E.I Du Pont Nemours
Principles of Management
MGT 212 Nathan Butterbaugh December 2011

I. Purpose/Objective Through an in depth analysis of DuPont I plan on utilizing the principles and concepts studied throughout the textbook to break down the structure and provide a tangible valuation on how management works to stimulate the future growth of the company. With a tough several years embroiled in a downturned economy, a focus will be put on how DuPont has responded and adapted through its management style and implementation of strategies to maintain profitability and realign themselves with the market.

II. Introduction/ History E. I. Du Pont De Nemours was founded in 1805 and was incorporated in Wilmington Delaware in 1915. The company first produced high-grade powder used in explosives. However, by the early 1900’s, the company shifted their focus to chemicals and energy to meet escalating needs by consumers and businesses. Today, DuPont is a world leader in science and innovation across a range of disciplines, including agriculture and industrial biotechnology, chemistry, biology, materials science and manufacturing. As of December 2010, according to the annual 10-K, DuPont employs over 60,000 people, amassed revenue of 322.7 billion with profits of just over 3 billion. The company has a diversified portfolio of business segments that range from seed production to auto paint-coatings and even pharmaceuticals. Ellen Kullman was introduced as the new CEO in 2009 and the since then the company has embarked on a mission of sustainability and capitalizing on agricultural efficiency in order to become a major player in that field as global population growth continues. In line with this vision, in 2010, DuPont consummated its acquisition of Dansico, a leading technology oriented company with strong research and application development on the biotechnology front. With core competencies in specialty food ingredients and biofuels, and an infrastructure of more than 7,000 employees operating in 23 countries, the move positions DuPont as the clear leader in industrial biotechnology. (See pg. 2 of 10-K) DuPont has recently switched its structure to the seven separate reportable segments that it has today. This was implanted in order to allow the segment leaders the ability to make more strategic decisions on day to day operations to be more responsive to market trends that facilitate growth in market share. DuPont realized that by giving the autonomous business unit leaders more oversight and responsibility they were more readily active to the pulse of the market on a real time basis. Allowing them to make strategic decisions and not become stymied by the flow of information down the chain of management. “Based upon the reaction of the stock analysts to its recent senior management shifts, it is not only a remarkably well managed company but has a corporate culture that facilitates the development and retention of superb managerial depth throughout the entire enterprise” (Seid, 2011).

III. Business/Management Structure DuPont is broken into 13 businesses that are grouped in 7 reportable segments including Agriculture and Nutrition, Electronics & Communications, Performance Chemicals, Performance Coatings, Performance Materials, Safety & Protection, and Pharmaceuticals. Presiding over these segments is the CEO and the eleven board members who comprise the Board of Directors. The positions of CEO and the Chairman of the Board are held by the same person, unless circumstances specify otherwise. The role and responsibility of the board is to direct corporate policy to the segments providing oversight of management and stewardship of resources in order to enhance long-term value for the company and its shareholders. The first business segment is Agriculture and Nutrition, This segment's mission is to identify methods to improve the quantity, quality, and safety of the global food supply through manufacturing insecticides, fungicides, herbicides, and plant food. This segment includes Pioneer Hi-Bred International, a wholly owned subsidiary and the world's largest producer of seeds. (pg. 27 of 10-K) This segment's core markets are the production agriculture and food processing industries. (pg.8 Annual Review) Agriculture is a key driver of future growth for Dupont, which said in June 2010 it will focus on expanding seed production to boost global agriculture productivity. In the second segment the Electronics & Communications focuses on growth as a leading supplier of enabling materials and systems for photovoltaics, consumer electronics, flat panel displays, advanced printing and other electronic applications worldwide. (pg 20 of Data Book) This business unit provides materials for the electronics industry, inks and printing systems, fluoropolymer and fluorochemical products, displays, and alternative energy products. DuPont Electronic and Communication Technologies is a large supplier of materials for plasma displays (pg. 28 of 10-K). Price increases were driven by increases in the cost of raw materials and favorable changes in US dollar exchange rates. This segment's core markets include the semiconductor, automotive, displays, commercial packaging and printing, HVAC, telecommunications, and chemical processing industries. (pg. 8 of Annual Review.) The Performance Coatings segment supplies motor vehicle coatings. It is the world's largest manufacturer by volume of titanium dioxide products, a material used in paint, plastics, and paper. (pg.28 of 10-K) This segment's core markets are the automotive, paper, industrial coatings, transportation, architectural coatings, and plastics industries. Performance Materials, This business unit manufactures high performance polymers, elastometers, films, and other material components. The decrease in volume was driven by an overall reduction in inventory in anticipation of a protracted period of weak global demand from the 2008 recession and extended facility shutdowns from Hurricanes Gustav and Ike. Key markets for the Performance Materials segment include the automotive, packaging, electronics, construction, and consumer durables industries.(pg.33 of 10-K) Safety and Protection, This business unit provides scientific-based safety products such as Kevlar, Tyvek, Nomex, and Corian. DuPont Safety and Protection also provides consulting services to assist organizations in reducing workplace injuries and operating costs. (pg.34 of 10-K) For 2009, the company's management saw sales tempered by the global recession, with demand for Kevlar and Nomex increasing moderately, offset by weakness in the motor vehicle industries. Key markets for this segment include the military, homeland security, transportation, construction, energy, and protective apparel industries DuPont does not manufacture and distribute its own pharmaceutical products. Rather, the company's pharmaceutical segment income is based on its licensing interest in two drugs for the treatment of high blood pressure, Cozaar and Hyzaar, manufactured and distributed by Merck (pg. 3 of 10-K). The exclusivity period for these drugs was set to expire in 2010, The Company expects income to continue to step-down each year to zero when the contract ends, which is expected to be after 2012. In general, management expects a traditional sales, earnings and cash decline for a drug going off patent in the pharmaceutical industry. (pg. 34 of Data Book)

IV. Corporate and Company Level Strategies DuPont’s mission revolves around one central theme which is sustainable growth, and the company’s mission statement demonstrates how the company exemplifies this through their business practices; “Sustainable Growth: Increasing shareholder and societal value while reducing our environmental footprint along the value chain in which we operate”. ("Sustainable Growth," 2011) DuPont has had a long lineage of sustainable business practices that have helped create the company they are today. Starting in 1930 DuPont made its first statement on environmental responsibility leading into the 1970’s where they enacted the first policy on the matter. By the 1990’s DuPont was challenged by leadership to update the environmental policy and enhance the goal of sustainability. DuPont worked with a number of organizations on what became the Safety, Health, and Environmental Commitment. “It committed us to the goal of zero injuries, illnesses, incidents, waste, emissions, and use of depletable forms of raw material and energy” ("Sustainable Growth," 2011). By putting science to work in a constructive and environmentally conscience way, DuPont has been able to foster growth within their business segments without having to compromise their mission for sustainability. By going well beyond compliance the management of the company has been able to better align environmental performance with public expectations. “Our vision is to be the world's most dynamic science company, creating sustainable solutions essential to a better, safer and healthier life for people everywhere” "Sustainable Growth," 2011). DuPont’s vision statement coalesces nicely with the ission of the company as well, as they strive to blend pr `oductivity and profitability as a science company with health, safety and sustainability. With Innovation at the heart of what DuPont does, creating value through sustainability is not a distant concept but rather an immediate reality given the extraordinary breadth of industries and market driven approach wich makes DuPont well positioned to help deliver solutions that can impact the world. Yet to achieve such a high reaching status DuPont must be effective at every task they have to deal with, and this means streamlining to acclimate themselves with the market. Productivity and quality improvements are fundamental to achieving sustainable growth. “DuPont increases productivity by streamlining and standardizing supply chains and support functions globally to generate both cost and working capital savings.” DuPont as company works off their platform of sustainable growth to help achieve and bolster their core competencies in the fields of: Chemical Science and Catalysis, Leveraged Technologies, Biology, Material Science and Engineering, Process Science and Engineering, as well safety and the environment. But overall DuPont’s core competency is in its culture, one that is so strong that it permeates throughout the company. With an exceptional core belief in the ethical conduct of business, DuPont operates based on its belief of fairness in the marketplace, managerial discipline and diligence that looks for ways that do not force others to lose for them to win at their expense. With more than 200,000 customers worldwide, meeting their needs is a top priority, and it is this singular focus on the consumer that aligns partners as customers. With a prudent eye for the environment, safety and ethical business practices DuPont functions on the day to day operations side of its competencies in much the same way. By taking concepts and ideas to come up with commercially viable products that appeal to a market sector that is willing to pay more for an enhanced, more durable and quality driven product.

V. External Industry Analysis - SWOT A significant external influence that has been on the forefront as of recent has been growth of technology footprint in China, India and Brazil as DuPont is hoping to capture the tremendous growth in those areas. “We leverage our knowledge and experience, enhance our technical service capability, upgrade supply chains and our route to market, while continuing to develop local talent,” said Tony Su, DuPont president - Greater China. “As we build in new capabilities in China, we begin to develop offerings specifically tailored to local market needs” Su added. In 2005 DuPont opened a brand new R&D center in Pudong, Shanghai with more recent R&D expansions in 2010 to Paulinia, Brazil, and Hyderabad, India. By positioning themselves in rapidly expanding markets and drawing from their diverse range of core technologies, DuPont is hoping to capture and maintain the unique capability to integrate scientific disciplines to address some of the world’s most complex challenges. (PR Web, 2010) A second more detrimental external influence is the expiration of two government patents on Cozaar and Hyzaar, Hypertension drugs whose licensing fees provided a billion dollars in pretax operating income in 2008 and over 22% of revenue overall. With no corresponding cost reductions and virtually no cost required to generate these earnings, DuPont will face reductions directly to earnings per share and cash flow from operations. With this loss DuPont will have to find alternative revenue streams to in order to replace and replicate the income from the pharmaceuticals. Seen as a stalwart champion for environmental reform in the workplace DuPont faces another pressing external influence in the form of reducing their dependence on fossil fuels. Given their stance on the issue and the fact that DuPont is seemingly overexposed to commodity cost fluctuations it is a natural influence. Since the company uses oil as a raw material in the production of plastics, and utilizes natural gas as fuel to build their products, significant price fluctuations in oil or natural gas will disproportionately impact the company’s profits. Increased raw material cost can sometimes be passed off onto the customer to offset the issue, but other times that is not the case, and it is these instances, as well as the escalating cost associated with them, that will drive DuPont to further explore alternative energy sources. The final external influence to be discussed is broader as it deals with DuPont’s sources of capital that drive business demand, by navigating through the troubled financial market. DuPont has historically had a stable company profile producing an array of products that have met high quality standards, and have proven to be relatively profitable and innovative. This proven track record gives investors reason to stay the course through the turbulent economic waters, because DuPont’s operation is modeled to adapt to changing business climates and has successfully remained profitable in hard times. This is why their sources of capital have reminded strong, as cost cutting measures are implemented to stimulate their cash position, which in turn holds up their credit worthiness. Seen as DuPont’s largest competitor across the breadth of its market segments is BASF, the biggest chemical company in the world. DuPont competes with BASF on many fronts as they have several overlapping market segments. BASF much like DuPont, largest business segments include Plastics (24% of sales), Chemicals (22%), Oil and gas (20%), performance products (19%) and agriculture (10%). In June of 2009 both companies filed suit against each other U.S. District Court in Delaware, seeking to enforce intellectual property rights to biotechnology traits, including those that provide tolerance to ALS herbicides. Each believed the other to have infringed on patents related to biotechnology used in herbicides that were being produced by the respective companies. The suits were dropped in January of 2010 and cross-license agreements were made, but with two company’s so close in structure and market segments it’s hard to see DuPont and BASF staying out of each other’s way for long. Dow Chemical also competes with DuPont, seen most heavily in the specialty chemicals segment and agricultural products, while also offering some opposition in the performance chemicals and materials field. DuPont latest acquisition in Dansico has given them the leg up on the agricultural side, but the company can’t let down and must continue to innovate and grow to capture more market share that can be hard to regain if ground is lost.

Weaknesses
Strengths
S W.O.T. Analysis * Leading market position

* Strong R&D capabilities

* Diversified revenue stream

* Great sources of credit based on historical cash strong position

* Administrative action

* Legal proceeding

* Patents ending on Pharmaceuticals

Opportunities
Threats
* Technological advancements

* Growing photovoltaic (PV) solar energy market

* Aging global population and increasing healthcare spending

* Expansion of Animal Health Solution

* Business in Asia

* Business in Asia * Economic slowdown in the US and the European Union

* Risks associated with conducting business outside the US * Environmental regulations

VI. Organization in the News
DuPont CEO says agriculture a "tremendous" opportunity Reuters.com, October 13th 2011 Summary: DuPont has now shifted R&D priorities of its business in order to realize the big growth opportunities that could lay ahead in the agricultural sector as food needs escalate and the population is projected to expand by 30 percent over the next 40 years. DuPont’s agricultural business include seeds, crop chemicals, food packaging, protection and specialty food ingredients, with sales already accounting for 43 percent of pretax earnings. With DuPont’s subsidiary Pioneer Hi-Breed, the largest seed crop producer in the world, and now with the acquisition of Dansico, the leader in food ingredients and biofuels, DuPont could see their agriculture related business earnings growth to half of their total earnings. Analysis:
DuPont stands behind its commitment to continue to seek growth opportunities within its agricultural market segment in order to keep up with population increases and the growing demand of food. With Previous acquisition of Pioneer Hi-Bred (largets producer of seed and corn and many other crops) and new acquirement of Dansico (biofuels) DuPont is in prime position with all the right tools to capture market share. With an economy that is struggling to regain its footing, rising fossil fuel prices which are taking their toll on DuPont’s commoditized industries and fierce competition, makes the agricultural market segment the last bastion of resurgence the diversified bio chemical giant needs.

Good Timing: What DuPont Gains by Buying Innovalight renewableenergyworld.com, July 26th 2011 Summary: DuPont’s acquisition of the Silicon Valley solar materials-technology start-up Innovalight is a welcome addition to its already burgeoning solar market segment. DuPont is already a known player in the solar field, producing certain solar pastes that come in contact with Innovalight’s silicon inks. Thus one of DuPont’s hopes is to optimize both so that when they are used together they can help increase efficiency. Coming at the opportune time as the price of solar components declines and manufacturers are looking to boast technological efficiencies and more willing to allocate greater resources. Innovalight and DuPont teamed together are both primed and aimed at the goal of breaking more ground in the silicon solar market, and have plans to be able to deliver 20 percent cell efficiency in the next two years. DuPont will retain Innovalight’s team and Burke, The CEO of Innovlight, will serve as general manager of what will be called DuPont Innovalight. Analysis: The acquisition is the latest endeavor by a startup solar company seeking a deep pocketed backer in order to be able to compete in the global marketplace, showing a current dominance by Chinese companies. When faced with the proposition of having to raise hundreds of millions of dollars in order to build and maintain its own factories, Innovalight turned instead former competitors to customers. On DuPont’s side of the equation they now have one more significant tool in their arsenal, and the financial capital to be able to extend short term ideas into long term growth. With one billion dollars in revenue from its solar market in 2010, they hope to double that in the span of just four years, which falls in line with their goal of exploiting emerging markets.

DuPont Is Said to Weigh $4 Billion Sale of Auto-Paint Unit Businessweek.com, October 28th 2011 Summary: Reports are that DuPont has hired Credit Suisse Group AG in order to help find a willing buyer for its estimated 4 million dollar auto-paint coatings division. The division was responsible for 12 percent of the company’s revenue last year, and 5.1 percent of operating income. With the worst pretax operating profit-margin of the company’s six divisions, the performance coatings segment is now waning in light of management. Mark Gulley, a New York- based analyst at Ticonderoga Securities, said “the margins are half the corporate average, so selling it would improve the portfolio of the company”. With a longstanding partnership with the US automotive industry and a doubling of their market share with several key acquisitions in 1999, DuPont seems to be looking to phase out the stalwart revenue generator of years past in favor of reallocating resources and efforts to key “megatrends”. Analysis: Some my question the prudence of selling such a long standing segment of the company that with key acquisitions holds a sizeable market share in that area. However, When Ellen Kullman became the CEO in 2009; the shift in business focus transitioned toward growth of “megatrends” emerging from the global population growth, improvement of food quality, agricultural productivity, cutting reliance on fossil fuels, and protecting the environment and people. By acquiring a biofuel and food ingredient company in Danisco, and attempting sell off their auto paint-coatings division DuPont showed that they are reallocating resources to try to capture the most market share in areas that will allow them to become a preeminent agricultural company. VII. Conclusion Through an in depth organizational analysis, E.I Du Pont Nemours has undergone recent reorganization of management structure that has allowed for a more streamlined approach to market trends, as well as making several pivotal acquisitions in nascent markets. It is these dedicated approaches to increasing efficiency and realizing key growth markets that were instituted by the management of the organization in order to ensure the long term success of the company. By allowing for autonomy in the business segments and their leaders, DuPont is able to better pinpoint strategic decisions that do not have to be filtered down and risk missing key opportunities. Management also plays a role in shaping and honing the business environment for its employees and tailoring that to a specific mission and vision, just as DuPont has done with their ingrained corporate culture and mission of sustainable growth. DuPont and its management functions in order to make sure all these elements are working in a synergistic manner that augments the flow of procedures along the value chain they operate.

Work Cited E.I Du Pont Nemours and Company: (2009). 10-K Annual Report 2010. Retrieved from DuPont investor relations website: http://phx.corporate-ir.net/phoenix.zhtml?c=73320&p=irol-irhome E.I Du Pont Nemours and Company: Annual Review 2010. (2010). Retrieved from: ‘ http://phx.corporate-ir.net/phoenix.zhtml?c=73320&p=irol-irhome DuPont. (2010, December 21). DuPont Expands R&D Presence in Key Growth Markets. Retrieved December, 2011, from PR WEB website: http://www.prweb.com DuPont Is Said to Weigh $4 Billion Sale of Auto-Paint Unit [News Article 2]. (2011, October 28). Retrieved December, 2011, from Bloomberg website: http://news.businessweek.com Seid, M. H. (2011). Corporate Culture DuPont Becomes a Franchisor [Article]. Retrieved December 2, 2011, from MSA Worldwide website: http://www.msaworldwide.com Stebbins, C. (2011, October 13). DuPont CEO says agriculture a "tremendous" opportunity [News Article 3]. Retrieved December, 2011, from http://www.reuters.com Sustainable Growth. (2011). Sustainable Growth . Retrieved December, 2011, from http://www2.dupont.com/Our_Company/en_US/glance/sus_growth/sus_growth.html Wang, U. (2011, July 26). Good Timing: What DuPont Gains By Buying Innovalight [News Article 1]. Retrieved December, 2011, from Renewable Energy World website: http://www.renewableenergyworld.com

DuPont CEO says agriculture a "tremendous" opportunity
* Food value chain, population growth boost outlook
* Majority of R&D spending now tied to agriculture
By Christine Stebbins
DES MOINES, Iowa, Oct 13 (Reuters) - U.S. chemicals giant DuPont (DD.N) sees big growth opportunities ahead in its agricultural sector as the world's population expands 30 percent and food needs double by 2050.
"As we take a look at the value chains and what is going on around the world with population growth, we see agriculture as being a tremendous opportunity," DuPont Chief Executive Officer Ellen Kullman told reporters here on Thursday during the World Food Prize meetings.
"I'm a big believer in the sector -- it's an important sector for us," she said.
DuPont subsidiary Pioneer Hi-Bred, acquired in 1999 and headquartered in Des Moines, is the world's largest producer of seed for corn and many other crops. It sells seeds in 90 countries.
Revenues from DuPont's agricultural businesses, which include seeds, crop chemicals, food packaging, protection and specialty food ingredients, accounted for 29 percent of its second quarter sales of $10.3 billion.
But agricultural sales accounted for 43 percent of the company's pre-tax earnings of $1.9 billion in the quarter.
Ag-related sales in the quarter, which ended June 30, rose 4 percent by volume with prices up by 6 percent, according to company documents.
Earnings from its agriculture-related products could grow to half of DuPont's revenues with its takeover of Danish food ingredients and biofuels maker Danisco.
That is a big change for the company that invented nylon and supplied gunpowder during World War I.
"We are really having a lot of fun as we integrate Danisco and seeing the power that having everything from seed all the way through specialty food ingredients can bring to that marketplace," Kullman said.
Kullman said DuPont now invests $1.7 billion annually on research and development, with more than 60 percent of that tied to crop and food production.
Of that, the single biggest portion goes to seed and biotech followed by crop protection chemicals, the company said.

Good Timing: What DuPont Gains By Buying Innovalight
By Ucilia Wang, Contributor
July 26, 2011 |
DuPont's acquisition of Innovalight, announced Monday, comes at an opportune time. The price of solar energy components and panels are falling quickly, and manufacturers are scrambling to cut costs in order to compete effectively. To do so, they are devoting more resources to technologies that can help them boost efficiencies more quickly than what they could come up with.
Innovalight has been taking advantage of that intensified competition, and its ability to line up some of the biggest solar cell makers in the world no doubt made it an attractive acquisition target for DuPont.
Innovalight, based in Sunnyvale, Calif., licenses the know-how of using its silicon ink to the solar cell production process. The company also sells the silicon ink, which has gotten accolades such as a R&D Magazine’s Top 100 innovation award.
“We see a great opportunity in this (market) climate we are in,” said Conrad Burke, former CEO of Innovalight and now the general manager of the newly created DuPont Innovalight. “The thrust is to improve conversion efficiencies and to improve the overall cost structure. That’s the proposition that DuPont and Innovalight will bring together."
DuPont declined to disclose the purchase price.
Silicon wafers deposited with its nano-size particles could boost the efficiency of monocrystalline silicon solar cells by an average of 0.8 percentage point, Burke said. The company’s announced customers include Yingli Green Energy, JA Solar, Motech and JinkoSolar.
Founded in 2002, Innovalight has received about $6.4 million in two federal grants to support its technology development. The company considered being a cell maker, but ditched the idea when the financial market tanked in late 2008. The licensing model seems to have served it well, particularly in the age of declining pricing and gross margin for solar cell and panel makers.
Monocrystalline silicon solar cells typically get around 17.5 percent efficiency these days, while the multicrystalline variety achieves 15-16 percent, Burke said.
The technology works for both mono- and multicrystalline silicon cells, but it yields a greater improvement for monocrystalline silicon cells, Burke said. He said the company’s technology is compatible with an emerging technology that produces a wafer with a section of pure monocrystalline silicon structure and a section with mixed mono- and multicrystalline silicon. The technology is supposed to make it possible to produce more efficient mono-crystalline wafers at the cost of crystalline silicon wafers. Suntech Power recently announced the commercialization of this technology, though it’s one of many companies — including JA Solar — that are developing it by using a patent that expired a few years ago.
DuPont already is a big player in the solar market. It’s known for its encapsulants and other materials for protecting solar cells from moisture and other environmental damage. The company also sells pastes for forming the metal lines that ferry electrons out of solar cells. Since Innovalight’s silicon ink comes in contact with the metal pastes during production, DuPont wants to work on optimizing both so that when they are used together, they can increase cell efficiencies at greater rates, said Rob Cockerill, business manager of DuPont Innovalight.
DuPont generated over $1 billion in revenue from its solar products in 2010, and it expects to reach $2 billion by 2014.
Burke declined to divulge the silicon ink production volumes or its efficiency-gain roadmap. Innovalight previously talked about pushing the cell efficiency to over 20 percent by 2012. DuPont, too, promises that using its products (not just the silicon ink) will deliver 20 percent cell efficiency in the next two years, Cockerill said.
Innovalight served the the silicon solar market before being bought by DuPont, and that focus will continue now that it’s part of DuPont. Burke said there is no plan to target the thin film solar market in which alternative materials, such as cadmium-telluride and copper-indium-gallium-selenide are used instead of silicon.
“We will focus on the biggest market opportunity,” Burke said.
The majority of solar cells made today use silicon, and during Intersolar North America earlier this month, some silicon players sounded confident that the trend will continue in the next 10 years.

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Bloomberg
DuPont Is Said to Weigh $4 Billion Sale of Auto-Paint Unit
November 08, 2011, 12:50 PM EST
Oct. 28 (Bloomberg) -- DuPont Co. is exploring a sale of its auto-paint division that may fetch as much as $4 billion, said people with knowledge of the matter, as the company focuses on faster-growing products such as food additives.
DuPont hired Credit Suisse Group AG to seek buyers for the so-called Performance Coatings division, said the people, who spoke on the condition of anonymity because the talks are private. Credit Suisse has yet to begin an auction process, the people said.
The estimated $3 billion to $4 billion value of the division includes a smaller powder-coatings unit that Wilmington, Delaware-based DuPont is selling separately, the people said. Greenhill & Co. is handling the sale of that piece of the business, which makes coatings for tractors and playground equipment, people with knowledge of that effort said earlier this month.
The performance-coatings operations accounted for about 12 percent of DuPont’s $31.5 billion in revenue last year and 5.1 percent of operating income. Coatings for refinishing vehicles accounted for almost $1.7 billion of sales last year, new-car coatings totaled $1.2 billion, and sales of powder and liquid coatings were about $950 million, according to DuPont.
‘Turnaround Story’
The pretax operating-profit margin was about 7 percent last year, the worst of DuPont’s six divisions and half the margin of the safety-and-protection division, which was the second-worst performing unit. DuPont executives said in December that they planned to boost operating profit in performance coatings to at least 10 percent of sales by 2012.
“Performance coatings is a turnaround story, with less emphasis on revenue growth and more on productivity and cash generation,” Chief Financial Officer Nicholas Fanandakis told investors at the Dec. 9 meeting.
Performance coatings will account for 10 percent of sales and 5 percent of earnings next year as the weak automotive sector continues to pressure margins, Mark Gulley, a New York- based analyst at Ticonderoga Securities, said by telephone today.
“The margins are half the corporate average, so selling it would improve the portfolio,” Gulley said.
Gregg Schmidt, a DuPont spokesman, declined to comment. A Credit Suisse spokesman also declined to comment.
Acquisition in 1999
DuPont nearly doubled its auto-paint business to become the industry leader in 1999 with the $1.9 billion acquisition of Herberts from Germany’s Hoechst AG. Other top producers of transportation coatings include Pittsburgh-based PPG Industries Inc., Ludwigshafen, Germany-based BASF SE, and Akzo Nobel NV, based in Amsterdam.
Ellen Kullman, who became DuPont’s chief executive officer in January 2009, is focusing DuPont’s growth on “megatrends” stemming from the growing global population: Improving food quality and agricultural productivity, cutting reliance on fossil fuels, and protecting the environment and people. She expanded this year in food ingredients and biofuel enzymes with the purchase of Danisco A/S for $7.1 billion including the assumption of debt.
DuPont rose 1.3 percent to $49.36 at the close in New York. The shares have declined 1 percent this year.
The U.S. auto industry has been a customer of DuPont since its inception, the company said on its website. DuPont, which also makes plastics for auto parts, supplied General Motors Co. in the 1920s with a spray-on coating that cut the weeks-long process of painting a car to six hours.
--With assistance from Jack Kaskey in New York and Andrew Noel in London. Editors: Steven Frank, Simon Casey.