April 25, 2011
DuPont''s high volumes increase Q1 profit
DuPont Co. increased this year''s earnings after having double-digit sales which enhanced first-quarter earnings.
This caused executives to strongly encouraged shareholders of a Danish takeover target to think about its offer.
The chemical company is attempting to buy Danish food additives maker Danisco for nearly US$6 billion, but said it would pursue other opportunities if needed.
CEO and chairwoman Ellen Kullman said that DuPont''s offer was full, fair and firm, and that the company''s shareholders are debating between a solid offer and the chance that they will lose the opportunity to do so.
DuPont reported a net income of US$1.43 billion, or US$1.52 per share, for the quarter that ended March 31, up from US$1.13 billion, or US$1.24 per share, for the first quarter of last year.
That easily beat analysts'' average prediction for US$1.37 per share, according to FactSet.
Revenue jumped 18% to US$10 billion, with DuPont marking its fifth consecutive quarter of pricing gains. Results were partly offset by a US$171 million pretax decline in pharmaceutical income because of expiring patents.
Dupont, based in Wilmington, Del., increased its full-year earnings guidance to a range of US$3.65 to US$3.85 per share, up from US$3.45 to US$3.75 per share.
"Our top-line growth and productivity results support our confidence in raising the full-year earnings outlook,'''' said Kullman.
Despite the strong quarterly performance, early market reaction was muted, with the company''s shares dropping US$0.20 in midday trading before rebounding to approximately US$0.54 at US$55.91.
An analyst said DuPont turned in an exceptional quarter, but he maintained his hold recommendation on the stock amid concerns about rising raw material cost.
"We think that could begin to start weighing on profitability," the analyst said, adding that DuPont may soon be unable to pass on higher raw material costs to customers like it has in the past.
DuPont''s outlook excludes the impact of any deal with Danisco, which the company said could trim full-year earnings by US$0.30-0.45 per share.
Last month, Moody''s Investors Service and Standard & Poor''s Ratings Services gave favourable ratings to DuPont''s US$2 billion bond offering to help finance the US$5.8 billion buyout. That could change after the deal closes, however, because of the debt load the company would take on.
DuPont''s acquisition of Danisco would increase exposure to markets for alternative fuels such as ethanol, for which Danisco products also are used.
DuPont chief financial officer Nick Fanandakis said that DuPont will continue to hunt for other acquisitions if the Danisco deal falls through.
"I think there is probably a little frustration that maybe some of the Danisco shareholders have not jumped aboard a little faster'','' said the analyst.
However, Fanandakis said he was confident that the deal will close; pointing out that final regulatory approval was not received until last week.
Meanwhile, DuPont saw sales jump 30% in Latin America and 28% in the Asia-Pacific region in the first quarter.
Among the company''s business platforms, volume growth was led by a 14% increase in the safety and protection unit and 13% gain in the agriculture and nutrition segment.