DuPont posts profit; sees Q1 sales up 15 percent

By Ernest Scheyder

NEW YORK (BestGrowthStock) – DuPont (DD.N: ) posted a stronger-than-expected fourth-quarter profit (Read more your timing to make a profit.) on Tuesday as revenue surged in Asia, and improving market trends and cost savings led the chemical maker to boost its earnings forecast for 2010.

DuPont makes the building blocks for thousands of common items, such as plastics, paint and electronics.

Its results — which included a 12.3 percent jump in revenue — often offer investors a look at macroeconomic health, and the company reaffirmed a previous commitment to increase sales 10 percent over the next three years.

“The visibility we have into 2010 is much better and very encouraging compared to the picture we had one year ago heading into 2009,” Chief Executive Ellen Kullman told a conference call on Tuesday. “We will reap the benefits … of accelerating growth and operating leverage.”

Sterne Agee analyst Mark Connelly said Kullman’s confidence in 2010 and the raised guidance speaks to her “bullishness” about improving the company’s performance.

“DuPont’s numbers are showing you that not only is the stimulus helping, but their internal performance has turned around completely,” Connelly said. “It looks to me that (Kullman) is pretty confident there’s a whole lot more they can do internally, whether the economy cooperates or not.”

Alembic Global Advisors analyst Hassan Ahmed praised the “good numbers” and agreed the economy appears to be improving but said he would not change his “neutral” rating on the stock. He feels DuPont shares are fairly valued at current levels.

Shares of DuPont, a Dow Jones industrial average component, rose 18 cents to $33 in noon trading. The stock has traded between $16.05 and $35.62 in the past 52 weeks.

AREAS OF GROWTH

In Asia, DuPont’s sales jumped 36 percent and volume — the physical amount of product sold — rose 34 percent. Analysts had not expected results to be that strong in the region.

Asia is considered an important area of growth for the chemical industry as the United States recovers from the recession. DuPont’s U.S. sales slipped 2 percent in the quarter.

Among the company’s business units, pharmaceuticals brought in the lion’s share of operating income, about $247 million, or nearly a third of the total. Much of that, though, came from a heart medication whose patent expires at the end of 2010.

Outside pharmaceuticals, the company’s chemicals unit posted the best operating income, helped mostly by sales of titanium dioxide, which is used in paint for cars and construction.

DuPont’s agriculture and nutrition segment posted an operating loss, due in part to seasonal weakness. The result is notable, though, because DuPont would not have posted a profit during some parts of the recession without the ag unit.

On the conference call with investors, though, DuPont said it expects a “strong start” to the North American seed market.

BY THE NUMBERS

The Wilmington, Delaware-based company posted earnings of $441 million, or 48 cents per share, compared with a year-earlier loss of $629 million, or 70 cents per share.

Excluding one-time items associated with a restructuring plan, DuPont reported earnings of 44 cents per share. By that measure, analysts expected 41 cents, according to Thomson Reuters I/B/E/S.

Part of the restructuring charge was associated with DuPont’s plan to cull $1 billion in fixed costs, a goal the company said it reached in 2009. Part of those cuts came from reducing the size of its work force by 14,000, and the company said it could rehire workers this year depending on the economy.

Revenue rose 12.3 percent to $6.42 billion, exceeding the $6.16 billion analysts had expected.

For 2010, DuPont boosted its earnings forecast to a range of $2.15 to $2.45 per share from a prior outlook of $2.10 to $2.40. Sales are expected to jump 15 percent in the first quarter.

While the improving economy helped boost the outlook, lower pension costs also helped. DuPont, which had been expecting pension costs in 2010 of 10 cents to 30 cents per share, said it now expects such costs to be 10 cents a share lower than originally anticipated.

DuPont’s selling, general and administrative costs jumped about 7 percent during the quarter. Most companies, including DuPont, relied heavily on cost cuts in 2009 to bolster profits.

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(Reporting by Ernest Scheyder; Editing by Maureen Bavdek, John Wallace, Tim Dobbyn)

DuPont posts profit; sees Q1 sales up 15 percent