DuPont (DD) saw its profits jump in the fourth quarter of 2014, aided by its strategic measures including portfolio optimization, productivity improvements and cost-savings from operational redesign initiatives. The company saw higher volumes and margins across most of its reporting segments in the quarter amid a challenging operating backdrop including continued weakness in agriculture economy and headwinds from a stronger dollar.
The Delaware-based chemical giant posted adjusted earnings of 71 cents per share in the reported quarter that were higher than 59 cents per share registered a year ago. It was in line with the Zacks Consensus Estimate. Adjusted earnings exclude one-time items including charges associated with restructuring and the separation of the company's performance chemicals business.
Including one-time items, DuPont recorded earnings from continuing operations of 73 cents per share in the quarter versus 19 cents per share a year ago. Consolidated net income, as reported, jumped nearly four-fold year over year to $683 million or 74 cents per share from $185 million or 20 cents per share in the prior-year quarter.
Operating earnings for DuPont’s agriculture business jumped 47% year over year in the quarter. The electronics unit, which supplies materials for solar panels in the photovoltaic industry, saw a 4% rise in operating earnings in the quarter. The industrial biosciences business recorded a 23% rise while performance materials posted a 13% gain. Operating earnings edged up 1% in the nutrition and health unit while safety and protection saw flat results.
Operating profit from DuPont’s performance chemicals division (includes the paint pigment business) slipped 1% in the quarter. The company is spinning off the unit as it is gradually shifting its focus to high growth, less cyclical businesses. Separation of the business remains on track.
For the full year, adjusted earnings were $4.01 per share, also matching the Zacks Consensus Estimate.
DuPont's net sales for the reported quarter dipped 5% year over year to $7,378 million, impacted by portfolio changes and unfavourable currency impact. Whiles volumes rose across all business units barring electronics and communications, sales fell across the board. Sales also trailed the Zacks Consensus Estimate of $7,821 million.
For 2014, sales declined 3% year over year to $34.7 billion, missing the Zacks Consensus Estimate of $35.5 billion
DuPont, which is facing increased pressure from Nelson Peltz’s Trian Fund Management lately, divulged its earnings outlook for 2015 that came below analysts’ expectations. Its shares were down 2.9% in pre-market trading.
Segment Analysis
Agriculture: Revenues fell 4% year over year to around $1.7 billion in the reported quarter. Earnings jumped as lower costs, gains from the sale of businesses and the timing of seed shipments more than offset declined corn seed sales in Brazil and an unfavourable currency impact.
Electronics & Communications: Sales were down 11% to $573 million in the quarter. Operating earnings for the division rose on lower costs and productivity improvements.
Industrial Biosciences: Sales inched down 1% to $322 million. Earnings rose on better product mix, reduced costs and productivity improvements.
Nutrition & Health: Sales fell 3% to $843 million. Operating earnings rose modestly as higher volumes, a gain on termination of a distribution deal and lower costs were offset by negative currency impact and unfavourable product mix.
Performance Chemicals: Sales were down 6% to around $1.6 billion. Operating earnings fell on lower pricing for titanium dioxide and fluoroproducts.
Performance Materials: Sales were down 4% to roughly $1.5 billion. Operating earnings rose on higher ethylene and performance polymer volumes, productivity gains and lower costs.
Safety & Protection: Sales fell 3% to $943 million. Operating earnings were flat as reduced pricing and adverse impact of currency and portfolio changes were offset by higher demand for Nomex thermal resistant products, Kevlar high strength materials and Tyvek protective material as well as lower costs.
Financials
DuPont exited 2014 with cash and cash equivalents of roughly $6.9 billion, down around 23% year over year. Total borrowings and capital lease obligations fell roughly 14% year over year to around $10.7 billion. DuPont returned $2 billion to its shareholders in 2014 in the form of share repurchases.
Outlook
DuPont envisions adjusted earnings for 2015 in the band of $4.00 to $4.20 per share including a roughly 60 cents per share unfavorable currency impact stemming from a stronger dollar. The currency impact is expected to be mostly felt in the first half of this year. Projected earnings are lower than the current corresponding Zacks Consensus Estimate of $4.51.
DuPont has raised its cost reduction commitment from its operational redesign actions by around $300 million to at least $1.3 billion of cumulative expected savings by 2017. Its redesign initiatives are also expected to deliver savings of around 35 cents per share in 2015.
DuPont also sees annual savings of around $1 billion by end-2015, considerably ahead of its earlier communicated schedule. The company also said that it will repurchase shares worth around $4 billion utilizing the one-time dividend proceeds from the spin off of its performance chemicals unit over the 12 to 18 months following the completion of the transaction.
DuPont’s results put a spotlight on demand trends for chemical products across an array of industries. Its compatriot Dow Chemical (DOW) will report ahead of the opening bell on Jan 29.
Among other major names in the chemicals space, Eastman Chemical (EMN) will report after the close on Jan 29 while Air Products (APD) will release its first-quarter fiscal 2015 numbers before the bell on the same day.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment