Analysis: science, intensity, productivity to drive DuPont

28 June 2002 19:48  [Source: ICIS news]

WILMINGTON, Delaware (CNI)--DuPont is aiming for 10% normalized earnings/share (eps) growth, 6% annual sales growth and a return on invested capital (ROIC) in the 14-16% range. The company hopes to hit these targets by focusing on three "pathways to growth" - integrated science, knowledge intensity and productivity.

Speaking at the company's 200th anniversary celebration here, DuPont chairman and chief executive Charles Holliday said: "We believe we are uniquely positioned to pull together combinations of sciences to solve a customer's problem."

Holliday said the company's growth will be driven by a scientific innovation process that relies on three criteria: unique technology, customer relevance and a concrete commercialization plan that makes the product competitive in the marketplace.

For example, Holliday cited DuPont's new "super solids" coatings system recently adopted in the production of DaimlerChrysler's Dodge Durango. The technology helps the auto maker meet more stringent environmental requirements while improving vehicle appearance.

He also cited DuPont's 8th Continent soymilk joint venture with General Mills. Introduced a year ago using DuPont's soy protein Solae and General Mills' marketing expertise, the product is now number two in a marketplace that has $600m in annual sales and is growing at a 20% clip.

And DuPont cites its five-year, $35m alliance with the Massachusetts Institute of Technology (MIT) to combine biotechnology with fundamental capabilities in chemical engineering to solve problems that have eluded traditional approaches.

DuPont has an objective of deriving one-third of its sales from products commercialized in the last five years. Excluding DuPont's textiles and interiors unit, which is on the road to divestiture, DuPont had 22% of sales from new products in 2000 and 24% in 2001.

The second pathway to growth for DuPont is knowledge intensity, which involves forming new business models and leveraging existing know-how into more avenues of growth. Examples of this include using its inkjet technology to develop a total system solution for printing on textiles as well as leveraging its own expertise in safety to provide services to all types of customers to improve their safety.

With respect to productivity, the third pathway to growth, DuPont continues to rely on its Six Sigma initiative launched in 1999. Having cut costs and driven growth in past years, DuPont's Six Sigma program is now focused on helping customers solve their problems.

"Our mission is sustainable growth, and we will achieve this by taking our integrated science and focusing it on customer needs to turn out products based on knowledge while we constantly improve productivity," Holliday said.

DuPont sees four drivers for sustainable growth: electronics, biotechnology, material sciences, and safety and security. In organizing for sustainable growth, the company has six growth platforms - electronics and communications technologies, agriculture and nutrition, safety and protection, performance materials, coatings and color technologies, and DuPont textiles and interiors.

Said Holliday: "We believe these six platforms - five closely linked and one separated - are the right combination of places for us to focus going forward. We are determined to be the world leader in innovation in our chosen markets, bringing superior solutions based on our technology."

Moving into its third century, DuPont is in an enviable financial position with net debt of just $3.5bn at the end of the first quarter. The company plans to maintain a strong balance sheet, return excess cash to shareholders through dividends and share buybacks, and invest in compelling growth opportunities as they become available.

DuPont chief financial officer Gary Pfeiffer notes: "We are the only company in our industry with a AA- credit rating and one of the few companies in the entire country with that rating. That is important to us because it says DuPont has the financial strength to withstand any set of economic circumstances."

With a clean balance sheet, DuPont is also in a prime position to make acquisitions, although it feels little pressure to make a major purchase. Financial flexibility "is not burning a hole in our pocket," said Holliday. "We won't base our growth strategy on large acquisitions."

An acquisition must have strategic fit and be accretive to earnings almost immediately. "It must be a bolt-on and fit closely with what we know how to do," Pfeiffer said.

(For additional Chemical Market Reporter analysis, visit the CMR Web site at:

By: Joe Chang, Chemical Market Reporter
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