Long Ethylene Outage Hits DuPont's Earnings, but Performance Materials Spin-Off On Track

Researched by Industrial Info Resources (Sugar Land, Texas)--DuPont (NYSE:DD) (Wilmington, Delaware) reported its second-quarter net earnings rose 3% from a year earlier, but a lengthy maintenance outage at its Texas ethylene unit put a dent in its Performance Materials earnings. The company also reported its plan to spin off its Performance Chemicals segment remains on track.

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Industrial Info is tracking 44 DuPont projects in various phases that are worth about $1 billion, including grassroot plants, expansions, additions and maintenance.

Net income for the company, whose segments cover a wide range of businesses from Agriculture to Safety & Protection, totaled $1.07 billion, up by $40 million from the same quarter last year. Net sales fell 1.4% to $9.71 billion.

Sales volume growth in crop protection, nutrition and health, and most of the company's industrial businesses was offset by the impact of portfolio changes, a planned maintenance shutdown and lower corn seed volumes, according to the company. Operating earnings also dropped nearly 9% to $1.09 billion.

Operating earnings for DuPont's Performance Materials segment fell 9% to $303 million, largely as the result of 58-day maintenance shutdown at the company's ethylene unit in Orange, Texas. The planned shutdown offset performance polymers sales to global automotive markets.

"Absent that shutdown, segment operating earnings would have increased," DuPont executives said in a quarterly earnings statement.

DuPont Chair and CEO Ellen Kullman said during the company's earnings conference call that while the outage was expected to have an impact on earnings, the length of the shutdown was "sort of at the top of what we expected."

The maintenance project at DuPont's Sabine River Works site had a total estimated investment value of $20 million.

DuPont's sale of its glass laminating solutions/vinyls business to Japan's Kuraray late in 2013 was also cited as a factor in the Performance Material's earnings result.

The segment's third-quarter sales are expected to be flat, while operating income will rise slightly, according to the company forecast, but Kullman said she expects the picture to improve in the fourth quarter, citing continued growth in global automotive markets.

DuPont executives said that they expect to see third-quarter sales growth in all business segments, with the exception of the Performance Materials and Performance Chemicals segments, where sales will be flat.

DuPont's plan to spin off its Performance Chemicals segment into a separate company remains on track for mid-2015, Kullman said. Second-quarter sales by the segment amounted to nearly $1.7 billion, roughly 17% of total segment sales. The segment includes fluoropolymers, titanium dioxide (TiO2) pigment, refrigerants and surfacing materials.

The separation of the Performance Chemicals segment will result in a simplified support structure for DuPont and a smaller cost base, Kullman said, adding: "We anticipate we will achieve two thirds of the $1 billion in annual savings by the end of 2015 with the remainder by 2019."

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