Danisco acquisition pads profits at DuPont and better prices offset rising costs

DOVER, Del. – Strong performances from DuPont’s agricultural and performance chemicals units, combined with its acquisition of Danish food maker Danisco last year, contributed to an increase in first-quarter earnings, the company said Thursday.

DuPont, based in Wilmington, reported net income of $1.49 billion, or $1.57 per share, for the quarter that ended March 31, compared to $1.43 billion, or $1.52 per share, for the first quarter of last year.

Excluding a one-time pretax charge of $50 million for claims related to its weed killer Imprelis, DuPont says it earned $1.61 a share for the quarter.

Analysts, who typically exclude one-time charges, expected $1.55 per share, according to a poll by FactSet.

Federal environmental regulators ordered DuPont to halt sales of Imprelis last year because of reports of damage to trees, particularly evergreens, which resulted in several lawsuits against the company. DuPont said Thursday that it has charged a total of $225 million for Imprelis claims as of March 31, and that it believes total charges could range as high as $575 million. The company intends to seek recovery from insurance carriers for costs exceeding $100 million.

In the meantime, sales for the quarter grew 12 per cent to $11.2 billion, as higher local prices and portfolio changes helped offset lower volumes.

Chairwoman and CEO Ellen Kullman said the results were about what DuPont expected after a challenging fourth quarter in which the company saw a slight dip in net income as customers destocked inventories.

“We’re off to a good start of the year,” she said. “We expected slow sequential improvement, and that is what we’re seeing.”

“We’re encouraged with sequential improvement for many of our industrial businesses in the first quarter compared to the fourth quarter,” she added.

DuPont reaffirmed its full-year earnings guidance of $4.20 to $4.40 per share, which represents growth of 7 per cent to 12 per cent, excluding one-time items.

The company’s shares fell 74 cents to $52.53 in midday trading.

The agricultural unit led first-quarter performance with sales up 16 per cent, or $576 million, to $4.1 billion, reflecting 8 per cent higher volumes and 8 per cent price increases.

DuPont said seed sales were led by corn in North America, as well as an early start to the European growing season and commercial success in Brazil’s season for safrinha corn.

Seed sales rose 20 per cent to $3.2 billion, while crop protection sales increased 7 per cent, to $929 million.

“I think ag is the big story for the quarter,” said Edward Jones analyst Jeff Windau.

The acquisition of Danisco helped send pretax operating income in DuPont’s nutrition and health unit soaring to $83 million, from $25 million.

Sales in the nutrition and health unit jumped 149 per cent to $808 million as the result of acquiring Danisco’s specialty food ingredients business.

Overall sales for DuPont increased by 23 per cent in Latin America, with 15 per cent higher local selling prices and a 4 per cent volume gain. Volumes fell by 13 per cent in Asia-Pacific region, however, and were essentially flat in North America, Europe, Africa and the Middle East.

Sales were off by 17 per cent in the electronics and communications unit as volumes fell 18 per cent amid weak demand for photovoltaics, which was partially offset by increased demand for smart phones and tablets.

However, Windau credited DuPont with its pricing strength, which was up across all market regions and business segments.

“It is pretty impressive that they’re able to maintain that,” he said, adding that DuPont’s ability to raise prices is attributable in part to supply constraints.