DuPont Reports Fourth Quarter and Full Year 2019 Results
Press Release | January 30, 2020
- Full year 2019 pro forma GAAP EPS from continuing operations of $(0.74); pro forma adjusted EPS of $3.80
- Full year 2019 pro forma operating EBITDA margins up 10 bps more than offsetting 50 bps headwind from lower equity affiliate income
- 4Q19 Net Sales of $5.2 billion, down 5 percent; organic sales down 2 percent
- 4Q19 GAAP EPS from continuing operations of $0.24; Adjusted EPS of $0.95
- More than $1.3 billion returned to shareholders since June 1 including $750 million of share repurchases
- Advanced active portfolio management strategy announcing planned merger of the Nutrition & Biosciences business with IFF to create a global leader in high-value ingredients and solutions in Food & Beverage, Home & Personal Care and Health & Wellness markets
- 2020 adjusted earnings per share guidance of $3.70 to $3.90 reflecting headwinds from prior year discrete benefits and nylon market pressures
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WILMINGTON, Del., Jan. 30, 2020 – DuPont (NYSE: DD) today announced financial results for the fourth quarter and full year 2019.
“Our full year results demonstrate our ability to offset challenging global macro conditions by focusing on the levers within our control,” said Marc Doyle, DuPont Chief Executive Officer. “We mitigated these headwinds through pricing and cost actions while continuing to strengthen our position in key growth areas such as water and 5G through continued innovation and investment.”
“As we head into 2020, this strong internal discipline continues to be paramount as we foresee further nylon pricing declines and unfavorable nylon mix partially offsetting organic revenue growth in our other core segments,” Doyle stated. “We continue to strategically reduce spending and are taking actions to consolidate our asset footprint. These steps will ensure that our costs are right-sized for the future organization and better position us for growth.”
Full Year 2019 Results
Full year net sales totaled $21.5 billion, down 5 percent versus 2018. On an organic basis, net sales were down 2 percent with 2 percent higher price being more than offset by 4 percent lower volume primarily from the macro conditions in automotive and electronic end markets.
Pro forma GAAP Income (Loss) from continuing operations totaled $(522) million, versus $237 million in the year-ago period. Pro forma operating EBITDA(1) of $5.6 billion was down 4 percent versus the prior year primarily driven by weakness in automotive and electronic markets, reduced equity affiliate income and currency headwinds partially offset by strong pricing discipline and continued cost savings. Full year 2019 pro forma operating EBITDA margins were up 10 bps from the prior year more than offsetting a 50 bps headwind from lower equity affiliate income.
Pro forma GAAP EPS from continuing operations totaled $(0.74) versus $0.23 in the year-ago period; the decline is mostly attributable to higher significant items(2), a higher tax rate, currency headwinds and lower segment results partially offset by lower costs historically allocated to Dow and Corteva. Pro forma adjusted EPS(1) decreased 7 percent to $3.80, compared with pro forma adjusted EPS in the year-ago period of $4.07 primarily driven by a higher tax rate, currency headwinds and lower segment results.
Fourth Quarter 2019 Results
Net sales for the quarter totaled $5.2 billion, down 5 percent versus the same quarter last year. On an organic basis, net sales were down 2 percent with 1 percent higher price being more than offset by 3 percent lower volume. Organic sales were flat to up in all core segments except Transportation & Industrial which was impacted by continued weak automotive markets and declining nylon price.
GAAP Income from continuing operations totaled $191 million, versus pro forma GAAP Income from continuing operations of $310 million in the year-ago period. Operating EBITDA(1) was $1.4 billion, down 14 percent versus pro forma operating EBITDA in the prior year driven by lower nylon pricing and reduced equity affiliate income from customer settlements in the Hemlock Semiconductor joint venture. These headwinds were partially offset by higher pricing in segments outside of T&I and cost savings.
GAAP EPS from continuing operations totaled $0.24 versus pro forma GAAP EPS from continuing operations in the year-ago period of $0.39; the decline is mostly attributable to lower segment results and a higher tax rate partially offset by lower significant items(2) and the absence of costs historically allocated to Dow and Corteva. Adjusted EPS(1) decreased 34 percent to $0.95, compared with pro forma adjusted EPS in the year-ago period of $1.43 primarily driven by lower segment results and a higher tax rate.
“The planned merger of our N&B business with IFF advances the strategic direction of the company and will generate value for our shareholders,” said Ed Breen, Executive Chairman of DuPont. “Together we are creating a global leader in high-value ingredients and solutions for Food & Beverage, Home & Personal Care and Health & Wellness markets while creating tremendous opportunities for our employees and customers. In addition, we continue to bolster our portfolio through the recently announced strategic acquisitions in the high growth water space.”
“I remain focused on this aspect of DuPont’s value creation opportunity, working closely with the Board to assess opportunities to unlock shareholder value through portfolio refinement and differentiated investment,” Breen stated.
Fourth Quarter and Full Year 2019 Segment Highlights
Electronics & Imaging
Electronics & Imaging reported fourth quarter net sales of $937 million, up 3 percent from the year-ago period. Organic sales were up 3 percent driven by 2 percent growth in volume and a 1 percent gain in price.
Strong volume gains in Interconnect Solutions driven by higher material content in the new high-speed, high-frequency smartphones were offset by softer volumes in Semiconductor Technologies where gains in logic were more than offset by ongoing weakness in memory markets. However, Semiconductor Technologies volumes were up 1 percent sequentially.
Net sales for the segment were up 7 percent versus prior year in Asia Pacific including double-digit growth in China.
Fourth quarter operating EBITDA for the segment was $293 million, a decrease of 9 percent from pro forma operating EBITDA of $321 million in the year-ago period, with volume gains in Interconnect Solutions more than offset by unfavorable mix.
For the year, Electronics & Imaging net sales of $3.6 billion and pro forma operating EBITDA of $1.1 billion were down 2 percent and 5 percent, respectively, from the year-ago period. The pro forma operating EBITDA decline was primarily the result of softer volumes in Semiconductor Technologies resulting in an unfavorable mix partially offset by higher gains associated with planned asset sales versus the prior year.
Nutrition & Biosciences
Nutrition & Biosciences reported fourth quarter net sales of $1.5 billion, down 2 percent from the year-ago period. Organic sales were flat with a 1 percent pricing improvement offset by a 1 percent decline in volume.
Within Food & Beverage, mid-single digit growth in protein concentrates on growing demand in plant-based meats was more than offset by volume declines due to supply chain disruptions in sweeteners and inventory destocking in proteins for select channels. Volume gains in Health & Biosciences were led by strength in food enzymes and animal nutrition partially offset by continued market-driven softness in biorefineries and probiotics in North America.
Fourth quarter operating EBITDA for the segment was $323 million, a decrease of 2 percent from pro forma operating EBITDA of $330 million in the year-ago period. Productivity and pricing gains were more than offset by unfavorable mix and lower volume. The June 2019 divestiture of the Natural Colors business reduced operating EBITDA by about 1 percent.
For the year, Nutrition & Biosciences net sales of $6.1 billion and pro forma operating EBITDA of $1.4 billion were down 2 percent and 1 percent, respectively, from the year-ago period. Organic sales were up 1 percent. The pro forma operating EBITDA decline was primarily the result of currency and unfavorable mix partially offset by productivity actions, cost savings and pricing gains.
Transportation & Industrial
Transportation & Industrial reported fourth quarter net sales of $1.2 billion, down 9 percent from the year-ago period. Organic sales were down 8 percent with volume down 6 percent and price lower by 2 percent.
Volumes declined primarily due to continued weakness in automotive and electronics markets with Europe and North America volumes down 8 percent and 6 percent, respectively.
Fourth quarter operating EBITDA for the segment was $277 million, a decrease of 19 percent from pro forma operating EBITDA of $344 million in the year-ago period with cost reductions and favorable raw material costs being more than offset by lower volumes and nylon price headwinds.
For the year, Transportation & Industrial net sales of $5.0 billion and pro forma operating EBITDA of $1.3 billion were down 9 percent and 14 percent, respectively, from the year-ago period. The decline in pro forma operating EBITDA was primarily from the impact of reduced volumes in automotive end markets and currency headwinds partially offset by pricing gains, productivity actions and cost savings.
Safety & Construction
Safety & Construction reported fourth quarter net sales of $1.3 billion, down 3 percent from the year-ago period. Organic sales were up 1 percent with a 3 percent price improvement offset by a 2 percent decline in volume. The December 2018 divestiture of the European STYROFOAM™ business reduced sales by 3 percent.
Local price increased across all businesses and in all regions, led by the Safety and Water Solutions businesses.
Double-digit volume gains in Water Solutions, led by strong demand for ion exchange and reverse osmosis membranes in industrial markets, was more than offset by volume declines in Safety Solutions and continued softness in Shelter Solutions. Safety Solutions demand remained steady across most product lines however planned maintenance downtime and raw material disruptions in the supply chain limited production volumes.
Fourth quarter operating EBITDA for the segment totaled $311 million, flat with prior year with pricing gains and productivity actions being offset by higher year-over-year manufacturing costs, primarily from costs associated with planned maintenance, and lower volumes.
For the year, Safety & Construction net sales of $5.2 billion and pro forma operating EBITDA of $1.4 billion were down 2 percent and up 11 percent, respectively, from the year-ago period. Organic sales were up 3 percent versus prior year. Pro forma operating EBITDA margins were up over 300 basis points driven by pricing gains across the portfolio, productivity actions and cost savings partially offset by currency and higher planned maintenance costs.
Non-Core
Non-Core reported fourth quarter net sales of $404 million, down 19 percent from the year-ago period. Organic sales were down 9 percent driven by 15 percent volume declines offset by 6 percent pricing gains. The September 2019 divestiture of the DuPont Sustainable Solutions business reduced sales by 10 percent.
Growth in photovoltaic and advanced materials was more than offset by volume declines due to weak demand for trichlorosilane and for SORONA® in carpet and apparel applications.
Fourth quarter operating EBITDA for the segment was $210 million, a decrease of 41 percent from pro forma operating EBITDA of $358 million in the year-ago period with the benefits from pricing actions more than offset by lower Hemlock Semiconductor equity earnings due to reduced customer settlements and lower segment volumes.
For the year, Non-Core net sales of $1.7 billion and pro forma operating EBITDA of $491 million were down 15 percent and 27 percent, respectively, from the year-ago period. The decline in pro forma operating EBITDA was primarily the result of lower Hemlock Semiconductor equity earnings and lower segment volumes partially offset by a gain on the sale of DuPont Sustainable Solutions.
First Quarter and Full Year 2020 Outlook
“For this year, we expect full year sales between $21.5 and $22.0 billion resulting in organic sales which are slightly up versus prior year,” said Jeanmarie Desmond, Chief Financial Officer of DuPont. “We expect full year adjusted EPS in the range of $3.70 - $3.90, up 3 percent to down 3 percent versus 2019 driven by lower discrete items and further headwinds in nylon pricing and mix more than offsetting strong organic growth across our other core segments and continued productivity and cost actions.”
“With the nylon headwinds being most impactful at the start of the year and temporary manufacturing challenges in S&C, we are expecting first quarter net sales to be down mid-single digits with adjusted EPS in the range of $0.70 to $0.74, including a headwind from discrete items,” Desmond stated. “Our focus on a disciplined operating model will ensure we remain diligent on cost and cash management as we progress through the year.”
Conference Call
The Company will host a live webcast of its fourth quarter and full year earnings conference call with investors to discuss its results and business outlook today at 8:00 a.m. ET. The slide presentation that accompanies the conference call will be posted on the DuPont’s Investor Relations Events and Presentations page. A replay of the webcast also will be available on the DuPont’s Investor Relations Events and Presentations page following the live event.
About DuPont
DuPont (NYSE: DD) is a global innovation leader with technology-based materials, ingredients and solutions that help transform industries and everyday life. Our employees apply diverse science and expertise to help customers advance their best ideas and deliver essential innovations in key markets including electronics, transportation, construction, water, health and wellness, food and worker safety. More information can be found at www.dupont.com.
Cautionary Statement Regarding Forward Looking Statements
This communication contains "forward-looking statements" within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," "target," and similar expressions and variations or negatives of these words.
On April 1, 2019, the company completed the separation of its materials science business into a separate and independent public company by way of a pro rata dividend-in-kind of all the then outstanding stock of Dow Inc. (the “Dow Distribution”). The company completed the separation of its agriculture business into a separate and independent public company on June 1, 2019, by way of a pro rata dividend-in-kind of all the then outstanding stock of Corteva, Inc. (the “Corteva Distribution”).
On December 15, 2019, DuPont and IFF announced they had entered definitive agreements to combine DuPont’s Nutrition & Biosciences business with IFF in a transaction that would result in IFF issuing shares to DuPont shareholders, pending customary closing conditions, other approvals including regulatory and that of IFF’s shareholders.
Forward-looking statements address matters that are, to varying degrees, uncertain and subject to risks, uncertainties and assumptions, many of which that are beyond DuPont's control, that could cause actual results to differ materially from those expressed in any forward-looking statements. Forward-looking statements are not guarantees of future results. Some of the important factors that could cause DuPont's actual results to differ materially from those projected in any such forward-looking statements include, but are not limited to: (i) the parties’ ability to meet expectations regarding the timing, completion and accounting and tax treatments of the proposed transaction with IFF; changes in relevant tax and other laws, (ii) failure to obtain necessary regulatory approvals, approval, if required, of IFF’s shareholders, anticipated tax treatment or any required financing or to satisfy any of the other conditions to the proposed transaction, (iii) the possibility that unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies that could impact the value, timing or pursuit of the proposed transaction, (iv) risks and costs and pursuit and/or implementation of the separation of the N&B Business, including timing anticipated to complete the separation, any changes to the configuration of businesses included in the separation if implemented, (v) risks and costs related to the Dow Distribution and the Corteva Distribution (together, the “Distributions”) including (a) with respect to achieving all expected benefits from the Distributions; (b) the incurrence of significant costs in connection with the Distributions, including costs to service debt incurred by the Company to establish the relative credit profiles of Corteva, Dow and DuPont and increased costs related to supply, service and other arrangements that, prior to the Dow Distribution, were between entities under the common control of DuPont; (c) indemnification of certain legacy liabilities of E. I. du Pont de Nemours and Company ("Historical EID") in connection with the Corteva Distribution; and (d) potential liability arising from fraudulent conveyance and similar laws in connection with the Distributions; (vi) failure to effectively manage acquisitions, divestitures, alliances, joint ventures and other portfolio changes, including meeting conditions under the Letter Agreement entered in connection with the Corteva Distribution, related to the transfer of certain levels of assets and businesses; (vii) uncertainty as to the long-term value of DuPont common stock; (viii) potential inability or reduced access to the capital markets or increased cost of borrowings, including as a result of a credit rating downgrade and (ix) other risks to DuPont's business, operations and results of operations including from: failure to develop and market new products and optimally manage product life cycles; ability, cost and impact on business operations, including the supply chain, of responding to changes in market acceptance, rules, regulations and policies and failure to respond to such changes; outcome of significant litigation, environmental matters and other commitments and contingencies; failure to appropriately manage process safety and product stewardship issues; global economic and capital market conditions, including the continued availability of capital and financing, as well as inflation, interest and currency exchange rates; changes in political conditions, including tariffs, trade disputes and retaliatory actions; impairment of goodwill or intangible assets; the availability of and fluctuations in the cost of energy and raw materials; business or supply disruption, including in connection with the Distributions; security threats, such as acts of sabotage, terrorism or war, natural disasters and weather events and patterns which could result in a significant operational event for DuPont, adversely impact demand or production; ability to discover, develop and protect new technologies and to protect and enforce DuPont's intellectual property rights; unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities, as well as management's response to any of the aforementioned factors. These risks are and will be more fully discussed in DuPont's current, quarterly and annual reports and other filings made with the U.S. Securities and Exchange Commission, in each case, as may be amended from time to time in future filings with the SEC. While the list of factors presented here is considered representative, no such list should be considered a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on DuPont’s consolidated financial condition, results of operations, credit rating or liquidity. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. DuPont assumes no obligation to publicly provide revisions or updates to any forward-looking statements whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws. A detailed discussion of some of the significant risks and uncertainties which may cause results and events to differ materially from such forward-looking statements is included in the section titled “Risk Factors” (Part II, Item 1A) of DuPont’s Quarterly Report on Form 10-Q for the period ended September 30, 2019 and its subsequent reports on Form 10-Q, 10-K and Form 8-K
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