DuPont Profit Up, but Shares Fall on Cautious Outlook
DuPont said Tuesday that first-quarter profit rose 26 percent, spurred by robust demand for its biotech seed offerings and crop protection chemicals, but shares fell due to a cautious outlook from the chemicals maker.
Growing food demand from developing countries and global mandates for the increased use of biofuels have led to soaring grain prices that have encouraged farmers to use more high-yielding biotech seeds, while also increasing their use of fertilizers and crop protection chemicals.
DuPont affirmed its second-quarter and full-year outlooks, while cautioning that weakness in the United States is likely to weigh on strong overseas growth through the rest of 2008.
"It will be more challenging the rest of the year, but we're still predicting a 4 to 8 percent overall earnings improvement for the year, and a 10 percent earnings improvement for the first half, which we think, under these conditions, is very good," DuPont Chairman and CEO Charles Holliday, Jr. told "Squawk Box."
Net income rose to $1.19 billion, or $1.31 a share, from $945 million, or $1.01 a share, a year earlier.
Analysts on average were expecting $1.29 a share, according to Reuters Estimates.
The company's profit also benefited from strong growth in Europe and Asia Pacific, which helped offset major volume declines in the United States, where the construction and automotive industries are slumping.
"The highlight was the 6 percent (in) price increases and the lowlight was the 5 percent decline in U.S. volumes," said Soleil Securities analyst Mark Gulley.
Quarterly net sales rose 9 percent to $8.58 billion, matching Wall Street's forecast, as improved pricing and a weak dollar outstripped the impact of slightly lower volumes and flat sales in the United States.
"Our investments in agriculture and emerging markets enabled us to capitalize on robust growth in those areas which, when combined with gains from our productivity improvement programs, more than offset higher ingredient costs and weakness in certain U.S. markets," said Holliday, in a statement.
The Wilmington, Delaware-based company had raised its outlook for the first quarter twice in recent weeks, on the back of solid demand for its biotech seed offerings.
"What we're finding is, our new products are paying off for us," Holliday said. "We had 297 new products introduced in the first quarter, over a hundred of those in agriculture, and so our pricing has been very strong, because we're able to bring our customers what they needed."
"We had a margin expansion of one percentage point in the first quarter, and given these economic conditions, with oil going up, we're very proud of what our people have accomplished, but it was our innovation, our focus on science, that made that happen," Holliday said.
DuPont expects full-year earnings of $3.40 to $3.55 per share, excluding items. Wall Street is expecting $3.48.
The company also affirmed its second-quarter earnings outlook of about $1.05 per share, slightly below analysts' expectations of $1.09.
Soleil's Gulley said the second-quarter forecast reflects some of DuPont's typical conservatism, but is also linked to the fact that 12 percent of the company's global sales come from the U.S. housing and automotive markets.
DuPont sells products like Tyvek, Corian and powder coatings that are used in housing, while it is also a major supplier of paints, coatings and other systems used by the automotive industry.
DuPont is being cautious in its outlook due to a slow start to the U.S. corn planting season and the uncertainty around raw material costs, which have risen rapidly due to soaring crude oil prices, said Chief Financial Officer Jeffrey Keefer, on a conference call.
Edward Jones analyst Daniel Ortwerth said the Wall Street's expectations for the second-quarter may have run ahead of themselves following DuPont's recent increases of its first-quarter outlook.
"I am seeing everything I want to see. I am seeing the continued investment in global expansion, speed of new product development and excellent productivity programs," said Ortwerth.
--CNBC contributed to this report.