DuPont (DD) reported an increase in profit to $ 1.43 billion or $ 1.52 per share in the first quarter of 2011 from $ 1.13 billion or $ 1.24 per share in the same quarter of 2010. The profit exceeded the Zacks Consensus Estimate by 15 cents per share.
The improvement in profit was attributable to higher sales in the developing markets and strong volumes, especially in Safety & Protection, Agriculture & Nutrition and Electronics & Communications segments.
Sales in the quarter grew 18% to $ 10.0 billion, up from the Zacks Consensus Estimate of $ 9.3 billion. The increase in sales reflected a 9% rise in sales volume, 8% increase in local price and 1% net increase from portfolio changes. Sales in the developing markets rose 30%.
Segment Details
Agriculture & Nutrition: Sales rose 18% to $ 3.8 billion with a 13% growth in volumes, 4% rise in selling prices and a 1% increase from a portfolio change. Growth in seed sales reflects strong performance by both Pioneer brand and PROaccess products in North America and early start to the European season. Growth in sales of crop protection products reflects an early start to the northern hemisphere season. Pre-tax operating income (PTOI) went up 21% to $ 1.1 billion on higher volume.
Electronics & Communications: Sales swelled 29% to $ 811 million, with a 20% increase in selling prices, primarily considering the hightened metal prices, and a 9% rise in volume. The strong volume was driven by strong demand for photovoltaics and consumer electronics in Asia Pacific. PTOI increased by 6 million to $ 111 million, reflecting higher volume.
Performance Chemicals: Sales escalated 27% to $ 1.8 billion, with a 21% rise in selling prices and a 6% increase in volumes. Sales increased in all the regions, especially in the U.S. and Asia Pacific. The rise in selling prices was triggered by the strong global demand for titanium dioxide, refrigerants and fluoroproducts. PTOI more than doubled to $ 394 million from $ 190 million due to higher selling prices and volumes.
Performance Coatings: Sales rose 10% to $ 993 million, reflecting a 6% rise in selling prices and a 4% increase in volume. The increase in sales was attributable to improvement in the global automotive markets due to a significant rise in auto production in North America. Industrial coatings continued to experience strong demand, particularly in the North American heavy-duty truck market. PTOI increased 44% to $ 65 million on strong sales and operating leverage.
Performance Materials: Sales went up 11% to $ 1.7 billion, with a 7% rise in volume, 6% increase in selling prices and a 2% reduction from a portfolio change. The higher volume in the segment resulted from continued improvement in automotive, electronic and packaging markets. PTOI rose 25% to $ 288 million on higher selling prices and volume.
Safety & Protection: Sales grew 22% to $ 1.0 billion, with a 14% rise in volumes and a 7% increase from a portfolio change. The rise in sales was attributable to higher demand for aramid and non-woven products in the industrial markets across all regions. PTOI increased 42% to $ 145 million on higher volume and a portfolio change, partially offset by higher spending to induce growth.
Financial Position
DuPont had cash and cash equivalents of $ 3.8 billion as of March 31, 2011 compared with $ 4.3 billion as of December 31, 2010. Long-term borrowings and capital lease obligations amounted to $ 10.1 billion as of the above date.
In the quarter, DuPont had a net cash outflow of $ 1.5 billion from operating activities, a deterioration from $ 1.1 billion in the prior-year quarter. Meanwhile, capital expenditures increased to $ 323 million from $ 185 million in the year-ago period.
Outlook
DuPont upgraded its full year 2011 earnings outlook to $ 3.65–$ 3.85 per share from its previous forecast of $ 3.45–$ 3.75 per share. This revision was attributable to the company’s strong earnings and execution of growth plans for global economic boom. As previously announced, the planned acquisition of Danisco could reduce earnings by 30 cents–45 cents per share on a reported basis in 2011.
DuPont is a global chemical and life sciences company, employing more than 60,000 people worldwide with a diverse array of product offerings. With over 21,000 patents and 15,000 patent applications worldwide, DuPont sells its products in diverse markets such as transportation, construction, apparel, agriculture, nutrition and health, packaging and electronics markets.
The company currently retains a Zacks #2 Rank on its stock, which translates to a rating of “Buy” for the short term. In addition, we reiterate our “Outperform” recommendation on the stock for the long term.
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