DuPont is lowering earnings forecasts for 2014, due primarily to lower than expected quarterly performance of its agriculture and, to a lesser extent, performance chemicals segments. Reduced sales of corn seeds was cited as the company announced it will continue cost cutting and restructuring efforts.
The company expects operating earnings in the second quarter to be ” moderately below” the $1.28 per share recorded in the same period last year. As a result, the company is lowering its full-year outlook for operating earnings to $4 to $4.10 per share.
The revised outlook in agriculture reflects lower than expected corn seed sales and higher than expected seed inventory write-downs.
Soybean sales volumes in North America are higher than expected. However, the higher soybean volume will not fully offset the decline in corn volume, especially given the transition under way in the company’s soybean lineup to newer, higher performing products, a DuPont release stated. The company believes this is a short-term negative trend, and there will be strong demand for its next generation soybean products. The revised outlook also reflects lower than expected crop protection herbicide sales, largely due to weather.
“While 2014 is a transition year in agriculture, the revisions to the outlook we made today do not meet the expectations we set for our agriculture segment or for the company,” said DuPont CEO Ellen Kullman. “We have a strong global market position and a rich pipeline and we will make the necessary changes so that we return to our five-year track record of delivering the reliable, attractive growth our shareholders expect from this segment.”
Performance Chemicals second quarter results will be impacted by lower than expected selling prices in refrigerants for mobile and stationary applications.
Separately, DuPont disclosed more details today of its previously announced efforts to streamline support for its more focused portfolio of businesses following the separation of the Performance Chemicals segment. That change is expected in mid-2015.
This redesign initiative aims to extract savings from costs related to the separation as well as productivity improvements across all businesses, regions and functions. Additionally, a redesign of DuPont’s infrastructure, with a focus on automation and global standardization of transactional processes, will create a lower-cost systems environment and define new sources of savings as these changes are implemented broadly across the company, the release stated.
“We have a unique opportunity now to reset our operating model to optimize both our effectiveness and efficiency, consistent with the purpose, strategy and needs of DuPont in 2015 and beyond,” said Kullman.
The company expects to record a restructuring charge of about $270 million pre-tax, or $.20 a share, after tax, in the second quarter of 2014 related to the first actions under the redesign initiative. The company anticipates that it will incur future charges.
“Together, all of these efforts will contribute to at least $1 billion in savings by the end of 2019 from a 2013 baseline – two-thirds by the end of 2015 on a run-rate basis and the final third occurring between 2016 and 2019,” said Kullman.