DuPont reported a second-quarter net loss of $1.1 billion due mainly to the impact of $1.7 billion in charges related to asset impairment, restructuring, and the separation of Dow and Corteva. Net sales for the quarter were $5.5 billion, down 7% year on year (YOY).
Segment results were flat. The company reported operating EBITDA of $1.4 billion, same as the year-ago quarter, as higher price and cost savings were offset by lower volume, negative currency impacts, and higher cost of goods sold. Strength in probiotics, water, safety, aerospace, and healthcare end markets helped offset “ongoing softness in our short-cycle businesses,” including automotive; electronics, particularly semiconductor- and smartphone-related business; and US residential construction, says DuPont CEO Mark Doyle.
Net sales on an organic basis were down 3%, with 2% higher pricing more than offset by 5% lower volumes. Reported adjusted earnings of 97 cts/share were up 9% YOY and 11 cts above consensus analyst estimates as reported by Zacks Investment Research. “In the face of weaker-than-expected market conditions, our teams delivered on our bottom-line commitments by driving both cost and pricing actions resulting in operating EBITDA margin improvement of 170 basis points in the quarter,” Doyle says.
The company raised the lower band of full-year adjusted earnings guidance to $3.75–3.85/share, compared with previous expectations of $3.70–3.85/share. The company expects organic net sales to be slightly down for full-year 2019 compared with previous expectations of a 2–3% gain.
Segment results
DuPont’s electronics and imaging segment reported operating EBITDA of $246 million for the quarter, a decrease of 15% YOY driven primarily by lower volumes and an unfavorable product mix more than offsetting cost savings. Segment sales of $858 million were down 7% YOY. Volume gains in display technologies were more than offset by softer volumes in semiconductor technologies and interconnect solutions.
Nutrition and biosciences operating EBITDA was $391 million, an increase of 2% YOY with cost savings and pricing gains more than offsetting higher raw materials costs, currency headwinds, and lower volumes. The segment reported net sales of $1.6 billion, down 4% YOY. Volume gains in health and biosciences were more than offset by softer volumes in food and beverage and pharma solutions.
Transportation and industrial operating EBITDA was $357 million, a decrease of 11% YOY with pricing gains and cost savings more than offset by lower volumes and currency headwinds. Reported net sales of $1.3 billion were down 10% YOY. Segment volumes declined 12% due to lower autobuilds, primarily for the China market, weak electronics demand, and continued destocking in both the automotive and electronics channels. Europe and Asia volumes were down mid-teens as China tariff concerns coupled with inventory destocking impacted demand, DuPont says.
Safety and construction operating EBITDA totaled $382 million, an increase of 29% YOY led by strength in the water and safety solutions businesses. Segment net sales of $1.3 billion were down 2% YOY. High-single-digit volume gains in the water solutions business were mostly offset by lower volumes due to continued softness in North America residential construction demand. Safety solutions volumes were flat with the year-ago period driven by capacity constraints in Tyvek and aramid product lines.
Noncore divestitures on track
The noncore segment reported operating EBITDA of $99 million, a decrease of 20% YOY primarily driven by lower volumes. The noncore segment reported net sales of $442 million, down 16% YOY. Volume declines were driven by weak demand for trichlorosilane due to historically low polysilicon pricing and lower paste sales into electronic component end markets. Volumes in the biomaterials business were lower versus the same quarter last year primarily from a slowdown in the US residential carpet market.
DuPont said earlier this year that it would pursue a possible sale of the noncore businesses, which include photovoltaic and advanced materials; biomaterials; clean technologies, a supplier of sulfuric acid and clean air technologies; and its stake in polysilicon maker Hemlock Semiconductor, a joint venture with Corning and Shin-Etsu. The noncore segment also includes DuPont’s safety consulting business and the DuPont Teijin Films joint venture. DuPont executive chairman Ed Breen said today that the divestiture process for noncore assets is under way and that it expects to announce some agreements by the end of the calendar year.
By: Robert Westervelt
Source: Chemical Week
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