New DuPont pledges 'relentless' productivity - execs

Source: ICIS News


HOUSTON (ICIS)--The DuPont specialty products company to be separated from DowDuPont by 1 June 2019 will have a “relentless” focus on productivity, the top executives of “New DuPont” told analysts during a webcast investor event in New York on Thursday.

At the same time, New DuPont will continue to drive research and development (R&D) and introduce new products, targeted to account for 30% of total sales, and it will keep an eye on “tug-in” merger and acquisition (M&A) opportunities, the executives said.

The company is also divesting about 10% of its portfolio – lower-return and lower growth business, redeploying that capital to higher-growth areas, Ed Breen, executive chairman elect of DuPont, Marc Doyle, CEO elect, and Jeanmarie Desmond, chief financial officer elect, said.

Corporate costs

“We are instilling a culture of relentless productivity”, with a commitment to maintain corporate costs at less than 1% of sales - “a world class benchmark”, Doyle said.

DuPont did away with the previous matrix organisation, resulting in faster decisions and making the company much more entrepreneurial, and it abolished corporate R&D, shifting R&D to its each of its four key business segments.

Four reporting segments

New DuPont has four reporting segments – nutrition & bioscience, electronics & imaging, safety & construction, and transportation & advanced polymers.

The businesses’ market and technology drivers and trends are connectivity and mobility, healthy living, worker safety, sustainable development, as well as the digital revolution and biotechnology.

R&D spending of 4-5% of sales, or about $900m/year, will go to those transformational, secular trends – enabling the company to outpace global GDP growth.

Breen firmly ruled out cutting R&D should there be a recession.

“We won’t let that happen, if anything, our R&D may creep up a little bit”, he said.

About 95% of sales are coming from businesses and markets where DuPont holds leading positions, giving the company pricing leverage as it moves forward.

DuPont has a diverse base of more than 10,000 customers, with no one customer accounting for more than 2% of total sales.

“This is not the old DuPont, this is a very different portfolio as we brought in business from Dow, Dow Corning and the FMC nutrition and health business – all very synergistic,” Breen said.

About 67% of New DuPont will be heritage DuPont, 25% will be Dow Chemical, 5% Dow Corning, and 3% the FMC nutrition and health business acquired in 2017.

Executive chairman to focus on capex, M&A

Asked about his role as executive chairman, Breen told analysts that he would focus more on areas such as capital and R&D allocation, big investments, as well as M&A.

Capex, targeted at 4-5% of net sales, is slanted towards growth and high returns, but, at the same time, “there are no large risky projects going on in this company”, Breen said.

At this time, DuPont is working on two large growth projects.

A multi-site probiotics expansion in its nutrition & science business is expected to be completed in coming month.

Meanwhile, in safety & construction an expansion of Tyvek-brand products is expected online in 2021.

As for M&A, deals would most likely be “tug-in acquisitions, you are not going to see us doing another merger of equals”, he said with reference to the original $130bn Dow-DuPont merger agreed in 2015.

Acquisitions would be focused on the market and technology trends driving the four DuPont business, he said.