In a briefing today with securities analysts and investors, DuPont Chairman & CEO Charles O. Holliday, Jr. and other senior leaders provided details of actions announced Oct. 25 to accelerate execution of the company's growth and productivity strategies and increase shareholder value.
"We are seeing a structural shift in the global industrial economy that is impacting our businesses, certain customers and suppliers," Holliday said. "While we have the right strategies, we must and we will significantly accelerate their execution to increase shareholder value."
Three senior leaders will lead action programs to accelerate execution and deliver targeted results that will be regularly reported to the public.
Productivity Advancement. Chief Operating Officer Richard R. Goodmanson is leading the actions to streamline and reduce the cost of core operating processes. Goodmanson said these actions will significantly accelerate cost productivity and will reduce net working capital by $1 billion while improving customer service.
The scope of the streamlining will include all supply chains and support functions globally and will target cost improvements of $1 billion over the next three years. The company expects to begin to see meaningful benefits in 2006.
Goodmanson said a broad-based corporate employee severance program will not be required. The company will use normal attrition, contractor displacement, and redeployment of employees to business growth and improvement projects to meet expected staffing needs.
Fixed costs as a percentage of sales will be reported quarterly as the primary metric to track progress of this program.
Capital Deployment. Chief Financial Officer Gary M. Pfeiffer is leading the actions to accelerate an additional three point improvement in the company's return on invested capital. The company's recent assessment of capital efficiency among its more than 80 business units showed that two-thirds of the company's invested capital is currently generating an average return that is approximately twice the cost of capital. However, the remaining one third will be challenged to earn the cost of capital over a business cycle given the accelerating structural shift in the global industrial economy. Decisions are now being made to adjust the business model and mission for each of these businesses. Over the next 18 months, required changes in cost and capital deployed will be implemented to support those shifts and ensure all businesses are maximizing their contribution to shareholder value.
Return on net assets of businesses earning less than the cost of capital will be reported quarterly as a metric to track progress.
Growth Acceleration. Chief Science & Technology Officer Thomas M. Connelly is leading actions to accelerate science-based innovation by 30 percent. All programs are being reprioritized in light of the structural shift in the global industrial economy. Connelly said some programs will be deselected, others more fully resourced. The result will be a richer pipeline of science-based innovation capable of meeting customer needs by delivering products faster to the marketplace.
Progress from the new products pipeline will be reported semi-annually as a metric to track progress.
Bio-Based Materials Expansion. Connelly is also overseeing the launch of DuPont's newest technology platform. DuPont Bio-Based Materials applies biology to renewable feedstocks to create unique and compelling solutions in the materials, energy, surfaces and medical markets.
"Bio-Based Materials is the right science at the right time, and DuPont has the science lead to bring these new innovations to market," Connelly said. The components of the company's Bio-Based Materials pipeline are estimated to have a net present value of more than $3 billion. Bio-Based Materials Vice President and General Manager John P. Ranieri will lead this expansion.
Today's webcast presentation can be found on the Investor Center of the company's web site at www.dupont.com.
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.
Forward-Looking Statements: 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.
11/7/05
