Think tank: Some bright spots for DuPont's profit outlook

25 January 2013 10:39  [Source: ICB]

US-based DuPont's shares climbed higher on 22 January as investors savoured better-than-expected fourth-quarter 2012 results and a positive 2013 outlook.

There were also clear signs that the diversified chemicals maker was having some success in tackling slower growth, as well as indications of an upturn in demand in industries, such as US autos.

DuPont expects to benefit from improved US housing activity Rex Features

 Rex Features

DuPont expects to benefit from improved US housing activity

Fourth-quarter profits were down sharply in the company's industry and construction-focused materials segments but lower-cost feedstocks benefited some of the plastics and fibres businesses.

DuPont is not overly confident of much stronger global economic growth in 2013 but expects China to pick up after the Lunar New Year.

"Weakness in markets served by Performance Chemicals and Electronics & Communications provided significant challenges in 2012," said CEO Ellen Kullman. "We've adjusted our plans to meet the changing market environment and grow our businesses in a slow-growth world economy.

Underlying income from DuPont's continuing businesses were well down at $110m (€83m) from $246m in the year before with a lot of the decline as a ­result of much lower titanium dioxide (TiO2) prices. DuPont expects TiO2 industry fundamentals to improve gradually through 2013.

The company says now that it expects 3% sales growth in 2013 and earnings per share growth of between 2% and 7% with earnings down on a year-on-year basis in the first half but up in the second.

DuPont expects to deliver more than $600m of savings from restructuring and productivity improvements in 2013. Its planning is based on an only modest 2% GDP and industrial production growth forecast.

Renewed auto demand in North America and China is likely to help, although the year-end 2012 spurt is unlikely to be sustained.

DuPont said it expects auto builds globally to be down 4% in the first quarter with a 10% slowdown in Europe. Auto output could be up just 2% in 2013, compared with growth of 6% in 2012, it said.

The company is looking forward to some recovery in new house builds in the US. It also expects more infrastructure spending in China.

Kullman also sees market conditions stabilising in 2013 for the performance chemicals and the electronics & communications businesses. The US is experiencing a weak recovery with some bright spots, she said. "Growth in China is picking up with positive implications for the rest of Asia."

By: Nigel Davis
+44 20 8652 3214

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