DowDuPont formally reported strong` earnings and sales in the third quarter and announced plans for cost-cutting as work continues on splitting up the merged company into three pieces. The companies merged at the end of August.
The company will split up into Materials Science, Specialty Products and Agriculture. Specialty Products and Agriculture will be based in Delaware, with Materials Science headquartered in Michigan.
CEO Edward Breen said in an earnings call with analysts that the timeframe for the spin-offs may extend from 18 to 24 months after a previously announced reshuffling of businesses. He added that teams are working to expedite the process.
DowDuPont reported pro forma adjusted earnings per share of $0.55 increased 10 percent compared to the year-ago period. Pro forma adjusted earnings per share excludes significant items in the quarter.
Pro forma net sales increased to $18.3 billion, up 8 percent versus the year-ago period, led by gains in the Materials Science segments Industrial Intermediates & Infrastructure (16 percent), Packaging & Specialty Plastics and Performance Materials & Coatings (8 percent each), and the Specialty Products segments Transportation & Advanced Polymers (9 percent) and Safety & Construction (6 percent).
Sales rose double-digits in Europe, Middle East and Africa (16 percent) and in Asia Pacific (10 percent). Sales in North America grew 4 percent, while sales in Latin America declined driven by weakness in Agriculture due to expected lower corn area and a delayed start to the summer season in Brazil.
Highlights included:
- On September 12, DowDuPont announced certain targeted portfolio adjustments to the Materials Science and Specialty Products divisions to align with end-markets and enhance the competitive advantages of the intended companies.
- The Company started up its new ethylene and ELITETM enhanced polyethylene facilities, both in Freeport, Texas.
- On November 1, DuPont closed the divestiture of its cereal broadleaf herbicides and chewing insecticides portfolios, as well as certain parts of its crop protection R&D pipeline and organization to FMC, and closed its acquisition of FMC’s Health and Nutrition business.
- DowDuPont reiterated its commitment to the $3 billion cost synergy target and updated expectations by division: Agriculture – $1.0 billion; Materials Science – $1.2 billion; Specialty Products – $0.8 billion.
- The company began advancing its playbook to deliver $1 billion in growth synergies. For example, Agriculture will leverage its enhanced multi-brand, multi-channel approach designed to provide customers more value through broader choices and whole-farm solutions.
The cost cuts will come from procurement synergies, global workforce reductions, buildings and facilities consolidations and select asset shutdowns, among other activities.
“We delivered top- and bottom-line growth in the third quarter – a solid start for our newly-formed company. Our operating earnings increase was the result of broad-based demand growth in most of our core end-markets and disciplined margin management, which more than offset several headwinds, from multiple hurricanes to higher feedstock costs and a delayed start to the summer agriculture season in Brazil,” said Ed Breen, chief executive officer of DowDuPont. “Moreover, we delivered these results while advancing several value-creating initiatives, including: closing the merger, completing our comprehensive portfolio review, and defining the new synergy targets for each division. Going forward, you should expect us to remain focused on executing on our $3 billion cost synergy commitment and advancing preparations to create three focused growth companies in Agriculture, Materials Science, and Specialty Products.”
“Looking forward, DowDuPont has all the levers it needs to execute our near-term priorities: delivering earnings and cash flow growth; executing our cost synergy actions and realizing the savings; advancing stand-up activities for the intended growth companies; and unlocking the shareholder value creation envisaged through this historic transaction, said Andrew Liveris, executive chairman of DowDuPont.
