This Week on CENtral Science: Fireworks Disposal, Not-so- Alternative Careers, and More
Mar29

This Week on CENtral Science: Fireworks Disposal, Not-so- Alternative Careers, and More

Tweet of the Week: UC flack to me: Email is best way to contact researcher since many depts ditched phones due to budget cuts. What a world.— Sam Lemonick (@SamLemonick) March 28, 2013 When I read this I thought-- Really?? Then I figured, well, why not? I haven't had a land line since college. But I'm still wondering how big a chunk of change a phone bill really is in the grand scheme of the UC budget. Rachel will be handling this roundup during April. Until May, chem-keteers. To the network: Newscripts: In Print: Europe’s Got A Stink Problem and Fashion Police: Science Shoes and Amusing News Aliquots Terra Sigillata: Saturday Morning Natural Products PharmChem Radio! and Dr. Gina Stewart on Career Flexibility and Entrepreneurship The Safety Zone: Letter on Donaldson Enterprises fatal fireworks incident and Defining chemical safety, health, hygiene, and security The Watchglass: Kevlar Inventor Stephanie Kwolek and Behind that Chess Pic and Protein Folding and Lise Meitner and Carbonyl Attack and Radioimmunoassays take '77...

Read More
DuPont Revises 2011 Guidance
Dec09

DuPont Revises 2011 Guidance

DuPont has reduced its 2011 earnings-per-share guidance by a dime, down to a range of $3.87 - $3.95. In the company’s press release CEO Ellen J. Kullman said something somewhat disconcerting: “We are seeing slower growth in certain segments during the fourth quarter, driven by economic uncertainty. This uncertainty is contributing to ongoing conservative cash flow management in some supply chains.” Inventory drawdowns are very normal this time of year. A bigger inventory reduction than expected can mean many things. For instance, it can mean that customers expect prices in the supply chain to decline. (The most benign option.) Customers can be cashing out their inventories in order to brace themselves for potential Armageddon. (This happened during the 2008 panic.) Or customers, not knowing what the future has in store, don’t want to tie up too much of their working capital in inventories. (Middle of the road, not necessarily bad. This seems to be Kullman’s view.) Also, keep in mind that DuPont has reset its 2011 guidance a bunch of times. Here are the changes: Oct. 25, 2011:      $3.97 - $4.05 July 28, 2011:     $3.90 - $4.05 Apr. 21, 2011:      $3.65 - $3.85 Jan. 25, 2011:     $3.45 - $3.75 Dec. 14, 2010:     $3.30 - $3.60 DuPont is still way ahead of where it was in April. Looking at the list reminds me of Dow Chemical, which rather famously doesn’t give earnings guidance. I do see the wisdom in such a policy. Real numbers come in every quarter. Analysts have their own set of fake numbers. Why have another fake number? (Companies tend to lowball these anyway to set the stage for an artificial earnings beat.) If I am ever at the helm of a public company*, I would adopt the no guidance policy. *It would be a breach of fiduciary duty for a board of directors to let such a thing...

Read More
Megatrend Madness
Jan12

Megatrend Madness

A big part of what I do for a living is attending press conferences and listening to conference calls where top executives from leading chemical firms talk about their companies. Oftentimes, they invoke “megatrends” to justify what they are doing or otherwise convince shareholders that they are on the ball. All the leading chemical companies have them. They are the mission statements of the post-Friedman, Thomas not Milton, flat, hot world. Here are a few of the most prominent examples: DuPont: Increasing Food Production, Decreasing Dependence on Fossil Fuels, Protecting People and the Environment, and Growth in Emerging Markets. BASF: Growing and Aging Population, Urbanization, Energy Demand and Climate Protection, and Mobility and Communication Dow: Energy, Consumerism, Transportation Infrastructure, and Health And Nutrition. When these companies and others talk about Megatrends, I either put down my pen or start doodling with it. I perk up again when companies get down to brass tacks. Megatrends strike me as too obvious to be a serious tool to justifying anything. For example, DuPont recently invoked the food production and fossil fuel trends when it announced its purchase of Danisco. Fine, the company makes food additives and has technology that can be applied to cellulosic biofuels. The problem is that those megatrends tell me nothing about whether it will be a good acquisition or not. That depends on the specific value propositions of the Dansico businesses, and its pipeline, to specific markets as well as new opportunities that wouldn’t be possible without a DuPont/Danisco combination. DuPont might have used the same megatrends to argue for the purchase of Clorox’s Kingsford Charcoal unit—charcoal is made of wood and is used to cook food. (Heck, Kingford’s charcoal briquettes were originally made from the wooden remnants of Ford Model T production.) Dow’s megatrends are the most egregious because they are so vague. Energy and Nutrition have been “megatrends” ever since the first caveperson roasted the first boar over the first fire. And Dow’s megatrends can justify ANYTHING. Can Dow go out and buy Brown Forman? Sure. They can invoke consumerism: A growing and increasingly wealthy population will demand more Jack Daniel’s and Southern Comfort. There might even be a biofuel connection because of Brown Forman’s ethanol expertise. BASF’s are the most specific. Though, urbanization has been with us for quite a long time as well. In the interest of not wanting to sound overly shrill, I don’t want to accuse these firms and other companies of being insincere. I do think they actually believe in this megatrend stuff. And nobody likes to make mistakes with hundreds of millions of dollars. When companies make investments, I do...

Read More
A Few Observations About DuPont/Danisco
Jan10

A Few Observations About DuPont/Danisco

This morning, DuPont announced a deal to purchase Denmark’s Danisco for $5.8 billion in cash plus $500 million in Danisco debt. Here are some thoughts: 1) DuPont is long overdue to make a large acquisition. A decade ago, no chemical company was making as many deals as DuPont. An often quoted figure is that DuPont racked up a total of $60 billion in acquisitions and divestitures between 1998 and 2004. It was early in Chad Holliday’s tenure as CEO and he wanted to leave his mark. He split off Conoco in 1998. (The oil glut is almost perfectly bookended by DuPont’s Conoco ownership.) He also sold off pharmaceuticals. And in 2004, DuPont divested its Invista fibers unit to Koch Industries. In 1998, DuPont purchased Hoechst’s Herberts automotive paint unit. In 1999, it bought seed maker Pioneer Hi-Bred. But since it purchased electronic chemicals maker ChemFirst in 2002, for only about $400 million, there's hardly been a peep out of the company. 2) Valuation is a tough call. Based on the $6.3 billion price tag and Danisco’s expectations for the full fiscal year ending in April, DuPont is paying 27.4x earnings and 15.4x EBIT. That strikes me as a good full valuation. It isn’t the full you feel on Thanksgiving when you doze off while watching the Lions; it’s more like Big Mac and fries at your desk full. Looked at another way, DuPont is paying 7.7x book value (equity minus intangibles), which makes the deal seem a little more expensive. 3) There are deals in DuPont’s future The primary motive for DuPont to buy Danisco is enzymes maker Genencor. The rest of Danisco is all about food. Under “Industry Events” on Danisco’s website the next event Danisco has scheduled is the Banff Pork Seminar, after that company officials are on to the Bread and Butter Tradeshow. (Check the links. These are both real things.) How deep does DuPont want to get in the food industry? Outside of Genencor, Danisco’s three major units are enablers, which are the gums and emulsiers that go into food; sweeteners, fructose and the like; and cultures, as in probiotics. None of these seems to scream DuPont, though enablers sound like the best fit in DuPont because they are very chemistry oriented. Worth mentioning: in recent years, Danisco has divested its sugar business and its flavor and fragrances unit. UPDATE: In the conference call, DuPont CEO Ellen Kullman argued that Danisco would complement DuPont’s health and nutrition business. In other words, probiotic cultures from Danisco would complement Omega-3 fatty acids and soy proteins from DuPont. Specialty food ingredients from Danisco such as emulsifiers and sweeteners...

Read More
Chemical Industry Recovery Gaining Steam
Apr19

Chemical Industry Recovery Gaining Steam

While few people are getting overly excited about an economic recovery, 2010 is looking a lot better than 2009. At the height of the financial crisis, Saudi Basic Industries posted a loss of $258 million for the first quarter of 2009. SABIC blamed the economic downturn and a write down of assets. The loss was shocking because SABIC has a low-cost position making products, such as polyethylene, in Saudi Arabia and exporting them to fast-growing Asian markets. If SABIC was in trouble, what hope was there for everybody else? However, that loss has now swung to a $1.5 billion profit for the first quarter of 2010. Before the recession, SABIC’s profits peaked in the second quarter of 2008 at $2 billion. SABIC CEO Mohamed H. Al-Mady says volumes and prices for petrochemicals have seen strong improvement. “We are overcoming the impacts of the global financial crisis,” he said. A good barometer for the health of the chemical industry as a whole is DuPont. It has products ranging from agricultural chemicals to automotive coatings and generates more than 60% of its revenues outside of the U.S. Standard & Poor’s improved its outlook for the company’s investment-grade “A” credit rating from “negative”, which means that its rating is in danger of declining, to “neutral”. Ratings analyst Cynthia Werneth expects the economic recovery, cost reductions, and growth in agriculture will offset an expected $700 million decline in DuPont’s pharmaceutical licensing income. DuPont sold its pharmaceutical business to Bristol-Myers Squibb in 2001 but retained rights to the hypertension drugs Cozaar and Hyzaar, which it licensed to Merck. Patents for these drugs expire this year. A large DuPont acquisition, the report said, is unlikely. “We believe that management is committed to achieving and maintaining credit measures in line with the [credit] ratings, which would not support a large debt-financed acquisition or significant share buybacks at this time,” Werneth...

Read More