DuPont cutting 1,500 jobs; profit forecast slashed
(Reuters) - DuPont (DD.N) slashed its earnings forecast, reported a lower-than-expected quarterly profit and announced 1,500 job cuts on Tuesday, signs that demand for the chemical company's lucrative paint and solar products is slipping around the world.
Shares of DuPont, a component of the Dow Jones industrial average .DJIA, fell more than 9 percent in midday trading.
The job cuts are one of the more extreme reactions so far this earnings season to slipping demand and global economic uncertainty, and recent data suggest more layoffs could be on the way.
The number of jobs cut at U.S.-based employers jumped to 33,816 in September, up 5 percent from August, when layoffs hit a 20-month low, according to Challenger, Gray and Christmas, a consulting firm that tracks layoff data.
The DuPont cuts "may be a harbinger of things to come," John Challenger, the firm's chief executive, said.
Sagging sales and profits have become the norm across Corporate America for third-quarter results, and DuPont was no exception.
The company's sales fell 9 percent to $7.4 billion, below analysts' average forecast of $8.15 billion.
The drop was felt around the world, most sharply in Asia and Europe. Higher prices for titanium dioxide (Ti02), a key pigment used to make paint and a market DuPont dominates, heavily dented sales, as did falling demand for pastes used to make solar panels.
In China, some of DuPont's customers have put infrastructure projects on hold, harming demand for the Ti02 pigment and Nomex flame-resistant fabric for transformers, Chief Executive Ellen Kullman said.
Trying to reassure Wall Street, Kullman said the recently announced Chinese stimulus program should bolster sales by at soon as the first quarter of next year.
"We really see China hopefully becoming an improving picture as their new government stabilizes and gets back to focusing on the future," she said.
Despite the softening Ti02 market, DuPont will continue to expand its capacity to produce the chemical in 2013 and 2014, she said.
"We take a long-term view on the Ti02 industry, and the industry fundamentals are solid," said Kullman, who ran the company's Ti02 business in the 1990s. "Short term, there's always going to be some puts and takes, because it is a cyclical chemical."
The Ti02 market should grow at the same rate as global gross domestic product, and DuPont is the only producer that has announced increases in capacity, she said.
Wall Street worries that demand for the pigment could drop, leaving DuPont holding the bag.
"It's an illustration of the concern, 'Are we just slowing or this a cliff?'" said Jeff Windau, an analyst with Edward Jones. "There's concern on the international markets, specifically the more-commoditized types of products (like) titanium dioxide."
CHARGES FOR LAYOFFS
DuPont posted third-quarter net income of $10 million, or a penny per share, compared with $452 million, or 48 cents per share, a year earlier.
Excluding one-time items, it earned 32 cents per share, while analysts on average had expected 46 cents, according to Thomson Reuters I/B/E/S.
The 1,500 layoffs amount to about 2 percent of DuPont's 70,000-strong workforce.
Kullman said the job cuts will come around the world and in all businesses. She declined to mention specific regions where the cuts would be severe.
Roughly half of the layoffs are due to the weak economy, the company said, and it took a one-time charge of $242 million to pay out severance to workers.
The rest of the layoffs are connected to DuPont's August sale of its slow-growing car paint business to investment firm Carlyle Group LP (CG.O) for $4.9 billion.
Carlyle did not need some legal, human resource and other support staff previously used by DuPont to manage the car paint business. DuPont took a $152 million charge in the third quarter for its plan to lay off some of those employees.
The sale is expected to bring in after-tax proceeds of $4 billion cash when it closes in the first quarter of 2013, DuPont Chief Financial Officer Nick Fanandakis said on a conference call with investors.
DuPont cut its 2012 profit outlook to a range of $3.25 to $3.30 per share, below the $3.93 expected by Wall Street.
Previously, the company expected at least $3.79 per share, excluding the car paint business.
Shares of DuPont were down 9.3 percent at $45.11 in midday trading.
(Reporting by Ernest Scheyder in New York; additional reporting by Nick Zieminski; Editing by Lisa Von Ahn and John Wallace)
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