DuPont Reaffirms Outlook

Ei Dupont De Nemours Co.(DuPont) (DD) recently announced that it expects to generate about 10% growth in the top-line during 2009-2012. The chemical giant also plans to capture $1 billion in fixed cost productivity and $1 billion in working capital productivity gains during the 2010-2012. On average, DuPont expects to deliver almost 20% year-over-year growth in earnings per share between 2009 and 2012. Despite an expected decline in pharmaceutical royalties after expiry of patents in 2010, DuPont expects to grow earnings between $2.10 and $2.40 per share in the year. The company has also reaffirmed its full-year 2009 earnings outlook of $1.95 to $2.05 per share, excluding significant items, which are estimated to be $0.15 per share for full-year 2009 or $1.80 to $1.90 per share on a reported basis. It had previously forecasted earnings of $1.70 to $2.10 a share. DuPont expects improving demand in key markets, as well as lower raw material costs. For the full year 2009, the Zacks Consensus Estimate is pegged at $2.10, slightly higher than management's guidance. For the fourth quarter of the current year, Zacks is expecting DuPont to flash earnings of 41 cents. DuPont reported third-quarter 2009 earnings of 45 cents, beating the Zacks Consensus Estimate of 33 cents, helped by significant cost cuts and lower raw material, energy and freight expenses. In the Agriculture & Nutrition (Pioneer Hi-Bred, Crop Protection, Nutrition & Health) business, DuPont expects to generate more than $2 billion in top-line growth through 2012 by growing North America corn and soya volumes and market share. The company expects margins to improve in the Electronics & Communications business. The company anticipates top-line growth by leveraging an established leadership position in photovoltaics and displays; introducing key products and capitalizing on recovery opportunities and providing operational discipline with a lean business structure. In the Performance Coatings business, DuPont plans to restore pre-tax operating margins to low double digits by 2012 by delivering $300 million in fixed and variable cost productivity, while expanding and leveraging its leadership in refinish products and growing the portfolio in emerging markets. For Performance Materials (Performance Polymers and Packaging & Industrial Polymers) business, the company plans to focus on emerging markets by delivering lightweight and renewably-sourced materials to meet escalating global demands and continuing intense focus on productivity. In the Safety & Protection (Protection Technologies, Building Innovations, Safety Resources) segment, DuPont expects to generate 12%-16% annual revenue growth by launching new science-based products, including lighter weight and next-generation advanced materials. In the Performance Chemicals (Chemicals & Fluoroproducts, Titanium Technologies) business, DuPont will focus on cost productivity improvement; accelerating globalization to capture emerging markets growth. The company has merged two businesses in this segment (DuPont Chemical Solutions Enterprise and DuPont Fluoroproducts) into a single powerhouse unit named DuPont Chemicals & Fluoroproducts - accelerating growth by expanding global market access. The merger further streamlines the company from 14 to 13 businesses. Cost cuts have boosted DuPont's third-quarter pretax earnings by about $300 million, bringing cost reductions year-to-date to $900 million. The company's full-year goal is $1 billion. Raw material, energy and freight costs were 12% lower than the previous year levels, and DuPont expects these costs for full year 2009 to be about 5% to 6 % lower than 2008. All major chemical makers, including Dow Chemical Company (DOW), are focusing on cutting expenses. Dow has cut down on more than $375 million of expenses in the first six months of 2009 and expects synergies of $1.3 billion in the year. DuPont is currently the world's second-largest chemical company in terms of market capitalization, and the fourth in terms of revenues. We maintain our Neutral recommendation on DuPont.

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