DuPont reports $441M 4Q profits, boosts 2010 outlook as sales rebound

DuPont posts 4Q profit on strong Asia demand

DOVER, Del. — Improved sales across its global markets and lower raw material and energy costs led to a fourth-quarter turnaround for DuPont, which forecast continued improvement in 2010.

The chemicals company on Tuesday reported net income of $441 million, or 48 cents per share, in the three months that ended Dec. 31 versus a loss of $629 million, or 70 cents per share, a year earlier.

Earnings excluding significant items was $402 million, or 44 cents a share, versus a loss of $249 million or 28 cents per share in the prior year. The latest results topped analysts expectations for profit of 41 cents per share.

DuPont shares closed down 2 cents at $32.80 in trading Tuesday.

Full year earnings were $1.76 billion, or $1.92 per share, compared to $2 billion, or $2.20 per share, in 2008.

DuPont, which is based in Wilmington, increased its full-year 2010 earnings guidance to a range of $2.15 to $2.45 per share, up from $2.10 to $2.40 per share. Chief financial officer Nick Fanandakis said the change reflects lower than estimated pension expenses, partially offset by costs incurred from the devaluation of Venezuela’s currency.

Global sales increased 10 percent in the fourth quarter to $6.4 billion, led by stronger demand for titanium dioxide, electronic materials, seed products and performance polymers. Analysts expected lower revenue of $6.16 billion.

Demand for products such as titanium dioxide, a white pigment used in consumer goods, house paint and automotive coatings, often indicates whether the economy is growing or contracting, particularly in the short term.

“I call it the canary in the mine,” said DuPont chairman and CEO Ellen Kullman. “It’s the one that you hear first.”

Kullman noted that after several years of steep declines, U.S. housing starts appeared to bottom out in 2009 are expected to increase about 30 percent this year.

“This is certainly an encouraging outlook and we’ll be tracking this all year,” she said.

Forecasts of 10 percent growth in global automobile production also bode well for DuPont, Kullman said.

“With the restructuring and productivity actions we took in businesses that serve this market, namely performance coatings and performance polymers, we’re confident in our plans for growth and margin expansion,” she told analysts.

Dan Ortwerth, an analyst with Edward Jones, said DuPont has taken steps in recent years to revitalize itself, such as diversifying in both products and geography, but that it still appears to be a company depending “on the good graces of the economy.”

“I think their results are much more of a reflection of what’s going on with the economy than anything they’re doing themselves,” he said, adding that the automotive industry, a key customer, has “no where to go but up.”

During the quarter, volumes were up in all regions, led by a 34 percent jump in Asia-Pacific markets, where sales topped levels seen before the global recession. Fourth-quarter sales in greater China, which include Taiwan, were up more than 70 percent compared to 2008, and 26 percent compared to the fourth quarter of 2007.

China has indicated that it will curb bank lending in an effort to keep that country’s economy from overheating, a step that some fear could slow a global economic recovery, but Kullman said export increases indicate that economies outside of China are strengthening.

“We see China as being an important part of our global growth, and Asia in general is continuing to strengthen,” she said.

Meanwhile, DuPont’s U.S. sales declined 2 percent in the fourth-quarter, with lower prices partly offset by a volume increase of 4 percent. Overseas results also reflected lower local prices, as well as a 4 percent positive impact from currency exchange rates.

Volumes increased for four of the company’s business units but were down 2 percent in performance coatings and 9 percent in the safety and protection segment.

DuPont said performance coating results reflected continued industrial market weakness in developed regions, partly offset by higher demand from automakers. The safety and protection unit saw sales in automotive and consumer markets rebound while demand in industrial and law enforcement markets continued to lag.

The electronics and communications unit posted a 22 percent sales gain on 13 percent higher volume. Sales increased 20 percent for performance materials, led by 24 percent higher volume.

DuPont’s agriculture and nutrition unit, which has been of its few bright spots during the economic downturn, saw sales increase 12 percent to $1.4 billion, reflecting 25 percent higher seed volume and 5 percent higher crop protection product volumes.

Kullman said DuPont cut fixed costs by more than $1 billion last year and remains committed to compound annual growth targets of 10 percent for revenue and 20 percent for earnings through 2012.

“In 2010, we will continue the momentum generated from last year’s aggressive cost-cutting and cash-generating actions,” she said.