Key Trends To Watch In DuPont’s Earnings

by Trefis Team
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DuPont (NYSE:DD) is scheduled to announce its earnings for the fourth quarter of 2012 on January 22. The chemicals company posted weak third quarter results with net sales declining 9.2% as overall volumes dropped 5% y-o-y. The decline was led by the company’s performance chemicals and electronics and communications segments. Its weak performance was primarily due to low TiO2 demand on the back of slowdown in infrastructure growth in Asia, specifically in China, and continuing weakness in the photovoltaic market due to oversupply.

Here we take a look at the key trends that would be impacting performance reports of the company’s key divisions this quarter.

See our full analysis for DuPont

Agricultural Science Products Division To Lead Sales Growth

Agricultural science products sales were up 4% y-o-y during the third quarter as 7% volumes growth was partially offset by lower prices due to unfavorable currency impact. We expect a good performance from this segment in the fourth quarter as well, primarily driven by strong volume growth from the southern hemisphere planting season and positive price impact backed by tight global grain stock scenario. However, investments in R&D and new product launches, coupled with currency headwinds are expected to put pressure on operating margins for the segment.

Low Demand For TiO2 To Impact Performance Chemicals

Performance Chemicals sales were down 19% y-o-y last quarter due to lower volume because of global weakness in demand for TiO2 and fluoropolymers. Demand for these products is highly correlated with growth and the performance of the infrastructure industry. Due to continuing weakness in the European economy and slower growth in Asia, we expect demand for these products to remain subdued. While TiO2 producers reduce existing inventory levels, revenues for the division this quarter are expected to be down significantly from the same period last year.

Soft PV Demand To Be Partially Offset By Growth In Consumer Electronics

Electronics & Communications revenues were down 28% y-o-y last quarter, primarily due to soft photovoltaic volume and lower silver cost pass-throughs. We expect the ongoing trend to impact the division’s results this quarter as well. Moreover, trade actions in the United States and investigations in Europe are creating a downward pressure on photovoltaic demand. Growth in the demand of consumer electronics, primarily fueled by growth in smartphones and tablets, is expected to partially offset the impact of soft PV demand, as we see revenues to be flat to negative for the division this quarter.

Cost synergies with Danisco to drive higher margins

Nutrition and Health segment sales were up 4% y-o-y in the third quarter on higher volume, reflecting strong demand for specialty food ingredients and Solae soy specialties. Although we expect modest sales growth despite unfavorable currency impact, earnings from the division are expected to be substantially higher as compared to same period last year due to benefits from continued cost synergies between Danisco and Solae. However, sequentially margins are expected to be under pressure due to higher raw material costs.

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