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First Quarter 2007 Business Segment Performance

Published on 2007-04-26. Author : SpecialChem

"We're off to a solid start in 2007," said DuPont Chairman and Chief Executive Officer Charles O. Holliday, Jr. "We continue to improve operating margin and return on capital as we deliver on our growth strategies and productivity initiatives. Our results highlight the benefits of our global presence and diversified businesses."

Global Consolidated Net Income and Sales

Net income for the first quarter of 2007 was $945 million, or $1.01 per share including a net charge of $0.06 per share to increase an existing litigation reserve. First quarter 2006 net income was $817 million, or $0.88 per share including a net charge of $0.05 per share for significant items. The increase in first quarter net income reflected 6 percent revenue growth driven by significantly higher seed sales, increased pharmaceuticals income, fixed cost productivity gains and a favorable currency impact. See Schedule D for a summary of first quarter 2007 earnings and comparisons to prior year.

Consolidated net sales increased $451 million, or 6 percent, to $7.8 billion in the first quarter, reflecting 2 percent higher local prices, a 2 percent increase in volume, and a 2 percent currency benefit.

Business Segment Performance

Segment pre-tax operating income (PTOI) for first quarter of 2007 increased 20 percent to $1.6 billion from $1.3 billion in the first quarter of 2006. Excluding significant items in both years, segment PTOI rose 13 percent to $1.6 billion in the quarter from $1.4 billion in the prioryear quarter.

Agriculture & Nutrition

  • PTOI increased 9 percent to $651 million from $597 million due to strong seed sales partially offset by higher production costs. The first quarter of 2006 included a $28 million gain on the sale of a technology license. Excluding this gain, PTOI grew 14 percent.
  • Sales grew 13 percent to $2.5 billion primarily due to a strong Pioneer seed business. Volumes grew 5 percent and USD selling prices increased 8 percent. Significant global gains in seed corn and cereals herbicides more than offset the impact of lower demand for cotton and soybean products in North America.

Coatings & Color Technologies

  • PTOI was $194 million versus $21 million in the prior year which included a $135 million restructuring charge. Excluding the prior year restructuring charge, PTOI grew 24 percent as increased volume and cost productivity gains offset higher ingredient costs. PTOI in 2007 also included $16 million of hurricane-related insurance recoveries.
  • First quarter 2007 sales of $1.6 billion grew 5 percent reflecting 3 percent higher USD selling prices and 2 percent volume gains. Higher volume reflects post-hurricane share recovery in titanium dioxide and increased sales of refinish paint in Europe, net of lower volumes in automotive OEM and from divested businesses.

Electronic & Communication Technologies

  • PTOI declined to $124 million in the first quarter from $160 million in the prior year as improvements in packaging graphics and inks did not offset lower refrigerants pricing and lower sales in certain electronic materials markets.
  • Sales grew 4 percent to $920 million as volume growth in fluoroproducts and imaging were partially offset by lower refrigerant product pricing and softness in certain cell phone supply chains.

Performance Materials

  • PTOI was $150 million in the quarter, including a net $52 million charge related to existing litigation. Excluding this charge, PTOI increased 30 percent to $202 million from $155 million in the prior year, reflecting improvement in all businesses. Packaging and industrial polymers produced particularly strong results.
  • Sales increased 3 percent to $1.6 billion reflecting price gains and favorable currency, partially offset by lower volume. Volume gains in Europe were offset by lower demand in Asia Pacific and North America.

Safety & Protection

  • PTOI increased 9 percent to $291 million from $268 million in last year's first quarter as strong earnings growth in aramid products and cost productivity gains were partially offset by lower volumes in U.S. housing.
  • First quarter 2007 sales of $1.4 billion were up 1 percent versus 2006 reflecting a 3 percent increase in USD selling prices partially offset by 2 percent lower volumes, largely from decreased sales in U.S. housing.

Outlook

DuPont reaffirms its outlook for 2007 full-year earnings per share of about $3.15, excluding a $0.06 per share charge for significant items. The company continues to expect modest volume gains as growth outside the United States and strong agricultural seed markets outweigh lower demand from the U.S. housing and automotive markets. The company's outlook for the remainder of 2007 assumes that energy and ingredient costs will continue to be about equal to 2006.

"We're right on track. We are well positioned in global industrial and agricultural markets and have an exciting pipeline of new products that customers value," Holliday said. "We remain intensely focused on accelerating returns on our innovation and increasing cost and capital productivity."

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 E.

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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