The DuPont Co. said Tuesday that it will cut about 1,500 jobs and take other steps to increase its competitiveness, after weak demand for a key industrial pigment and uncertainty in the solar panel market led to a sharp drop in third-quarter earnings.
The chemical company, based in Wilmington, reported net income of $10 million, or a penny per share, compared with $452 million, or 48 cents per share, for the same period last year. Excluding one-time items, DuPont earned 44 cents per share, compared with 69 cents per share for last year's third quarter. Revenue from continuing operations totaled about $7.4 billion, down 9 percent from $8.1 billion.
The results fell short of analysts' estimate of 46 cents per share, according to FactSet. DuPont shares fell 9 percent in Tuesday trading, contributing to a broad market decline.
CEO Ellen Kullman attributed the disappointing results to weaker-than-expected demand for titanium dioxide — a whitening pigment used in products ranging from paint and plastics to toothpaste — and overcapacity and uncertainty in the market for photovoltaic solar energy products.
"I view that as two very specific issues," Kullman said. She noted that volumes were up by 3 percent year-over-year, excluding the business units that produce titanium dioxide and solar materials.
Edward Jones analyst Jeff Windau said that while third-quarter results were disappointing, DuPont continues to shift its focus to higher growth, higher margin businesses such as agriculture and nutrition and biotechnology.
"I think it's more broad economic issues than a company-specific issue," he said. "Overall, it was a rough quarter, but I think they are taking the necessary steps to move long-term into some of those faster growing businesses that will help them in the future," Windau added.
In the meantime, DuPont is working on a restructuring plan that Kullman said will deliver pretax cost savings of about $450 million. It includes eliminating some $230 million in residual costs related to the divestiture of its performance coatings unit and finding $220 million in savings in response to weak macroeconomic conditions.
Kullman said the restructuring includes eliminating about 1,500 positions globally over the next 12 to 18 months. The cuts involve streamlining headquarters and corporate staffs that supported the performance coatings unit, which produces automotive and industrial paints. It's being sold for $4.9 billion to The Carlyle Group, a private equity firm.
The 1,500 job cuts, coupled with the divestiture of some 11,000 jobs in performance coatings, would leave DuPont with a global workforce of about 57,500, down from about 79,000 at the end of 2002.
Beginning with the third quarter, DuPont classified the performance coatings business as discontinued operations and excluded it from continuing operations results on a retroactive basis. The company reported a loss from continuing operations of $40 million, or 5 cents a share for the quarter, compared with a gain of $376 million, or 39 cents per share, in the prior year. Excluding one-time items, third-quarter earnings from continuing operations totaled $302 million, or 32 cents per share, down from $579 million, or 60 cents per share, last year.
DuPont said it remains on track to achieve its full-year 2012 productivity targets for both fixed costs and working capital. It expects 2012 earnings from continuing operations, excluding significant items, to range from $3.25 to $3.30 per share, compared with prior-year earnings of $3.55 per share on a comparable basis.
For the quarter, volumes were down in all regions, except Latin America, led by a 10 percent decline in the Asia-Pacific region. Volume declines and currency effects led to sales declines worldwide, with sales dropping 15 percent in Asia-Pacific and the Europe, Middle East and Africa region.
Sales in the electronics and communications business, which includes solar products, were down 28 percent, with volume declining 20 percent. Kullman said trade sanctions in the solar panel market, including U.S. tariffs on Chinese-made solar panels and an antidumping investigation of Chinese manufacturers by European regulators, have created uncertainty among suppliers and customers.
The performance chemicals unit, which posted record titanium dioxide volumes in last year's third quarter, saw an 18 percent decline in volume and 19 percent drop in sales.
DuPont's agriculture and health and nutrition businesses remained among the company's bright spots, posting sales gains of 4 percent each.
DuPont shares closed down $4.51, or 9 percent, at $45.25. The stock has changed hands between $43.06 and $57.50 in the past 12 months, and is now down about 1 percent since the start of the year.