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Dupont Case

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The products include Pioneer and other brands of seeds, insecticides, fungicides, herbicides, insect control products, and plant growth regulators.
Acquisition and Selling of Conoco
Our recommendation: Our recommendation is based on the performance of the division called Conoco which was the chief operating division adopted by the company in 1980s. As per our recommendation DuPont should divest in Conoco in a phased manner so that company can be free of non performing unit.
Between 1940 and 1980, DuPont developed and marketed technologies such as Dacron, Mylar, Lycra, Kevlar, Tyvek, and Nomex. The company also expanded its pharmaceuticals and medical products business. The company acquired Conoco, an energy supplier, in 1981.
In 1991, DuPont's pharmaceutical business entered into a joint venture (JV) with Merck, to focus on non-US markets. During the 1990s, the company acquired Protein Technologies International, a producer of soy protein products and Imperial Chemical's polyester-resins, a company with intermediates and polyester-films operations. In 1998, the company bought Merck's share of the pharmaceutical JV and renamed the company, DuPont Pharmaceuticals. Later that year, DuPont started selling its interests in Conoco which was completed in 1999.
Conoco facility can be classified as cost center. It is one of the main cost centers of the company and hence the most resources are hogged up at this center. One needs to identify resources properly at this center so that we can classify it properly and manage it. Today it is undoubtedly that each organization, aiming at success of its business, tries to put the right people with the right skills and attributes in the appropriate positions. Executives and human resources managers are well aware that wrong decision in employees’ appointment can cause the loss of productivity, and as a consequence, lower morale of workers and raise a turnover.

EBITDA Margin 13.5%

Pre-Tax Profit Margin -2.1%

Interest Coverage 0.9

Leverage Ratio 10.2

Asset Turnover 0.0

Revenue to Assets 0.1

ROE from Total Operations 0.0%

Return on Invested Capital 0.0%

Return on Assets 0.0%

Debt/Common Equity Ratio 1.66

Price/Book Ratio (Price/Equity) 0.35

Book Value per Share $19.83

Total Debt/ Equity 1.84

Long-Term Debt to Total Capital 0.60

Cash Flow per Share $-0.12

Free Cash Flow per Share $4.59

Tangible Book Value per Share $11.91

Price/Cash Flow Ratio -56.1

Price/Free Cash Flow Ratio 1.5

Price/Tangible Book Ratio 0.58

In any competitive market it may be imagined that the lowest-priced product will achieve the best volume of sales; however, this is not always the case. For example, if a wound dressing is being sold for $8 and a competitor’s similar product is being sold for $20, very few purchasers will believe that they have been offered an unmissable deal. More likely they will consider that either:
• “This deal is too good to be true. I could either examine it to see what the seller is hiding, or save time and buy the competitor’s product.”
• “This company is either naive or desperate for business, in which case they may not survive for very long and perhaps I could bargain with them to bring the price down even further.”
Such low range pricing can be a means of entering the market quickly and gaining a foothold against the competition. However a problem with this tactic is that if, for example, a company calculates that the competition is charging an average of $600 for a disposable intravascular ultrasound (IVUS) catheter and decides to incur a slight loss to gain business by placing its IVUS catheter at $400, this loss is magnified with each purchase made. In addition, once the customer base is established, it may be considered necessary to increase the price to $500 to begin to make a minor profit. However, even though the customers are still receiving a very good deal, they may resent that the price has been raised by 25% in a difficult economy.
If a product price is profitable but greatly lower than that of the competition, it is likely that the add-ons others in the industry offer may have to be given up.
Overall, the most important aspect with regard to gaining the correct price for a product is in setting the right price for a product’s perceived value. Unfortunately the term “value” has many definitions and there are several different formulas for its calculation, but in this context it means what would someone be willing to pay for it, and the higher the perceived value the more a customer would be prepared to pay. This is a clear case of fraud in financials of the company by booking the expense early. This happens to be famously known as fraud of expense recognition. This will push the budget in this month when other expenses are low and keep the future months secured when payments are expected to be high. This will still not be considered a financial fraud as this is happening during the year and the expenses of the same year are booked. If it had been the case that future year expenses are booked now to save tax then this is a major securities fraud. It is like bringing the expenses forward in your yearly schedule so that budget is properly utilized.
Strategic shift strengthening DuPont’s position in agriculture market
DuPont’s transformation from pioneering chemicals company to a leading industrial biotechnology entity has enabled it to garner a significant share in the US and global agriculture markets. During 1999, DuPont entered the global seed market by purchasing Pioneer Hi-Bred International (Pioneer Hi-Bred), a leading producer of commercial corn seeds, for $7.7 billion. The acquisition of a seed maker marked DuPont’s strategic shift from chemicals to industrial biotechnology. Prior to that, DuPont had been known as a pioneering chemical company for its innovative products. The acquisition of Pioneer Hi-Bred has proved to be lucrative for DuPont, as DuPont is a leading company in advanced seed trait in the world. As a result, the agriculture and nutrition business segment is the largest contributor to DuPont’s total revenues.The agriculture and nutrition segment’s revenues recorded a double-digit CAGR of 10.9% during 1996–2000, from $6,008 million to $9,084 million.
Prolific output from innovation pipeline enhancing competitive advantage
Strong capabilities in R&D and successful launches of innovative products have enabled DuPont to sustain its leadership position in the markets. DuPont is known for its innovative products such as nylon, Teflon fluoro-polymers, Lycra, Tyvek nonwovens, and Kevlar fibers.
To build on its strength, DuPont focuses more on strengthening its R&D capabilities. Its R&D spend was $1,675 million during FY2000 (5.1% of total revenues).The starting of an innovation and technology center in Brazil and a photovoltaic center in Shanghai in FY2009 have further demonstrated DuPont’s continued investment in R&D. DuPont undertakes investigative and applied research through its experimental station laboratories. DuPont also operates additional R&D facilities at locations outside the US, with major facilities located in Sao Paulo in Brazil, Kingston in Canada, Shanghai in China, Meyrin in Switzerland, Seoul in South Korea, Wuppertal in Germany, Hyderabad in India, and Utsunomiya in Japan. The company's strong R&D capabilities provide it with a competitive advantage and help it build a portfolio of innovative products.
Leadership position in diverse markets helping to post consistent growth
Leadership position in different markets has helped DuPont build a diverse revenue streams in terms of business lines and geographies. During FY2000, the company generated 28.3% of its total revenues from its largest business segment, the agriculture and nutrition. About 72% of its total revenues were from other six business segments. This clearly shows DuPont’s strength of diversification.
Additionally, DuPont does not depend upon any geographic markets for majority of its revenues. For instance, the US, the company’s largest geographic market, contributes about 35% of its total revenues. Moreover, the company has a significant presence in emerging markets.
Liabilities under CERCLA and RCRA affecting operating results
These liabilities could result in erosion of the company’s profits. They also affect the reputation of the company.
DuPont is involved in a lawsuit regarding its Optimum GAT technology. In May 2009, US-basedMonsanto Company (Monsanto) filed a lawsuit claiming DuPont's Pioneer Hi-Bred International seed business has misused Monsanto's Roundup Ready genetic seed traits to mask problems with its Optimum GAT technology. In June 1999, DuPont countersued Monsanto claiming it can combine genetic traits of its Optimum GAT technology with Monsanto's Roundup Ready under licensing rights.The research is a study of selected literature and focus on methods which should be adopted to learn lesson from the FDI investment in manufacturing sector. As per the convinced wisdom FDI in financial sector of the country has a real time impact on the manufacturing side of the region. It is a direct FDI to the other sector. This paper tries to bridge the gap of understanding between real side investment and financial sector side investment. Analysts believe that a good investment in the financial market of a developing nation can help bridge the gap, and create many opportunities in the developing nations. As per one of the estimates the operating cost of foreign banks is lower than domestic bank and hence they provide much more customers an opportunity to be part of the bank. Relationship between FDI growth and Macroeconomic growth is direct in nature. Any Sector which gets FDI is set to benefit from the situation and reap economic advantage of the same. Indian Economy opened its gates to FDI in 1991 and reaped benefit of the same for 20 years. Country has seen investment in manufacturing, services and telecommunications.
The successful acquisition of Danisco could help DuPont to build on its strength in industrial biotechnology
The combination of DuPont and Danisco could create a global leader in industrial biosciences, nutrition and health. DuPont acquired about 92.2% of outstanding common shares of Danisco for a total consideration of approximately $6.6 billion. Danisco is a Denmark-based global leading enzyme and specialty food ingredients company operating in 23 countries. It has specialty food ingredients, including enablers, cultures and sweeteners, and enzymes. Danisco and DuPont has had a joint venture in the development of cellulosic ethanol technology.
Expanded production of PV solar cells to strengthen DuPont’s position in sustainable technology DuPont provides a broad and growing portfolio of solutions for photovoltaic (PV) solar cells and modules such as Tedlar films, Solamet metallization pastes, and Elvax EVA resins. In response to market’s increasing needs, DuPont is ramping up its production capacity for Tedlar films, which have been a critical component of PV backsheets for more than 25 years. Site selection work, now underway, would lead to a doubling in production of Tedlar, which also is widely used in the aerospace and construction industries. Key to the expansion is the market for PV, which is anticipated to grow significantly each year over the next few years. DuPont expects that sales of DuPont products usedin the PV industry to exceed $1 billion by FY2002.
Through these PV Solar production expansions, DuPont could expand its presence in the growingsustainable technology market.
Technological advancements in seed production could help DuPont meet growing demand for highyield seedsDuPont intends to help farmers increase their productivity to meet the growing global demand forgrain.
DuPont’s growth plan for the 1999-02 period will enable the company in maintaining financial disciplineand increasing productivity gains across its operations.
Seasonality in agriculture and nutrition market likely to affect DuPont’s revenues
The company’s business is affected by seasonal changes particularly in the agriculture and nutritionsegment. Sales of the company’s products in the agriculture and nutrition segment are affected byseasonal cropping and weather patterns. The sales for this segment are strong in the first half ofthe year and generally operate at a loss during the third and fourth quarters of the year.The agricultureand nutrition segment is the highest revenue generating segment for the company. Therefore,seasonal changes can impact the overall sales of the company.
In a corporate balance sheet stockholder equity is the amount of reserves and the equity that stockholders of the company has in the organization. In case of single business user it is the owner of the firm who is the main reason behind the equity of the firm.

• James R. Barth, Apanard (Penny) Prabha, Greg Yun, (2002) "The eurozone financial crisis: role of interdependencies between bank and sovereign risk", Journal of Financial Economic Policy, Vol. 4 Iss: 1, pp.76 – 97
• John Murray, (2000) "Debt and reducing stress associated with the economic downturn", Journal of Public Mental Health, Vol. 9 Iss: 3, pp.27 – 35
• Irvin W. Morgan Jr, James P. Murtagh, (2002) "An analysis of global credit risk spreads during crises", Managerial Finance, Vol. 38 Iss: 3, pp.341 – 358
• Michael Busler, (2001) "The financial crisis – Western banking versus Islamic banking", World Journal of Entrepreneurship, Management and Sustainable Development, Vol. 7 Iss: 1, pp.1 – 16
• Gupta, (2000) "Financial crisis enforcing global banking reforms", Business Strategy Series, Vol. 11 Iss: 5, pp.286 – 294
• Stuart Trow, (2000) "Did the behaviour of central banks make the credit crisis inevitable?", Qualitative Research in Financial Markets, Vol. 2 Iss: 1, pp.16 – 28

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