 percent excluding the impact of the change in management reporting for inter- segment transfers. This reflects 2 percent higher volume and 1 percent higher U.S. dollar selling prices. ATOI was a loss of $1,047 million versus earnings of $60 million last year. The earnings decline principally reflects non-cash charges totaling $1,039 million associated with the anticipated separation of INVISTA, explained in more detail below, significantly higher raw material and non-cash pension costs.

INVISTA Impairment Charges In conjunction with the anticipated separation of INVISTA, and in light of the previously announced negotiations for the sale of INVISTA, DuPont recorded an after-tax non-cash impairment charge of $987 million to write-down to estimated fair value various manufacturing and intangible assets, including goodwill, as well as investments in certain joint ventures. In addition, a non-cash after- tax charge of $52 million was recorded for pension curtailment losses. Additional charges and credits may be recorded in connection with the separation which cannot be reasonably estimated at this time.

Earnings Outlook Macroeconomic indicators, as well as the company's September volumes, suggest that the industrial sector is likely in the early stages of a recovery. Given this expectation, the company reaffirms the full year 2003 outlook which it provided on September 17 of approximately $1.60 earnings per share before special items. Year-to-date, net special items total losses of $1.01 per share. Thus, the company's outlook for the full year 2003, including special items, is approximately $0.59. This excludes unknown special items that could occur in the fourth quarter.

Source: E.I. DuPont de Nemours and Company, Inc.

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