DowDuPont profits slim as split costs increase
As costs in preparation for its three-way split increase, DowDuPont Inc. reported Thursday that its third-quarter profit rose less than 1 percent.
The world's largest chemical maker posted a net income of $535 million for the quarter. Profit attributable to shareholders, however, decreased 3 percent to $497 million with diluted earnings per share of 21 cents, down 34 percent.
Net sales increased about 10 percent to $20.1 billion. Sales were up in all regions and its three divisions, benefitted by overall 5 percent rises in volume and local prices.
Integration and separation costs for the company rose 88 percent to $666 million. Its selling, general and administrative costs increased 49 percent to $1.5 billion.
"As our divisions advance toward separation, they continue to build out the structure and features necessary to their future successes," DowDuPont CEO Ed Breen said on a call with analysts. "Each of them continues to make progress to their best-in-class cost structures."
DowDuPont, created last year from the merger of Dow Chemical Co. and DuPont Co., plans to split into three separate companies by June 1. The first spinoff, plastics maker Dow, is expected April 1 and will be headquartered in Midland. Specialty products business DuPont and agriculture business Corteva Agriscience will be based in Wilmington, Delaware.
The materials science division saw increases in all regions and most segments. Sales rose 13 percent to $12.4 billion, driven by 7 percent local price growth and 6 percent volume growth. Its industrial intermediates and infrastructure, however, experienced a 3 percent drop in pre-tax earnings due to increasing raw material and an unexpected outage at a facility on the Gulf Coast.
Specialty products saw an increase in sales by 8 percent to $5.7 billion with gains in all regions and most segments. The acquisition of FMC Corp.’s Health & Nutrition business and strong demand for transportation and advanced polymers boosted volume 3 percent and local prices 2 percent. Electronics and imaging, however, had flat sales with revised Chinese incentive policies reducing demand for certain products.
The agriculture division netted $1.95 billion in sales, a 2 percent increase. An 8 percent volume increase from new products and an early planting season in Latin America as well as a 3 percent price gain from crop protection boosted sales.
Company leaders shared the target investment ratings for the spinoffs. Dow's is BBB, indicating having an adequate capacity to meet financial commitments, with $3 billion in cash and adjusted $28-$31 billion in debt. DuPont's and Corteva's ratings were slightly higher at BBB+ and A-, respectively.
DowDuPont also revealed the first members of the executive boards for the three companies. The chemical maker said it was increasing its cost savings efforts and starting an initiative to repurchasing shares, as well.
DowDuPont stock is down 24 percent over the past year. It was up more than 4 percent to $56.25 each in pre-market trading Thursday.