DuPont CEO launches bullish 2012 forecast
WILMINGTON, Delaware |
WILMINGTON, Delaware (Reuters) - DuPont (DD.N) expects to beat Wall Street's earnings forecast next year, with strong agricultural and chemical sales offsetting weak shipments to electronic and housing customers.
The bullish talk from Chief Executive Ellen Kullman at the company's investor day comes less than a week after DuPont cut its forecast for the current year. It was the first time Kullman reduced the company's forecast since taking the top job at DuPont in 2009.
DuPont's shares were down 0.4 percent at $43.72 on Tuesday afternoon. The shares remain nearly 5 percent below levels from last Thursday, when the forecast was cut.
In essence, Kullman is betting DuPont's strong agriculture and nutrition products will help buoy the company through the remainder of the economic storm.
DuPont continues to grow in emerging markets, especially in Asia and Latin America, and the United States is performing "better than anybody thought," but "nobody in Europe feels really comfortable right now," Kullman said.
Some of DuPont's electronics and polymer customers are cutting costs and drawing down their own inventories before replenishing supplies, she said.
"Nobody wants to hold inventory," Kullman said. "I do think it needs to settle out a bit for there to be a little bit of confidence and for restocking to occur."
Other units, particularly agriculture and nutrition, are performing well as a growing world population demands more food, Kullman said.
The company, which also makes Kevlar bulletproof fabric and pigments for paint, said it expects to earn between $4.20 and $4.40 per share next year.
Excluding a 17 cent-per-share expense for pensions, DuPont expects to earn $4.37 to $4.57 per share in 2012.
That compares with Wall Street's estimate of $4.23 per share, according to Thomson Reuters I/B/E/S.
The forecast assumes that global GDP increases 2 to 3 percent next year, and that the U.S. dollar will increase in value by 3 percent compared with a basket of currencies, DuPont said.
The company expects its pension contribution in 2012 to hit $875 million, up from some $320 million this year. The stark jump is due to lower interest rates and higher fund management expenses, the company said.
"For many years we haven't had to make a contribution. The fund itself, its return on assets was able to fund the pension plan," DuPont Chief Financial Officer Nick Fanandakis said.
With the discount rates falling recently and market volatility, "that has resulted in a need for a pension contribution," he said.
PERFORMANCE COATINGS SALE
Kullman blasted recent media reports that DuPont is selling its struggling Performance Coatings unit, which sells paint to car makers and refinishers.
The sale of the unit could net DuPont as much as $4 billion, Reuters reported in October.
"I'm quite frankly appalled at the irresponsibility of some media outlets," Kullman said.
Still, she did not deny outright that DuPont has the performance coatings unit up for sale.
"Time will tell about any part of our portfolio and where it sits," Kullman said. "I love all my children until I don't love them. That does bother my own children, but in business it seems to work.
"If something changes, we'll be the first ones to come out and talk to you."
Several private equity firms, including KKR & Co (KKR.N), Bain Capital, TPG Capital and Onex Corp (OCX.TO), have made preliminary inquiries about the sale and talked to banks about financing a potential deal, sources have told Reuters.
DuPont expects 2012 revenue of $40 billion to $42 billion. Analysts expect $41.4 billion.
While sales of titanium dioxide paint pigment have slowed in the fourth quarter, DuPont expects the business to be strong in 2012.
The company expects its raw material and energy supply costs to rise 4 percent in 2012, but executives said they are focused on offsetting that by being more productive.
"When you get more out of the same plant with the same number of people, you get great productivity," Kullman said. "That's certainly been a big part of our story."
(Reporting by Ernest Scheyder in Wilmington, Del.; additional reporting by Matt Daily in New York, editing by Dave Zimmerman, Maureen Bavdek and Matthew Lewis)
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