US DuPont sees continued headwind from BD, benzene pricing

25 July 2017 16:16 Source:ICIS News

Asia shares rise on China dataHOUSTON (ICIS)--Operating margins in DuPont’s performance materials business will likely continue to contract in the remainder of the year, mainly due to increased prices for key raw materials such as butadiene (BD) and benzene, DuPont’s chief financial officer Nicholas Fanandakis told analysts during the company’s second-quarter earnings call on Tuesday.

The segment’s main products include engineering polymers, packaging and industrial polymers, films and elastomers, among others.

In the second quarter, performance materials' operating margins contracted by about 50 basis points year on year, mainly due to the higher raw material prices, as well as impacts from a planned turnaround of DuPont’s cracker at Orange, Texas, which impacted volumes, Fanandakis said.

"Looking forward, we see those raw headwinds continue around BD, benzene, ethane… The ethylene margins are going to see compression because we are seeing ethylene spot pricing start to decline somewhat as well," he said.

"You will continue to see that margin compression in performance materials because of the market, and the raws," he said.

In the second quarter, performance materials' operating earnings rose by 1% year on year to $329m, primarily on volume growth and higher local price, largely offset by the negatives from the raw material costs and the cracker turnaround.

Increased demand for polymers in automotive markets and increased demand for high-performance parts in semiconductor and aerospace markets drove the higher volumes.

The segment’s sales were up 3% year on year to $1.38bn, accounting for almost 19% of DuPont’s total second-quarter sales.

DuPont’s performance materials is set to become part of the materials company DowDupont expect to spin off within 18 months of closing their merger next month.

Fanandakis said that DuPont will not issue standalone second half and full-year earnings guidance, given the expected closing of DowDuPont. However, the merged company will file historical pro-forma financial information after closing, he added.

By Stefan Baumgarten