Chemical manufacturer DuPont cites strong business growth, more than doubles 1st-qtr earnings

DuPont 1Q profit more than doubles

DOVER, Del. — After enduring several quarters in the economic doldrums, chemical maker DuPont Co. experienced smoother sailing in the first quarter as a rising economic tide helped generate higher-than-expected profits.

Buoyed by double-digit volume gains in many of its business units, the Wilmington-based company reported earnings of about $1.13 billion, or $1.24 per share, for the quarter ended March 31, more than double the $488 million, or 54 cents per share, in last year’s first quarter.

Higher local selling prices and a positive impact from currency exchange rates also contributed to a 23 percent increase in net sales, which improved from $6.87 billion to $8.48 billion.

Overall sales volume increased by 19 percent, led by a 65 percent volume increase in the Asia-Pacific region.

“It was a very strong quarter, everything kind of clicked for them,” said Oppenheimer analyst Edward Yang.

The results easily beat expectations of analysts surveyed by Thomson Reuters, who predicted a profit of $1.06 cents per share on revenue of just over $8 billion.

CEO Ellen Kullman said the first-quarter results reflect DuPont’s efforts over the past year and a half to cut costs, respond to customer needs and focus on research and development.

“This time last year, we were taking aggressive actions to respond to deteriorating market conditions. … Today, those actions are paying off,” Kullman said.

DuPont increased its full-year earnings guidance to a range of $2.50 to $2.70 per share, up from $2.15 to $2.45 per share. Despite the positive results, the company’s shares closed down $1.55, or 3.8 percent, at $39.40 as worries about debt problems in Greece and Portugal overshadowed upbeat first-quarter earnings reports.

For much of the past year, DuPont has relied on results from its agriculture and nutrition business while units that sold coatings and other products to the automotive and housing markets struggled during the recession. Those businesses saw strong gains in revenue and operating profit during the first quarter, even as the agriculture unit saw volume increase only 1 percent.

Performance among DuPont’s various business segments was led by the electronics and communications unit, which reported a 60 percent increase in volume on strong global demand, led by the Asia-Pacific region, and increased demand for photovoltaics.

DuPont’s performance materials unit saw volume increase by 56 percent as demand improved in the automotive, industrial, consumer and electronic markets.

Yang, the Oppenheimer analyst, said DuPont was getting significant earnings leverage off its volume percentages, even when compared to the relatively dismal results of last year’s first quarter.

“This is a very cyclical company,” he said. “We saw it on the downside, and now we’re seeing it on the upside.”

At the same time, DuPont noted that it expects raw material, energy and freight costs, which were down 2 percent in the quarter, to increase about 5 percent this year. The company also expects currency headwinds as the dollars strengthens in comparison to the troubled Euro.

Dan Ortwerth, an analyst with Edward Jones, cautioned that DuPont’s near-term projections may be overly optimistic and too reliant on improving economic conditions.

“There’s a great risk of a negative surprise with a company like this,” he said.

Ortwerth acknowledged DuPont’s efforts to create value through new technology. On Tuesday, for example, DuPont said sales of photovoltaics should grow by more than 50 percent this year and exceed $1 billion in 2011, a year ahead of schedule.

DuPont also said it expects to gain 1 or 2 points of global market share in crop seeds, but Ortwerth said the company has been offering “cut-rate seeds at cut-rate prices” during a challenging growing season for farmers who have been unwilling to pay premium prices for seeds from rival Monsanto.

“Let’s see what happens when ag and commodity prices start going back up and farmers start needing yield,” he said. “Monsanto products offer better yield.”