(DD) Excerpts from DuPont’s Analyst Day

Chemical titan DuPont (DD) divulged its strategic and operational priorities for this year and beyond during its annual investor day in Wilmington, Del. Chairman and CEO Ellen Kullman highlighted three strategic priorities that are aimed at boosting shareholder value and driving multi-year sales and earnings.

Kullman noted that DuPont’s priorities are expansion of its leading footprint across the food value chain, reinforcing its leadership position as a provider of differentiated, high-value advanced materials, and development of leading industrial biotechnology capabilities. Boosting R&D returns will be a top priority.

DuPont reaffirmed, at the meet, its compound annual growth rate (CAGR) targets for sales and operating earnings per share of 7% and 12%, respectively. The company said that it is optimistic in achieving these long-term goals given its portfolio strength, scientific capabilities, global reach and strong execution. Prudent cost saving measures and new products will also help in achieving these targets.

DuPont has embarked on an aggressive cost-cutting strategy by reducing fixed costs, retrenching employees, restructuring work schedules and improving working capital productivity. The company expects pre-tax cost savings of at least $300 million from its restructuring measures in 2013. DuPont also has a bevy of new products in its pipeline that are expected to create value for its customers.

Nicholas C. Fanandakis, DuPont’s Vice President and Chief Financial Officer, presented long-term profit margin targets for each business segment at the meet. For the agriculture business, the company expects margins of as much as 24% and sales CAGR of up to 10%.

DuPont is witnessing strong momentum in its agriculture business and is seeing healthy demand for its corn hybrids. Strong planting activity by  growers across North and Latin America, product innovation, solid order book and healthy supply of seeds and crop protection products strongly positions DuPont in the agriculture market.

For both electronics and industrial biosciences franchises, long-term margins are expected to be as high as 18% while sales CAGR target has been pegged at up to 9%.

In electronics, DuPont expects to benefit from higher adoption of the organic light emitting diodes (OLED) technology for TVs and is well placed to capture incremental opportunities in consumer electronics and photovoltaic markets. For industrial bioscience, higher demand for enzymes in emerging geographies and increasing use of sustainable materials represents the driving factors.

The nutrition and health unit is expected to see margins and sales CAGR of as much as 14% and 9%, respectively. The rapidly growing specialty food ingredients market has been seen as an attractive opportunity.

For the performance chemical business, DuPont foresees margins and sales CAGR of as much as 20% and 5%, respectively. The division remains challenged by weak titanium dioxide market fundamentals. Lower pricing for titanium dioxide, which is used to give paint and other coatings a white hue, is hurting performance chemical results. Nevertheless, key growth drivers include expansion of Altamira pigment plant in Mexico and roll out of next-generation refrigerants.

DuPont’s performance materials business is expected to see profit margins of as much as 18% and sales CAGR of up to 5%. Healthy trends are being witnessed across packaging and light-weighting automotive.

Lastly, margins and sales CAGR for safety and protection has been set at as much as 23% and 7%, respectively. Increased infrastructure investments and product innovation are among key drivers for growth.

DuPont carries a Zacks Rank #3 (Hold).

Other companies in the chemical industry that are worth considering include Shin-Etsu Chemical Co., Ltd. (SHECY), Celanese Corporation (CE) and Methanex Corporation (MEOH). While Shin-Etsu Chemical retains a Zacks Rank #1 (Strong Buy), both Celanese and Methanex hold a Zacks Rank #2 (Buy).
CELANESE CP-A (CE): Free Stock Analysis Report

DU PONT (EI) DE (DD): Free Stock Analysis Report

METHANEX CORP (MEOH): Free Stock Analysis Report


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