Chemical maker DuPont posted higher quarterly earnings, meeting Wall Street forecasts as it benefited from stronger coatings profits and a one-time gain from taxes and insurance recoveries.
DuPont, like other large chemical companies, has been hurt by higher raw materials costs, particularly natural gas, but the Wilmington, Delaware-company has moved to insulate itself by
focusing on higher margin specialty chemicals.
"We really liked what we saw at DuPont. The company is in the first inning of a transformation away from a commodity orientation," said Jim Russell, director of core equity strategy at Fifth Third Asset Management, where he helps invest $22 billion.
"Earnings were good, and we look forward to margins benefiting in 2007 from lower raw material costs," he added.
Net income rose to $871 million, or 94 cents a share, from $154 million, or 16 cents a share, a year earlier including $449 million from tax settlements and insurance recoveries.
Excluding significant items, earnings increased to 45 cents a share from 13 cents, matching analysts' average forecast of 45 cents a share, according to Thomson Financial.
Net sales climbed 8% to $6.3 billion. About half that increase was due to higher sales prices and currency effects, the company said, offsetting declines in the United States.
The company, whose products range from Kevlar suits to hybrid seeds, reiterated its 2007 forecast for earnings per share of about $3.15, with growth outside the United States expected to top U.S. increases. Costs likely to be steady with 2006.
DuPont said it aimed to save more than $400 million in 2007 from productivity improvements designed to offset inflation and contribute to spending in growth areas.
Seeds of Growth
Much of that growth is expected to come from its seed business, where competitor Monsanto has widened its market leading position in the high-margin genetically-modified segment in recent years.
DuPont cut spending at its crop protection and nutrition business to focus on seeds, and made some headway in regaining market share in the seed business in the Southern Hemisphere in
the fourth quarter, said Hassan Ahmed, analyst with HSBC.
"They've lost so much over the last five years it should be relatively easy for them to regain some of that" in 2007, he said.
Worldwide sales volumes grew by 4%, primarily from increases in engineering and packaging polymers, elastomers and crop protection and seed products outside the United States.
The coatings and color technologies unit posted an operating profit of $282 million, up from $153 million a year earlier, when it suffered from the impact of Hurricane Katrina.
Coatings also saw a 31% jump in the sales of the pigment titanium dioxide and a gain on the sale of assets.
Shares of DuPont have risen about 27% in the last six months, outstripping a 19% gain for the Standard and Poor's Chemicals Index.