18 March 2005 17:13 [Source: ICIS news]
"Go where the growth is” is a phrase we are likely to hear a lot more often from DuPont.
Chief technology officer, Tom Connelly, used it at an investor conference this week when he said it will not be long before the company opens research facilities in India and possibly Russia in its bid to push the top line.
Connelly this month cut the tape on a research and development centre in Shanghai, China, DuPont’s third major R&D facility outside the US. The company will open a (much smaller) technical centre at a science and technology institute in Seoul, South Korea, later in 2005. Both operations demonstrate the need for the company to be actively supporting market development in these vitally important countries.
DuPont is in an expansionary phase and pushing growth hard in much the same way it has in recent years pushed on productivity. In research, the drive for the sort of products focused on markets that can deliver significantly higher variable margins has accelerated. Shifts in the portfolio, in the asset base and in personnel have highlighted the move eastward.
Connelly talked at the Merrill Lynch chemicals conference in New York on 15 March about DuPont’s momentum moving into 2005 and the way that new products are contributing. The company says it achieved global sales growth of 15% in 2004 and growth of more than 20% in major emerging markets (the numbers exclude the spin-off of textiles & interiors: as reported sales were 1.1% higher at $27bn (Euro20.1bn)). Nearly 800 new products were launched, a record number, and generated $7.4bn, or 30% of the sales total.
Geographically, the focus is China and wider Asia but DuPont is not likely to pass up opportunities in places like Turkey, Brazil and Eastern Europe. The trick will be to access local research capabilities to help tailor products to local markets. It may not necessarily matter where research is done but companies are wise to seek out the expertise that will help them tap in to new, expanding areas.
DuPont’s recent research effort is noteworthy for the emphasis put on productivity and research effectiveness. In the 1990s the rate at which DuPont filed patents in the US, for instance, declined, but since 2001the number of filings has risen at double digit rates.
Connelly expects the company to almost match this rate of filing over the next few years. Importantly, he notes that product development cycle times have been cut and claims that the even more important time to peak sales can be reduced by nearly 40%.
Driving the research and product development effort harder ultimately targets stronger growth and higher margins. DuPont says the top 75 new products (those brought to market in the latest five years) in its safety & protection segment have the potential to produce $700m of sales in 2007. The new product potential in 2007 in other segments is: $530m in coatings and colour technologies; $660m in electronics & communications; $680m in agriculture & nutrition; and $450m in materials.
DuPont is not a company likely to have ‘blockbuster’ products but a new insecticide probably has the greatest potential. In electronics and communications its ‘thermal colour filter system’ a single layer coating for use in liquid crystal display screens could produce sales of several hundred million dollars, Connelly says. This is a critical year for technology and systems development.
The focus on research productivity, new geographical opportunities and top line growth is changing the face of DuPont. The company says its structural “transformation” is complete. It has helped reduce cyclicality. The research drive will do more of the same making DuPont increasingly resistant to the vagaries of the chemicals and of regional economic cycles.
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