DuPont to cut 1,500 jobs after Q3 profit slide
By Randall Chase, AP
October 25, 2012, 12:10 am TWN
DOVER, Delaware--The DuPont Co. said Tuesday that it will cut about 1,500 jobs and take other steps to increase competitiveness after weak demand for a key industrial pigment and uncertainty in the solar panel market led to a sharp drop in third-quarter earnings.
The chemical company, based in Wilmington, Delaware, reported net income of US$10 million, or a penny per share, compared with US$452 million, or 48 cents per share, for the same period last year. Excluding one-time items, DuPont earned 44 cents per share, compared with 69 cents per share for last year's third quarter. Revenue from continuing operations totaled about US$7.4 billion, down 9 percent from US$8.1 billion.
The results fell short of analysts' estimate of 46 cents per share, according to FactSet. DuPont shares were down nearly 9 percent in afternoon trading amid a broad market decline.
CEO Ellen Kullman attributed the disappointing results to weaker-than-expected demand for titanium dioxide — a whitening pigment used in products ranging from paint and plastics to toothpaste — and overcapacity and uncertainty in the market for photovoltaic solar energy products.
"I view that as two very specific issues," Kullman said. She noted that volumes were up by 3 percent year-over-year, excluding the business units that produce titanium dioxide and solar materials.
In the meantime, DuPont is working on a restructuring plan that Kullman said will deliver pretax cost savings of about US$450 million. It includes eliminating some US$230 million in residual costs related to the divestiture of its performance coatings unit and finding US$220 million in savings in response to weak macroeconomic conditions.
Kullman said the restructuring includes eliminating about 1,500 positions globally over the next 12 to 18 months. The cuts involve streamlining headquarters and corporate staffs that supported the performance coatings unit, which produces automotive and industrial paints. It's being sold for US$4.9 billion to The Carlyle Group, a private equity firm.
Beginning with the third quarter, DuPont classified the performance coatings business as discontinued operations and excluded it from continuing operations results on a retroactive basis. The company reported a loss from continuing operations of US$40 million, or 5 cents a share for the quarter, compared to a gain of US$376 million, or 39 cents per share, in the prior year. Excluding one-time items, third-quarter earnings from continuing operations totaled US$302 million, or 32 cents per share, down from US$579 million, or 60 cents per share, last year.
DuPont said it remains on track to achieve its full-year 2012 productivity targets for both fixed costs and working capital. It expects 2012 earnings from continuing operations, excluding significant items, to range from US$3.25 to US$3.30 per share, compared to prior-year earnings of US$3.55 per share on a comparable basis.
Volumes were down for the quarter in all regions, except Latin America, led by a 10-percent decline in the Asia-Pacific region. Volume declines and currency effects led to sales declines worldwide, with sales dropping 15 percent in Asia-Pacific and the Europe, Middle East and Africa region.
Sales in the electronics and communications business, which includes solar products, were down 28 percent, with volume declining 20 percent. Kullman said trade sanctions in the solar panel market, including U.S. tariffs on Chinese-made solar panels and an antidumping investigation of Chinese manufacturers by European regulators, have created uncertainty among suppliers and customers.
The performance chemicals unit, which posted record titanium dioxide volumes in last year's third quarter, saw an 18-percent decline in volume and 19-percent drop in sales.