UPDATE 3-DuPont sets $5 bln buy back as farm focus fuels profit

Tue Jan 28, 2014 11:33am EST

* 4th-quarter adj earnings per share $0.59 vs est $0.55

* Agriculture unit posts operating profit

* Announces $5 bln share buyback program

* Shares down 0.7 percent

By Swetha Gopinath and Garima Goel

Jan 28 (Reuters) - DuPont's quarterly profit doubled, beating market estimates, as its strong push into agriculture paid off, and the chemical maker said it would buy back $5 billion in stock.

Strong insecticide sales in Latin America and the earlier- than-usual shipment of seeds to farmers in Brazil and North America helped the company's agriculture unit buck seasonal weakness and post its first profitable fourth quarter in four years.

DuPont's decision to repurchase shares come amid increasing investor pressure at chemical companies to increase shareholder value by divesting volatile businesses.

Activist investor Daniel Loeb is urging rival Dow Chemical Co to spin off its petrochemical unit and focus on specialty chemicals.

DuPont outlined plans in October to spin off its performance chemicals unit, which has weighed on results since 2012, after Nelson Peltz's Trian Fund Management took a stake in the company.

Peltz has said shares of DuPont, the largest U.S. chemical maker by market capitalization, are undervalued but has not set out any plans for the company.

"Our $5 billion share repurchase program reflects ongoing confidence in our plan to continue increasing the value of DuPont for shareholders in 2014 and beyond," Chief Executive Ellen Kullman said on Tuesday.

DuPont expects to repurchase $2 billion of its shares this year.

Shares of DuPont, a Dow Industrial Average component, were down less than a percent at $59.92 in late morning trading on Tuesday.

MORE SPIN OFFS?

Part of DuPont's strategy to concentrate on growing its high-margin agriculture business includes spinning off the performance chemicals unit.

Hiving off the unit, which makes materials used in non-stick cookware, refrigerants and a white pigment used in toothpastes sunscreens, would shield the rest of the company from volatile commodity prices.

But Wall Street analysts and investors also want DuPont to spin off its agriculture, food and nutrition businesses into a separate unit.

"I think the management is committed to shareholder friendly acts ... We would think there is more to come, but they may not come as fast as some people want," said Jack Murphy, a portfolio manager at hedge fund Levin Capital Strategies that owns DuPont's stock.

DuPont could look at hiving off other businesses such as its electronics and communications unit, said Stephen Hoedt, senior equity research analyst with Key Private Bank.

"(The unit) has been a bit more commoditized in recent quarters and they want to keep their focus on specialty chemicals ... so that's one that could come up for discussion," he said.

Fourth-quarter operating earnings more than doubled at the electronics and communications unit, which makes metal paste used in solar products among other things. The rise was the second highest among DuPont's seven businesses.

The biggest rise was at DuPont's agriculture business, which is benefiting from rising demand for fertilizers, seeds and pesticides caused by an expanding global population, particularly in Asia.

The unit, which is newer than DuPont's other six businesses, was the company's biggest by sales in the fourth quarter. Operating profit was $88 million, compared with a loss of $77 million a year earlier, as seeds typically shipped in the first quarter were sold in the fourth quarter.

Because of the timing of the shipments, the company now expects first-quarter sales and margins in the unit to be "essentially flat".

PROFIT BEATS

DuPont said it expects full-year operating earnings to rise 8-15 percent to $4.20-$4.45 per share. The company expects 2014 sales to inch up 4 percent to about $37 billion.

Analysts on average expect DuPont to earn $4.31 per share, on revenue of $38.05 billion in 2014, according to Thomson Reuters I/B/E/S.

The company's outlook for the year reflects an expectation for continuing improvement in global industrial production, lower agricultural input costs, and a slightly stronger U.S. dollar, DuPont said in a statement.

DuPont expects 2014 earnings to rise substantially only in its small industrial biosciences business, with earnings at all units expected to be flat or up "moderately", according to a presentation on the company's website.

"Even with the new share repurchase activity, the guidance for 2014 is still only in line with expectations," said John Roberts, who leads U.S. chemical coverage at UBS Investment Research.

Net income attributable to DuPont rose to $185 million, or 20 cents per share, in the fourth quarter ended Dec. 31, from $92 million, or 9 cents per share, a year earlier.

Operating earnings per share were 59 cents per share, ahead of analysts average expectations of 55 cents per share.

Net sales rose 6 percent to $7.75 billion.

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