Focus Will Be On Capital Deployment, Productivity, Growth and Bio-Based Materials
Company Also Unveils $5 Billion Share Repurchase Plan
DuPont today said it has initiated a series of actions to increase shareholder value and accelerate its growth and productivity strategies. The company will host a presentation for investors on Monday, Nov. 7, 2005, at 9:00 a.m. (EST) in New York to provide more details. The presentation will be webcast live via www.dupont.com.
"Hurricanes Katrina and Rita accelerated what we believe is a structural shift in input costs that will affect the competitiveness of industries we serve," said DuPont Chairman and Chief Executive Officer Charles O. Holliday, Jr. "This fundamentally changed external environment requires us to increase the speed with which we execute our core strategies - putting science to work, going where the growth is, and driving productivity."
Holliday said key contributing factors to the structural shift are higher input costs; slower U.S. growth, especially in challenged industries; and the changing relative competitive position for U.S. natural gas-dependent businesses.
Combined with efforts already in progress to drive more effective pricing, capital efficiency and operational excellence, DuPont will take the following additional steps to aggressively improve value:
In light of the external structural shifts and as a way to improve the competitive position and business fundamentals of every business in DuPont, the company will take actions over the next 18 months to assure every business can at least earn the cost of capital over a business cycle. Chief Financial Officer Gary M. Pfeiffer will manage the process, with quarterly external progress reports.
DuPont will accelerate work already under way to standardize and simplify its operating processes and will reduce its functional support costs to externally-benchmarked "top-quartile" standards. This work will make full utilization of the investment in new "state-of-the-art" information technology for business and financial systems ("SAP") implemented over the past five years. Building on its well-established Six Sigma base, the focus will include lean global supply chain practices to strengthen service, reduce costs and reduce inventory. Chief Operating Officer Richard R. Goodmanson will manage the process, with quarterly external progress reports.
DuPont will extend its project-based, milestone-driven innovation processes beyond its research and development organization to accelerate new product introduction. During the past four years, DuPont has nearly doubled its patent filings and new product launches, and has increased by half its revenue from new products to more than $7.5 billion. DuPont has introduced over 900 new products in the first three quarters of 2005, compared to 800 for all of 2004. For 2006, innovation resources will be directed to projects that can achieve short-term business payoffs such as building innovations for energy efficiency; alternative energy technologies; electronic materials and components; agricultural biotechnology, and; biomaterials/bio-fuels. Innovation expenses in many remaining areas will be constrained. Chief Science and Technology Officer Thomas M. Connelly will manage the process.
Bio-Based Materials Expansion
Global increases in energy costs over the past year have significantly increased the value of DuPont's Bio-Based Materials portfolio. Just one example of the opportunity is Bio-PDO™, a key ingredient in DuPont™ Sorona®. Bio-PDO™ is scheduled to start production the second quarter of 2006 through a joint venture with UK-based Tate & Lyle. To capitalize fully on its potential, Bio-Based Materials will be elevated to a Corporate Technology Platform, where it will be appropriately resourced and aggressively leveraged across the company's five growth platforms. Bio-Based Materials Vice President and General Manager John P. Ranieri will continue to manage this effort.
To complement these actions with near-term value enhancement for shareholders, and to underscore the company's confidence that it will succeed in its initiatives, DuPont will further leverage the strength of its balance sheet by financing a $5 billion share repurchase program. The company has entered into a $3 billion "Accelerated Share Repurchase" agreement with Goldman, Sachs & Co. that will begin immediately. Under the agreement, DuPont will purchase from Goldman Sachs 75,719,334 shares of DuPont common stock on Oct. 27, 2005, at a price per share of $39.62, with Goldman Sachs purchasing an equivalent number of shares in the open market over the next nine months. At the end of this period, DuPont may receive from or be required to pay to Goldman Sachs a price adjustment based upon the volume weighted average price of DuPont shares during this period. For the earnings per share calculation, DuPont will have 75,719,334 fewer shares outstanding immediately following the Oct. 27 purchase. DuPont intends to execute the remaining $2 billion repurchase over the 12 months following the completion of the Accelerated Share Repurchase program in mid-2006, consistent with DuPont's financial discipline principles.
"We are confident the actions we announced today will create value for our customers and shareholders both in the near and longer term," Holliday said. "The share buyback program puts our financial strength to work to ensure our shareholders begin to realize that significant value now, and to demonstrate our confidence that we will successfully accelerate our growth and productivity strategies."
The Nov. 7 investor presentation will be held at 9:00 a.m. (EST) at the St. Regis Hotel, Two East 55th Street, at Fifth Avenue, New York, NY.
DuPont is a science company. Founded in 1802, DuPont puts science to work by creating sustainable solutions essential to a better, safer, healthier life for people everywhere. Operating in more than 70 countries, DuPont offers a wide range of innovative products and services for markets including agriculture, nutrition, electronics, communications, safety and protection, home and construction, transportation and apparel.
This news release contains forward-looking statements based on management's current expectations, estimates and projections. All statements that address expectations or projections about the future, including statements about the company's strategy for growth, product development, market position, expected expenditures and financial results are forward-looking statements. Some of the forward-looking statements may be identified by words like "expects," "anticipates," "plans," "intends," "projects," "indicates," and similar expressions. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, including those discussed more fully elsewhere in this release and in documents filed with the Securities and Exchange Commission by DuPont, particularly its latest annual report on Form 10-K and quarterly report on Form 10-Q, as well as others, could cause results to differ materially from those stated. These factors include, but are not limited to changes in the laws, regulations, policies and economic conditions, including inflation, interest and foreign currency exchange rates, of countries in which the company does business; competitive pressures; successful integration of structural changes, including restructuring plans, acquisitions, divestitures and alliances; cost of raw materials, research and development of new products, including regulatory approval and market acceptance; seasonality of sales of agricultural products; and severe weather events that cause business interruptions, including plant and power outages, or disruptions in supplier and customer operations.
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