Shedding its auto paint business and stung by declining demand for titanium dioxide, DuPont will lay off 1,500 workers as part of a “targeted restructuring plan” to improve performance, the company announced this week.
The Delaware-based chemical giant made the announcement Tuesday (Oct. 23) as it released a third-quarter financial report that showed a plunge in net income, net sales, and earnings per share for the quarter.
|Some of the 1,500 layoffs will follow the sale of DuPont’s Performance Coatings business.|
DuPont announced in August that it was selling its Performance Coatings unit, one of the world’s largest automotive coatings suppliers, for $4.9 billion, after a year of struggling performance. DuPont has been in the car paint business since the dawn of the mass-produced automobile.
Q3 Earnings, Sales Plummet
The company reported third-quarter 2012 earnings from continuing operations, excluding significant items, at $.32 per share—nearly half the $.60 per share of the prior-year period. The company reported a $.05 loss per share in the period, versus a gain of $.39 per share in the third quarter of 2011.
Total company third-quarter 2012 earnings, excluding significant items, were $.44 per share, compared with $.69 per share in the prior-year period. (On average, 14 analysts polled by Thomson Reuters expected earnings per share of $0.47 for the quarter.)
Total company reported earnings were just $.01 per share, compared with $.48 per share a year ago.
Third-quarter sales from continuing operations were $7.4 billion—9 percent below the same period of last year. Most of the loss stemmed from volume declines in Electronics & Communications and Performance Chemicals, especially in Asia Pacific, DuPont said. Unfavorable currency rates also took a toll.
Sales in the Performance Chemicals unit, which includes DuPont’s titanium dioxide business, dropped by 19 percent, nearly all of it due to volume declines, the company said.
DuPont noted that the year-ago quarter saw record volume for the white pigment. DuPont is the world’s largest producer of the common paint and coatings pigment.
|Sales in Performance Chemicals, which includes the Titanium Technologies business, plummeted from the record volumes seen in the third quarter of 2011.|
“About 60 percent of incremental earnings growth since 2009 has come from titanium dioxide,” Hassan Ahmed, a New York- based analyst at Alembic Global Advisors, told Businessweek this week. “If that’s cycling down, it seriously jeopardizes Ellen’s earnings growth target and has quite serious ramifications for 2013 and beyond.”
David Begleiter, a New York-based analyst at Deutsche Bank AG, told Bloomberg that TiO2 demand was being weakened by declining demand in the auto and construction markets, especially in Europe. Meanwhile, cheap imports from China are creating a global oversupply, he added.
In July, Boo Ching Chong, president of DuPont Titanium Technologies, told Reuters that global demand for titanium dioxide would remain strong in the second half of the year. Chong said and that reports by some titanium ore miners of softening demand were “overstated.”
$450M in Restructuring
DuPont said it had already launched a restructuring plan to “increase productivity, enhance competitiveness and accelerate growth.” The plan includes shedding 1,500 jobs in the next 18 months and eliminating certain corporate costs tied to the Performance Coatings unit. DuPont expects the plan to produce about $450 million in pre-tax savings.
|CEO Ellen Kullman said the restructuring would involve “fine-tuning the organization, eliminating costs, and expanding beyond our everyday focus on productivity.”|
“Today, we are taking additional actions to improve competitiveness and accelerate market-driven innovation and growth by fine-tuning the organization, eliminating costs, and expanding beyond our everyday focus on productivity,” DuPont Chair and CEO Ellen Kullman said in a statement.
“We continue to execute well in many parts of the company, and certain segments are outperforming despite market volatility. Weaker-than-expected demand in titanium dioxide and photovoltaic markets contributed to the decline from last year’s record third-quarter earnings. We are addressing these challenges now to position ourselves for improved performance.”
The Road Ahead
DuPont forecast its full-year 2012 earnings from continuing operations, excluding significant items, to be in the range of $3.25 to $3.30 per share. Prior-year earnings were $3.55 per share on a comparable basis.