DuPont results illustrate continued chemicals struggle

24 April 2002 17:45  [Source: ICIS news]

There is no reason to get carried away with the first wave of chemical company first quarter financial results. The numbers point to a welcome increase in volume sales in the US compared to the fourth quarter of 2001 and better margins in sectors like pharmaceuticals and agriculture but little else.

Chemical markets remain depressed, a fact which shows through in the detailed figures being released now, and there is little in the way of good news. Companies have been pointing to some sequential upward movement in volumes and, in certain instances, in prices but the pick up is hardly widespread

Important markets for chemicals remain depressed – electronics is a case in point. The volume upturns seen in the US are not necessarily reflected in better business in Europe and Asia. The strength of the dollar hangs over US chemical companies and higher oil prices are of concern. Producers are trying to push prices up but it is questionable whether increases will be achieved let alone be sustainable.

DuPont on Tuesday reported flat underlying first quarter 2002 earnings per share and a 6% sequential increase in sales volumes in the US excluding its agriculture and nutrition segment. However, sequential global volumes were flat, the US rise offset by declines in Asia and Latin America. The good news from DuPont, the largest US chemical company, was that the first quarter outside of agriculture and nutrition, in volume terms at least, looked globally as though it represented the bottom of the cycle.

So, is the only way up? Probably, but only in fits and starts.

Leafing through the company’s first quarter 2002 segment details shows the industrial businesses struggling with flat if not weak demand and certainly poor quarter to quarter (first quarter 2002 to first quarter 2001) comparisons. DuPont has reported low coatings volumes, particularly in Europe; significantly lower white pigment sales; sharply lower fluoropolymer sales; electronic materials sales down significantly on lower volumes; significantly lower engineering polymer sales in Europe; elastomer product sales down significantly on lower volumes and prices; speciality and industrial chemicals sales down substantially and lower prices in the new - and to be spun off - textiles and interiors business. The list goes on.

All in all DuPont has continued to face tough operating conditions and had to trim back spending even harder than before – research and development (R&D) spending in the first quarter was $287m compared to $410m, for instance, although this cut back also reflects divestment of DuPont Pharmaceuticals. The company has had to react sharply to the downturn and from the first quarter of 2002 has reorganised into what it calls five market-oriented sectors.

Under the old reporting structure the DuPont strategic business units were the operating segments and aggregated into reporting segments. Now the operating segments are the company’s five ‘growth platforms’ plus DuPont Textile and Interiors, DTI, which is to be spun off in 2003. DuPont says that the new reporting segments are not just reporting aggregations but reflect how the businesses are managed.

Chief executive Chad Holliday stresses the growth potential in the businesses to be retained but says that DuPont has not changed its view that a significant period of demand growth is needed to absorb capacity before pricing strengthens in the manufacturing sector. As the second quarter progresses, the sequential volume momentum and lower year-to-year raw material costs will be mitigated by the strength of the US dollar and the difficult price environment, the company says.

DuPont’s first quarter sales were 8% lower on a comparable basis but 10% lower as reported at $6.14bn (Euro6.91bn). Net income was down 3% at $479m.. Earnings before interest and tax (EBIT) for the quarter were $1.01bn, 7% down against the comparable period of 2001. The new reporting segment details below give some idea of the difficult business conditions faced by the company as a whole.


DuPont segment sales & profits (after tax operating income) excl exceptionals


ATOI ($m)

Change (%)


Change (%)

Agriculture & Nutrition





Coatings & Colour Technologies





Electronic & Communication Technologies





Performance Materials







Loss q1 2001



Safety & Protection





Textiles & Interiors













By: Nigel Davis
+44 20 8652 3214

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