QUOTE AND NEWS
MarketWatch  7 hrs ago  Comment 
OncoMed Pharmaceuticals Inc. said early Monday that Chief Medical Officer Jakob Dupont had resigned, effective early 2017, and that he plans a return to Genentech/Roche . The company said it has started a search for its next CMO. Dupont's...
Forbes  Nov 30  Comment 
Looking at options trading activity among components of the Russell 3000 index, there is noteworthy activity today in Intuitive Surgical Inc (NASD: ISRG), where a total volume of 1,766 contracts has been traded thus far today, a contract volume...
Forbes  Nov 28  Comment 
The most recent short interest data has been released for the 11/15/2016 settlement date, which shows a 3,493,966 share decrease in total short interest for DuPont (NYSE: DD), to 9,696,160, a decrease of 26.49% since 10/31/2016. Total short...
Forbes  Nov 21  Comment 
Entrepreneurs are putting the Silicon in Silicon Valley with investments in cosmetic surgery companies. Today, techies are adding everything from RFID chips to remote controls to breast implants. So which Series DD round should you invest in?
Financial Times  Nov 20  Comment 
UK telecoms group’s pension deficit has grown to £9.5bn, second only to DuPont’s
Forbes  Nov 19  Comment 
In Part 1 of this interview series with Sun Valley native Alexis “Lexi” duPont, the Eddie Bauer big mountain free skier discussed her famous extended billionaire family, what scares her, her most exotic ski destination and more. Here, duPont...
newratings.com  Nov 18  Comment 
WILMINGTON (dpa-AFX) - Ahead of the $130 billion merger with Dow, DuPont Co. said it will not pay new contributions to pension plan of employees. The decision will affect more than 13,000 workforces in U.S. The company reportedly will save $550...
NPR  Nov 17  Comment 
Defeat DD is raising awareness for the No. 2 killer of children under five around the world — by getting people to write haikus about poop.




 
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DuPont (NYSE:DD) is a global chemical and technology conglomerate that manufactures materials used in automotive manufacturing, construction, pharmaceuticals, agriculture, and electronics. In 2008, the firm generated $31.8 billion in revenue and $2 billion in net income.[1]

Dupont has also manufactures genetically modified plants used to produce renewable energy such as ethanol and biobutanol. Rising oil prices have led to higher demand for alternative energy, and many states have started to require that ethanol be added to gasoline to reduce pollution and conserve oil. Since DuPont's acquisition of Pioneer Hi-Bred in 1999, the company has become the world's largest seed company by sales, providing genetically modified plants that produce the highest levels of corn or soybean per acreage. [2]

DuPont's role as a supplier leaves the company vulnerable to adverse conditions in its customers' industries- for example, declines in the automotive industry and construction industry hurt DuPont's operating margin in 2008. [3] Furthermore, Dupont was hit hard by the slowing world economy in 2008, seeing 2008Q4 losses of $629 million, with revenues dropping to $6.07 billion from $6.98 billion a year earlier.[4] In response, the company laid off 6,500 workers in early 2009 and has implemented several reforms that will save $600 million in operating expenses for 2009.[5]

Company Overview

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Dupont 2008 Net Sales by Segment ($M) [6]

DuPont is a large chemical and biotech conglomerate organized into five primary market segments. In addition to the five segments, the company's other segments include Pharmaceuticals and Other.[7]

Business Segments

  • Agriculture and Nutrition (25.8% of net sales, 29.8% of pretax operating income)[6]: This segment's mission is to identify methods to improve the quantity, quality, and safety of the global food supply through manufacturing insecticides, fungicides, herbicides, and plant food.[8] This segment includes Pioneer Hi-Bred International, a wholly owned subsidiary and the world's largest producer of seeds.[8] In 2008, Agriculture and Nutrition increased sales by 16% to $8 billion amid a 14% higher US selling price and a 3% increase in volume.[8] Higher 2008 US selling prices reflected an increase in price to offset higher raw materials costs and favorable exchange rates in Europe, Latin America, and Canada. [8] This segment's core markets are the production agriculture and food processing industries. [9]
    • Genetically engineered seeds for corn and soybeans. Plants grown from these seeds have a higher yield (more starch per plant), are more resistant to disease, and have a higher tolerance for herbicides used to kill weeds. In 2008, Pioneer launched 30 new soybean varieties and 60 new corn hybrids. [8]
    • Pesticides that help control insects and protect crops.
    • Soy proteins and lecithins which are used by food companies to enhance their products. These are used in Snickers Marathon bars and in Bio Soja from Danone.
    • Liquid packaging systems for beverages and food.
  • Coatings and Color Technologies (21.2% of net sales, 8.9% of pretax operating income)[6]: This segment supplies motor vehicle coatings. It is the world's largest manufacturer by volume of titanium dioxide products, a material used in paint, plastics, and paper.[10] Sales in 2008 were flat at $6.6 billion compared to 2007. [10] A 8% higher US selling price was offset by an 8% decline in volume sales, driven by the declining motor vehicle industry, which collectively constitutes a major customer. Titanium oxide sales were strong in developing markets. [10] This segment's core markets are the automotive, paper, industrial coatings, transportation, architectural coatings, and plastics industries. [9]
  • Electronic and Communication Technologies (12.5% of net sales, 11.9% of pretax operating income)[6]: This business unit provides materials for the electronics industry, inks and printing systems, fluoropolymer and fluorochemical products, displays, and alternative energy products. [11] In the growing market for flat panel displays, DuPont Electronic and Communication Technologies is a large supplier of materials for plasma displays. [11] In 2008, sales of $4 billion were up 5 percent from 2007, reflecting a 7% increase in USD selling prices and a 3% volume decline. [12] Price increases were driven by increases in the cost of raw materials and favorable changes in US dollar exchange rates. This segment's core markets include the semiconductor, automotive, displays, commercial packaging and printing, HVAC, telecommunications, and chemical processing industries. [9] Products include:
    • Refrigeration chemicals used in air conditioners.
    • Ceramic circuit materials used to make electronics.
    • Printing technologies used on clothing and paper.
    • Materials used in flat panel televisions
  • Performance Materials (30.4% of net sales, 3.5% of pretax operating income)[6]: This business unit manufactures high performance polymers, elastometers, films, and other material components. [12] In 2008, sales of $6.4 billion were 3% lower than 2007, reflecting a 13% decrease in volume sales. [13] The decrease in volume was driven by an overall reduction in inventory in anticipation of a protracted period of weak global demand from the 2008 recession and extended facility shutdowns from Hurricanes Gustav and Ike. [13] Key markets for the Performance Materials segment include the automotive, packaging, electronics, construction, and consumer durables industries. [9] Products include:
    • Resins used in cars, make-up, and computer chips. (Zytel, Delrin, Hytrel, Surlyn)
    • Laminate interlayers used in windows and glass--materials that prevent glass from breaking apart when shattered. (SentryGlas Plus, Butacite)
    • Synthetic rubber used in adhesives and car tires.
    • Polyester (plastic) films used in videotapes, packaging labels, and x-rays. (Mylar, Melinex)
  • Safety and Protection (18.2% of net sales, 22.7% of pretax operating income)[6]: This business unit provides scientific-based safety products such as Kevlar, Tyvek, Nomex, and Corian. DuPont Safety and Protection also provides consulting services to assist organizations in reducing workplace injuries and operating costs. [14] In 2008, sales of $5.7 billion were 2% higher than 2007, reflecting a 9% increase in USD selling prices and a 5% decline in volume.[14] For 2009, the company's management expects sales to be tempered by the global recession, with demand for Kevlar and Nomex increasing moderately, offset by weakness in the motor vehicle industries. Key markets for this segment include the military, homeland security, transportation, construction, energy, and protective apparel industries.[9] Products include:
    • High tech fibers such as Kevlar and Nomex that are used for military, law enforcement, and aviation purposes for their weight savings, strength, and durability. Sales of Kevlar and Nomex have benefited from strong demand for body armor for military, law enforcement, and firefighting personnel. [14] In 2007, DuPont invested $500 million to expand production of Kevlar and a $100 million investment for the expansion of Nomex. [14]
    • Nonwoven fibers such as Tyvek and Sontara. Tyvek is used mainly as an insulation wrap for houses, while Sontara is a cleaning fabric that absorbs more efficiently than other fabric.
    • Lubricants such as Krytox.
    • Surfaces such as Corian (mainly used for countertops in kitchens, bathrooms and utility rooms) used in construction.
  • Pharmaceuticals (0% of net sales, 28.1% of pretax operating income)[6]: DuPont does not manufacture and distribute its own pharmaceutical products. Rather, the company's pharmaceutical income is based on its licensing interest in two drugs for the treatment of high blood pressure, Cozaar and Hyzaar, manufactured and distributed by Merck (MRK). [15] The exclusivity period for these drugs is set to expire in 2010, and income from these drugs will stop in 2013 per the agreement with Merck. [3]
  • Other (0.5% of net sales, -5.0% of pretax operating income):[16] Other includes embryonic businesses not included in the growth segments, including applied biosciences and nonaligned businesses. Applied biosciences aims to provide products for agricultural energy crops, feedstock processing, and advanced biofuels. The division commercializes ethanol and biobutanol in joint ventures with Danisco (DCO-KO) and BP (BP).[14] Nonaligned businesses include costs of Benlate fungicide and other discontinued products as well as the remaining assets of the Textiles & Interiors segment. [14]

Research and Development

In 2008, DuPont spent $1.4 billion on research and development, spending which was been fixed at 5% of net sales for the past from 2006-2008.[17] DuPont brings more than a thousand new products to market a year. [18] In 2007, the company was ranked No. 1 in a Patent Board 500 ranking of patent portfolios of companies across the globe, with about 2000 new patent filings and over 20,000 patents in force worldwide. [18] DuPont operates more than 50 R&D centers around the world, aiming to attract the best available scientific talent and take advantage of regional knowledge necessary to create products catered to the varying needs of customers in every market[18] with the highest concentration of research at its Wilmington, DE facilities. [19] DuPont's modern research concentrates on renewable bio-based materials, advanced biofuels, energy-efficient technologies, enhanced safety products, and alternative energy technologies. [19]

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Dupont 2008 Revenue and Net Income ($M) [20]
Dupont Pretax Operating Margin
Dupont Pretax Operating Margin [21]

Trends and Forces

Rise of Ethanol has Increased Demand for Corn

Increased demand for corn by ethanol refineries pushed corn prices to record highs in 2008.[22] DuPont's genetically modified seeds allow farmers to grow more corn in a given acreage of land. The average yield of corn in the US is 150 bushels per acre, but DuPont aims to push the yield to 400. [23] US farmers increased corn plantings 19% in 2007.[3] In addition, the percentage of genetically modified corn in the US has risen from 46% in 2004 to 61% in 2006, driving higher seed sales for Pioneer, DuPont's seed company.[23] Pioneer is investing 9-11% of its revenue on seed research to boost corn productivity.[23] Adverse crop prices, weather patterns, harvest strength, and pest epidemics all influence farmers' buying capacity for Dupont's products.

Declining Automotive Industry Slows Demand for Many DuPont Products

The rubber in engine hoses and belts, the plastics in car bumpers and under the hood, the refrigerant in the A/C and the safety membrane in the windshield are all produced by DuPont. A global decline in demand for motor vehicles, led by the near-collapse of the Big Three U.S. automakers (Ford, Daimler Chrysler, and GM), has depressed volume sales of these products. In December 2008, the Coatings & Color Technologies segment laid off 1,600 workers and closed several manufacturing units at a cost of $236 million because of declining sales. [10] Dupont expects this restructuring plan to cut operating costs by $140 million annually after it is completed in 2010. [10]

Exchange Rates and Currency Fluctuations

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Trade Weighted Exchange Index: Major Currencies [24]

More than half of DuPont's sales are outside the US.[25] As the dollar strengthens in comparison to other currencies, DuPont's dollar earnings decrease, as foreign customers pay in a foreign currency that has decreased in value. Between early 2008 and early 2009, the US dollar appreciated about 20% against a basket of major currencies. [24] While the low value of the dollar benefited Dupont in FY2008, the appreciating dollar has the potential to drag growth in FY2009.

Commodity Prices

Since DuPont uses oil as a raw material to make plastics and burns natural gas as a fuel to make its products, any significant fluctuation in oil or natural gas prices will impact the company's profits. Despite widespread commodity price increases, DuPont has actually increased margins by preemptively raising the prices for its products. In 2008, increased prices in the Agriculture and Nutrition segment contributed to a 16% increase in sales to $8 billion.[8] However, in other cases increased raw materials costs have not been successfully passed on to the customers. In 2008 for example, the Performance Materials segment reported a 3% decrease in sales after increasing prices by 11% because of a 13% decrease in sales volume. [13]

Competition

DuPont's business units compete in a range of markets. The company's competitors include chemical, agricultural, and biotechnology companies. [26]

R&D ($M) R&D % Revenue Revenue ($B) Net income ($B) EBITDA margin
DuPont$1,393 [17] 5% [17]$31.80 [20]$2 [20]13.23% [20]
BASF SE (BASFY) $1831** [27]2.20%[27]$84**[27]$3.9**[27]26.50%[28]
Bayer AG (BAYRY) $3869**[29]8.10%[29]$48 [30]$2.20 [30]21.20%[31]
Dow Chemical Company (DOW) $1305* [32]2.40%[32]$57.50 [33]$0.58 [33]5.68% [33]
Monsanto Company (MON) $980 [34]8.6%[34]$11.4 [35]$2.0 [35]30.63% [33]

\*2007 data

\*\*Company reports earnings in euros. Conversions to US dollars are based on exchange rates as of December 2008 and provided for reference only. [36]




References

  1. Dupont 2008 Annual Report
  2. DUPONT (E.I. DUPONT DE NEMOURS AND COMPANY)
  3. 3.0 3.1 3.2 Bloomberg "DuPont Net Falls Unexpectedly on Auto, Housing Slides"
  4. Marketwatch: Dupont swings to $629 million quarterly loss, cuts outlook
  5. Dupont 2008 Annual Report, page 18
  6. 6.0 6.1 6.2 6.3 6.4 6.5 6.6 Dupont 2008 10-K, Notes to the Consolidated Financial Statements, page F-47
  7. Dupont 2008 10-K, Item 1 "Business," page 2
  8. 8.0 8.1 8.2 8.3 8.4 8.5 Dupont 2008 10-K, Item 7 "Management's Discussion," page 27
  9. 9.0 9.1 9.2 9.3 9.4 Dupont 2007 Annual Review, page 8
  10. 10.0 10.1 10.2 10.3 10.4 Dupont 2008 10-K, Item 7 "Management's Discussion," page 28
  11. 11.0 11.1 Dupont 2008 10-K, Item 7 "Management's Discussion," page 28
  12. 12.0 12.1 Dupont 2008 10-K, Item 7 "Management's Discussion," page 32
  13. 13.0 13.1 13.2 Dupont 2008 10-K, Item 7 "Management's Discussion," page 33
  14. 14.0 14.1 14.2 14.3 14.4 14.5 Dupont 2008 10-K, Item 7 "Management's Discussion," page 34
  15. Dupont 2008 10-K, Item 1 "Business," page 3
  16. Dupont 2008 10-K, Item 7 "Management's Dicussion," page 34
  17. 17.0 17.1 17.2 Dupont 2008 10-K, p. 21
  18. 18.0 18.1 18.2 Dupont 2007 Annual Review, page 4
  19. 19.0 19.1 Dupont 2008 10-K, Item 1 "Business," page 7
  20. 20.0 20.1 20.2 20.3 Google Finance, DD
  21. Dupont 2007 Annual Review, page 3
  22. USDA "Corn Prices Near Record High, But What About Food Costs?"
  23. 23.0 23.1 23.2 Dupont sees key GMO role in ethanol corn challenge
  24. 24.0 24.1 Federal Reserve Trade Weighted Exchange Index: Major Currencies
  25. Morningstar analyst report, DD, 23 Feb 2009
  26. DUPONT (E.I. DUPONT DE NEMOURS AND COMPANY)
  27. 27.0 27.1 27.2 27.3 BASF Annual Report 2008, p. 2
  28. BASF Annual Report 2008, p. 79
  29. 29.0 29.1 Bayer 2008 Annual Report, page 2
  30. 30.0 30.1 Post Gazette "Bayer 2008 revenue rises, profit plunges"
  31. Bayer 2008 Annual Report, page 52
  32. 32.0 32.1 DOW 10-K 2007, Item 1 "Business," page 8
  33. 33.0 33.1 33.2 33.3 Google Finance DOW
  34. 34.0 34.1 MON 10-K 2007, Item 1 "Business," page 7
  35. 35.0 35.1 Google Finance MON
  36. U.S. / Euro Foreign Exchange Rate
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