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...

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Rumors Swirling Around DuPont’s Coatings Unit
Nov01

Rumors Swirling Around DuPont’s Coatings Unit

A bunch of stories have been circulating that DuPont is putting its performance coatings business up for sale. The DuPont business makes automotive OEM coatings, which are applied in the assembly plant; automotive refinish coatings; and powder coatings. It earned $249 million in operating income on $3,805 million in net sales in 2010. It has been DuPont’s least profitable segment for the last three years. Bloomberg seems to have been the first out of the gate Friday afternoon. Citing “people who spoke on the condition of anonymity because the talks are private”, it reported that DuPont retained Credit Suisse to shop the business around. The value of the coatings business would be between $3 billion and $4 billion. The Bloomberg piece had DuPont selling the powder coating unit separately from the automotive coatings business. Reuters also had a story out Friday afternoon. It contained the same details regarding Credit Suisse as well as the price range for the business and cited “sources familiar with the matter.” The Reuters piece contained some analyst speculation that BASF, PPG, or AkzoNobel might be interested in the business. (I would personally go with Akzo out of those choices because I’m not sure that regulators would let PPG or BASF have the OEM paint business. Though, I think Akzo is already big in refinish. Perhaps “none of the above” is a better choice.) The Wall Street Journal published a story on the matter yesterday. It has the same details, citing “a person familiar with the matter”. When Kevin McCarthy from Bank of America Merrill Lynch asked about disposing of the unit in a conference call last week, DuPont CEO Ellen Kullman wouldn’t say much: So one of the things I think that's been limiting DPC this year has been the raw material increases. I mean, energy and freight, I've just seen a lot of increases on their raw on the whole board, and I think that's been a drag on them as they really gone out. And I think they've done a tremendous job with new products and with customers getting improvements. So I think being stable for them in this environment is a very positive thing. So productivity, they continue to focus on it. Fixed costs as a percent of sales is down 110 basis points in the third quarter of '11 versus third quarter of '10. I still maintain and talk into the team there that we can get to a PTOI margin target of 10% next year, and we continue to drive hard on that. And we'll see where it ends up. We just -- John McCool's been there just a...

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Chief CMAI Economist Has Left

I’m writing about the economy this week for C&EN. Scouring the world for economists that specialize in chemicals to quote (There aren’t many), I called CMAI looking for chief economist Tim Hopper. He is no longer there. Hopper was hired last November to replace long-time CMAI economist Arved Teleki. Hopper gave the economics presentation at CMAI’s conference in March. I was told over the phone that Hopper left about a month ago. I wasn’t told why, though I was assured that CMAI is in the process of finding a replacement. IHS acquired CMAI in May and has a number of economists of its own in house. Teleki played an important role in CMAI. His forecasts were important in underpinning the assumptions for analysis of specific chemical markets, for example, polyethylene market growth, and so...

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BASF And Total Take Over Sabina
Aug03

BASF And Total Take Over Sabina

Here’s a development I find interesting. BASF and Total Petrochemicals are taking over Shell Chemicals’ interest in their Sabina joint venture. Sabina started up in 2004 in Port Arthur, Texas, to extract butadiene from C4 streams. Two-thirds of these streams came from Shell’s Deer Park cracker. The rest was supplied by a naphtha-based cracker Total (then briefly known as Atofina) and BASF had just completed at the time. It started up with a capacity for 400,000 metric tons of butadiene. Sabina also alkylates iso-butene into octane for gasoline blends. The n-butene cut goes to a metathesis unit, giving the cracker venture greater propylene yield. Shell owned 60% of the venture, BASF had a 24% stake, and Total had a 16% interest. With the change in ownership, Sabina will have a 60% BASF and 40% Total ownership, like their cracker venture. Shell hasn’t put out a press release on this. When I asked the company why it was exiting the venture, they sent me this statement: “Shell has signed an agreement to exit the Sabina venture effective August 1, 2011. This action fits well with the Shell strategy to streamline and concentrate its downstream portfolio.  Shell plans to continue supplying our customers with product and accepting supply from our feedstock suppliers without interruption.” The important context here is that like many other chemical makers, Shell has been moving to lighter feedstocks because of ethane from natural gas shale. Shell has even undertaken capital projects in Deer Park and Norco, La., to enable it to crack lighter feeds. As a result, Shell probably has less C4’s in its system now and likely can’t or doesn’t want to be tied up with the commitments to Sabina. If that is the case, I wonder if Sabina is now struggling to find...

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Liveris On The Debt Ceiling

Dow CEO Andrew N. Liveris put out a press release on July 14 regarding the debt ceiling negotiations in Washington. Here it is in its entirety: MIDLAND, Mich.--(BUSINESS WIRE)--Andrew N. Liveris, Dow's chairman and CEO, stated today, with reference to the bi-partisan impasse on raising the debt ceiling: “Business doesn’t have a seat at the table in these talks, but we sure have a stake in the outcome. All Americans do – we are all in this together. There’s huge opportunity for our nation if both parties reach a meaningful agreement, and huge consequences if they do not. We need a resolution as soon as possible and urge all involved in the negotiations to continue to work towards a solution that eliminates uncertainty and puts stability into our economy.” Whenever anyone uses the phrase “We are all in this together”, you can rest assured that the speaker isn’t saying much and is relying on someone else to get down to the business of hammering out the particulars. This is surprising from someone who wrote an entire book about about corporate taxes, bureaucracy, many other topics directly related to what is being negotiated in Washington. Liveris isn’t alone, GE’s came out with a dramatic pronouncements before the U.S. Chamber of Commerce last week where he didn’t say very much at all either. Via a WSJ Blog: “I just think we need certainty about the debt ceiling and we need it now. That really can only happen here. Let’s do it now.” Do what, Jeff? But a little perspective might make for a more fair assessment of these two executives. Both are involved with the Obama Administration. Liveris last month was named co-chairman of President Obama’s Advanced Manufacturing Partnership. Immelt is the chairman of The President's Council on Jobs and Competitiveness. It might be significant that Immelt and Liveris aren’t backing particular Obama proposals. And probably more than anything else, these executives could be worried that the far-left and far-right activists in Congress will scuttle an agreement should it be made. If that sounds crazy, remember in September 2008 when the House of Representatives rejected TARP and the Dow Jones Industrial Average dropped 700 points? So what Liveris and Immelt said is probably better than saying nothing at...

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Thoughts On Bio-Plastics

Sorry for the light posting recently. I blame the news, which is sauntering along at a midsummer’s pace. Last week, OM’s acquisition of a German magnet maker was about the most exciting thing to hit C&EN’s Edison, N.J., business newsroom. While I’m sure that it is an important and exciting development for OM, it didn’t inspire me to blog. I considered a post comparing it to OM’s purchase of Degussa’s precious metals business a few years back. (If you don’t remember that, that’s OK, OM didn’t own it for very long.) After further reflection, that wasn’t such a good comparison. Things seem to be turning around a little bit this week. Lonza is buying Arch Chemical, a one-time spinoff from bullet and chlorine maker Olin. One thing that intrigues me about that purchase is that it is a major investment from Lonza in specialty chemicals, not really in fine chemicals. I’m beginning to think every small to mid-sized chemical business is a target for a strategic acquisition nowadays. A couple of weeks ago, I attended the BioPlastek Forum in New York City. There is an article on the conference in today’s C&EN. In the piece, I profile the growing rivalry of new-to-the-world materials brought to us by biology versus bio-based drop-in substitutes for petrochemical feedstocks for conventional plastics. There was some debate at the conference. On the one hand, brand owners really seem to be interested in plastics like Braskem’s ethanol-based polyethylene. Such materials align with their existing manufacturing infrastructure and can be recycled just the same as ordinary polyethylene. There were plenty of start-ups with routes to chemicals like p-xylene and adipic acid. On the other hand, a few firms touted new materials, with new beneficial properties. For instance, Avantium presented on polyethylene furanoate, a polyester made from furan dicarboxylic acid. It has an oxygen barrier six times greater than PET’s. Where do I stand? In the middle, and not just because I don’t want to offend anybody. I don’t see these things as mutually exclusive. There are legitimate worries that PEF bottles might someday muck up the recycling stream. But as one major brand owner whispered to me during a discussion, “More than 50% of packaging isn’t recycled anyway.” I wanted to chime into the conversation. But, as a journalist, I figured it was best to just shut up and take notes. However, one point that I would have made if I did say something is that breaking new materials into the plastics world has been a very hard thing to do, even for petrochemically derived plastics. The last major resin to do so was linear low-density...

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