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DuPont Ponders Sale of Chemicals Unit

Wednesday, July 24, 2013

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DuPont may shed its Performance Chemicals segment, which produces paint pigments, after a less-than-stellar performance in the second quarter, the major chemical manufacturer announced on Tuesday (July 23).

DuPont announced that the company was "taking the next steps in its transformation to a higher growth company" by exploring strategic alternatives for its Performance Chemicals segment and realigning its leadership team.

These strategic alternatives could include a full or partial separation of its Performance Chemicals businesses, including a spin-off, sale or other transaction, the Wilmington, DE-based company said.

DuPont Performance Chemicals
Photos: DuPont

After a 56 percent drop in earnings for the Performance Chemicals segment, DuPont is considering selling it off.

The company also sold off its Performance Coatings segment in February for $4.9 billion in cash.

"As we discussed at our Investors Day in May, we have been carefully weighing the strong cash generation of our Performance Chemicals businesses against their cyclicality and lower growth profile," said Ellen Kullman, DuPont CEO and Chair.

Evaluating Options

The statement coincides with the release of the company's second-quarter financials, also announced on Tuesday, which showed a 56 percent drop in the operating earnings of the Performance Chemicals segment compared to the second quarter of 2012.

The Performance Chemicals segment includes Titanium Technologies and Chemicals & Fluoroproducts, which produce paint pigments from titanium dioxide, Teflon coatings and other products.

Kullman added, "We are evaluating options for our Performance Chemicals businesses as part of our ongoing plan to deliver higher growth and greater value creation for our shareholders."

"These steps are part of DuPont's transformation to a higher growth, less cyclical company that integrates its unique scientific capabilities in biology, chemistry and materials to develop differentiated, high-value solutions in the attractive agriculture and nutrition, industrial biosciences and advanced materials markets worldwide," the company stated.

DuPont CEO Ellen Kullman

"We have been carefully weighing the strong cash generation of our Performance Chemicals businesses against their cyclicality and lower growth profile," said Ellen Kullman, DuPont CEO and Chair.

Since selling its Performance Coatings segment in February, DuPont has been evaluating further sales, and executives are handling "a lot of questions" on how performance chemicals fits with the company, Kullman told Bloomberg Businessweek.

Performance Coatings Sale

DuPont sold its Performance Coatings segment to The Carlyle Group for $4.9 billion in cash in February.

After the sale, the Performance Coatings segment was renamed Axalta Coating Systems, and John G. McCool, who was president of DuPont Performance Coatings and had been with the company since 1976, was appointed to lead the new company.

The segment consisted of DuPont Industrial Coatings, DuPont Aviation Finishes, DuPont Commercial Finishes, DuPont Refinish, Standox, Spies Hecker, and Nason Finishes.

Kullman had told reporters in 2011 that poorly performing businesses would get "a chance" to improve before the company looked at "alternatives, whatever that means."

Earnings Fall in Q2

DuPont's second-quarter financials showed a 1 percent decline in net sales to $9.8 billion, which the company says reflects lower titanium dioxide pricing. 

Overall, company volume increased by 1 percent, with gains in the Agriculture, Performance Chemicals, Performance Materials and Safety & Protection divisions.

Total segment operating earnings were at $1.9 billion, down from $2.2 billion in the prior year. Performance Chemicals operating earnings declined by $330 million from peak levels last year, primarily due to "significantly lower" titanium dioxide prices. Titanium dioxide volumes increased 12 percent from Q2 2012 and 18 percent from Q1 2013.

DuPont sold its Performance Coatings business in February for $4.9 billion in cash.

Operating earnings in the Performance Materials segment dropped 2 percent to $336 million, primarily due to lower selling prices, and partially offset by higher volume.

"Agriculture sales remained strong in the second quarter and titanium dioxide volume improved. As expected, this was largely offset by a substantial decline in Performance Chemicals earnings from last year's peak levels," said Kullman.

"We anticipate second half earnings will be significantly better than last year's second half. We expect to deliver full-year earnings modestly above 2012 results, overcoming steep declines in the titanium dioxide market and economic headwinds in Europe and parts of Asia."

Leadership Changes

Two leadership changes took effect at DuPont on Tuesday to "accelerate the execution of its applied integrated science strategy across its businesses."

James C. Collins, Jr., who currently leads the Industrial Biosciences business, will become senior vice president and will oversee the Industrial Biosciences, Performance Polymers and Packaging & Industrial Polymers businesses. He has been with DuPont for 29 years.

Matthew L. Trerotola will rejoin the company as senior vice president responsible for overseeing the Protection Technologies, Building Innovations and Sustainable Solutions businesses. A previous DuPont corporate officer, he most recently served as vice president and group executive of life sciences for the Danaher Corporation.

 

   

Tagged categories: Acquisitions; Automotive coatings; Coatings manufacturers; DuPont; Finance; High-performance coatings; Mergers; Titanium dioxide

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