DuPont Profit Nearly Triples; Sales Rise

asia.reuters.com Tue January 28, 2003 10:20 AM ET

WILMINGTON, Del. (Reuters) - DuPont Co. DD.N , the No. 2 U.S. chemical company, on Tuesday said fourth-quarter profit, excluding a huge one-time gain a year earlier for selling its drug business, nearly tripled with stronger sales of everything from nylon and spandex to automotive paint.

Including the gain, its net earnings fell sharply.

DuPont, whose chemicals are used to make products ranging from Stainmaster carpets to Teflon coatings, has been cutting jobs and closing plants for the past two years to cope with soaring energy prices and lower spending by manufacturers. It has already announced plans to eliminate at least 5,500 jobs.

Now the company -- a component of the Dow Jones industrial average -- says it is starting to see "modest growth" in many of its businesses and its revenue for the quarter rose about 8.6 percent to $5.68 billion.

DuPont is not entirely in the clear, however. Chemical prices are still relatively depressed, pension expenses are up and energy costs have been climbing steadily higher as the United States has made preparations for a possible war with Iraq.

Unless business or world events change dramatically, the company said its earnings in the first-quarter would be similar to what they were a year ago, which would be below most current analysts' estimates.

But after a recent warning that its fourth-quarter earnings would fall short of expectations, the company actually reported profit that surpassed many forecasts.

Net income fell to $350 million, or 35 cents a share from $3.92 billion, or $3.82 per share a year ago, when its results were heavily influenced by a huge gain from the sale of its pharmaceuticals business.

Stripping out one-time items, profit rose to $345 million, or 34 cents a share, from $124 million, or 12 cents a share, a year ago. Its fourth-quarter earnings were 2 cents a share above the Thomson First Call consensus forecast.

Shares of DuPont were up 31 cents at $38.77. During the fourth quarter, they rose more than 17 percent, outperforming the Dow Jones, which increased nearly 10 percent during the same period.

EQUITY WRITEDOWN

DuPont, whose total sales are slightly below Dow Chemical Co.'s DOW.N , is not the only chemical company trying to dig out of a long downturn in the chemical market. Smaller rivals PPG Industries PPG.N and Rohm and Haas Co. ROH.N lowered fourth-quarter profit expectations before this month's earnings season, blaming continued weak demand.

Although DuPont showed signs that sales were rising from the depressed levels of a year ago, the entire industry still must deal with high energy costs. Crude oil and natural gas are key components of raw materials used in the industry, and energy prices over recent weeks have been bolstered by concerns about the possibility of U.S. military action in Iraq and a workers strike in Venezuela.

The other threat to DuPont's earnings is increased pension and other postretirement benefit costs. Largely to reflect a decline in the market value of its pension assets, DuPont said it will reduce stockholders' equity by about $2.5 billion after-tax. It also said the combined impact of pension and other postretirement expenses will lower 2003 earnings by 34 cents to 39 cents a share, compared to the prior year.

At the moment, the company expects 2003 first-quarter earnings per share to be roughly similar to prior-year earnings, before special items, when it earned 55 cents a share. Current estimates range from 53 cents to 70 cents a share, with an average of 64 cents.