INSIGHT: Stronger signs of market growth

20 October 2009 17:26  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS news)--DuPont could not see much in the way of an upturn at the end of the second quarter. It is seeing stronger signs at the end of the third quarter, but an erratic picture overall.

CEO Ellen Kullman on Tuesday described “a developing recovery that is shaped different by market and geography”.

Not surprisingly, DuPont’s China sales have been growing year on year, but its Asia-Pacific sales have not.

Central Europe sales are well down and have pulled the region with them. US sales remain depressed compared with last year.

But the picture is shifting slightly and the outlook is certainly more positive than three months ago.

There are signs of restocking in the automobile-related product chains that are so important to the company. Kullman said in a conference call that the third quarter seemed to represent true demand for DuPont’s industrial polymers and performance elastomers. The sign must be welcome.

All in all, the chemicals giant is seeing its markets stabilise and some early indications of an upturn.

Titanium dioxide, an early cycle indicator, is doing well and DuPont is almost sold out. Other important products for the company, however, are still feeling the squeeze. It could be months before they might be expected to recover.

The company continues to do well in driving costs down and is on target to save $1bn (€670m) in fixed costs this year.

Kullman said $750m of these costs savings can be retained over the longer term. There is a clear commitment to deliver on promises.

What is also important is that DuPont’s product development engine continues to fire on all cylinders.

The company launched 323 new products in the third quarter, bringing the year-to-date total to 1,107. That’s a 50% higher launch rate than last year.

The new products help drive growth in the continued weak market environment and will help lay the foundations for faster growth.

On the demand side, then, there is not a great deal to get excited about. But given the unclear global economic picture, that is hardly surprising.

DuPont is confident enough, nevertheless, to forecast that its earnings per share this year will be at the top of an earlier stated range. A solid foundation has been laid in 2009. The company is holding on to product prices.

It is the degree to which savings have been made and the research engine delivered that have contributed immensely to confidence this year. Yet the market has begun to more forcefully respond.

Erratic as the recovery may be, it appears as if there are more widespread opportunities to grasp.

($1 = €0.67)

For more on DuPont visit ICIS company intelligence
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By: Nigel Davis
+44 20 8652 3214

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