DUPONT REPORTS HIGHER EARNINGS
EXPANDS OPERATING MARGIN FOR SIXTH CONSECUTIVE QUARTER

WILMINGTON, Del.,  July 26, 2005  —   :

Highlights

  • Second quarter 2005 earnings were $1.01 per share versus $.50 per share in the prior year.
  • Excluding significant items, second quarter earnings per share grew 13 percent.
  • Asset sales, a favorable tax audit settlement and restructuring costs totaled a net benefit of $.11 per share in the quarter. In second quarter 2004, similar significant items totaled a net charge of $.30 per share.
  • Segment pretax operating income margin improved for the sixth consecutive quarter, up 1.4 percentage points versus prior year (excluding significant items and the divested Textiles & Interiors businesses).
  • Local prices increased 6 percent, more than offsetting higher energy and ingredient costs.
  • Segment sales were $7.9 billion, up 8 percent, excluding sales from the divested Textiles & Interiors and Photomasks businesses. Sales growth was achieved in all operating segments.
  • Volumes were flat, with strong growth in Asia, Latin America and Eastern Europe offsetting lower volumes in the United States and Western Europe.

"We improved our operating profit margin for the sixth consecutive quarter, despite record high energy and ingredient costs," said DuPont Chairman and CEO Charles O. Holliday, Jr. "Continued success with pricing and sales from new products were key to our strength in the quarter."

Global Consolidated Net Sales and Net Income
Consolidated net sales for the second quarter were $7.5 billion, essentially flat versus the second quarter 2004 which included $0.6 billion in sales from the Textiles & Interiors (T&I) businesses divested April 30, 2004. Net income for the second quarter was $1,015 million or $1.01 per share. Current quarter net income includes a net benefit of $111 million, or $.11 per share, related to asset sales, a favorable tax audit settlement, and restructuring costs. Second quarter 2004 net income was $503 million, or $.50 per share, including similar items totaling a net charge of $302 million, or $.30 per share. See Schedule B for a summary of these items.

Earnings Per Share
The table below shows the increase in second quarter 2005 earnings per share (EPS) versus second quarter 2004, by major element:

(EPS) Variances Versus 2nd Quarter 2004

 

2nd Quarter

 

 

EPS — 2004

$ .50

 

———

2Q'04 Significant Items (See Schedule B)

 

$ .30

 

 

  Local Prices

.31

  Volume

(.01)

  Variable Costs

(.20)

  Fixed Costs

.01

  Currency

.02

  Other

(.04)

 

 

2Q'05 Significant Items (See Schedule B)

.11

 

———

EPS — 2005

$1.01

 

 

Business Segment Performance – Segment Sales
Segment sales in the second quarter 2005 were $7.9 billion. Second quarter 2004 sales of $8.2 billion included $0.8 billion from divested businesses. As shown below, sales increased 8 percent versus 2004 excluding these divested businesses.* Sales growth resulted from 6 percent higher local selling prices and a 2 percent currency benefit and flat volume. Positive pricing momentum for the growth platforms continued throughout the second quarter.

ANALYSIS OF SEGMENT SALES*

BY PLATFORM
(Dollars in billions)

Three Months Ended
June 30

Percentage Change Due To

 

$

% Change

U.S. $
Price

Volume

Agriculture & Nutrition

$2.1

1%

6

(5)

Coatings & Color Technologies

1.7

5

8

(3)

Electronic & Communication Technologies

0.9

12

9

3

Performance Materials (a)

1.8

8

10

(2)

Safety & Protection

1.4

19

9

10

 

 

 

 

 

Total Core Segments (b)

$7.9

8%

8

-

 

 

 

 

 

BY REGION
(Dollars in billions)

Three Months Ended
June 30

Percentage Change Due To:

 

$

% Change

Local
Price

Currency
Effect

Volume

U.S. (b)

$3.5

5%

7

-

(2)

Europe

2,2

4

4

5

(5)

Asia Pacific

1.4

17

6

2

9

Canada & Latin America

0.8

13

5

5

3

 

 

 

 

 

 

Total Core Segments (b)

$7.9

8%

6

2

-

 

 

 

 

 

 

* Includes transfers and a pro rata share of equity affiliate sales; excludes sales from T&I businesses divested on April 30, 2004 and the company's equity interest in DuPont Photomasks Inc., sold in April 2005.

(a) Excluding sales from both current quarter and prior year for former DuPont Dow Elastomers (DDE) businesses transferred to The Dow Chemical Company on June 30, 2005, Performance Materials second quarter 2005 worldwide sales were $1.6 billion, up 4 percent, reflecting 10 percent higher USD prices, partly offset by 6 percent lower volume.
(b) Excluding sales from both current quarter and prior year for former DDE businesses transferred to The Dow Chemical Company on June 30, 2005, total core segment sales were $7.7 billion, up 7 percent and reflected a 1 percent volume decline. U.S. sales were $3.4 billion, up 4 percent, and reflected a 3 percent U.S. volume decline.

Business Segment Performance – PTOI
Segment pretax operating income (PTOI) for second quarter 2005 was $1,588 million compared to $668 million in the second quarter 2004. Segment PTOI increased 14 percent and PTOI margin increased 1.4 percentage points excluding significant items and divested businesses from both periods. The second quarter 2005 segment performance reflected a $90 million net benefit from significant items. The second quarter 2004 included significant item charges totaling $661 million, principally for corporate restructuring costs and charges related to the separation of T&I businesses. Segment PTOI and percentage changes versus second quarter 2004 are shown below:

 

Three Months Ended June 30

PRE-TAX OPERATING INCOME
(Dollars in millions)

2005

2004

% Change vs. 2004*

 

 

 

 

 

 

Agriculture & Nutrition

$511

$446

15%

 

Coatings & Color Technologies

194

150

29

 

Electronic & Communication Technologies

211

(27)

NM

 

Performance Materials

190

103

84

 

Pharmaceuticals

192

174

10

 

Safety & Protection

283

163

74

 

Other (including divested T&I businesses)

7

(342)

NM

 

 

 

 

 

 

       Total

$1,588

$668

138%

 

 

* See Schedule B for detail of significant items affecting segment PTOI for the current and prior-year quarters.

Agriculture & Nutrition

  • PTOI was $511 million versus $446 million in the prior year. Excluding significant items, PTOI grew 6 percent as higher selling prices were partially offset by lower volumes and continued investments for growth.
  • Second quarter sales were $2.1 billion, up 1 percent on 6 percent higher USD selling prices and 5 percent lower volumes.
  • Higher selling prices reflect higher soybean and chemicals prices and a richer corn seed product mix. Volumes declined in seed, soy protein and crop protection chemicals.
  • On a year-to-date basis, which better reflects the Northern Hemisphere selling season, sales were $4.5 billion, up 4 percent. Year-to-date PTOI was $1,268 million versus $1,077 million in the prior year. Excluding significant items, PTOI grew 14 percent.
  • 12 new products were introduced during the quarter, largely in support of an expanded fungicide offering.

Coatings & Color Technologies

  • PTOI was $194 million versus $150 million in the prior year. Excluding significant items, PTOI declined by 9 percent, primarily due to higher raw material and other costs.
  • Second quarter segment sales were $1.7 billion, up 5 percent on 8 percent higher USD prices, and 3 percent lower volumes.
  • Higher selling prices largely reflect continued price improvements in titanium dioxide. Lower motor vehicle builds contributed to declining volumes.
  • 114 new products were launched during the quarter, led by expanded offerings in automotive systems and powder coatings.

Electronic & Communication Technologies

  • PTOI was $211 million versus $(27) million in the prior year. Excluding significant items, PTOI increased 87 percent versus second quarter 2004 and pretax operating income margin improved more than 700 basis points.
  • Second quarter sales were $0.9 billion up 10 percent. Excluding the divested Photomasks unit from both periods, sales increased 12 percent on 9 percent higher USD prices and 3 percent higher volume.
  • Higher sales volume for electronic materials and fluoroproducts, higher fluorochemical pricing, and productivity gains drove sales and earnings improvement.
  • 56 new products were introduced during the quarter. New product sales gains were significant in the photovoltaic, auto electronics, and display markets.

Performance Materials

  • PTOI was $190 million versus $103 million in 2004. Excluding significant items, PTOI increased 9 percent due to higher elastomers earnings. Other than in elastomers, higher prices and productivity gains offset higher raw material costs and lower volume.
  • Second quarter sales were $1.8 billion, up 8 percent on 10 percent higher USD prices, and 2 percent lower volume.
  • Local prices were up in every business. Higher elastomers volumes largely offset declines related to North American motor vehicle production and intermediates demand.
  • 21 new products were launched during the quarter including new Zytel® molding resins reinforced with Kevlar® and Fusabond® coupling agents.

Safety & Protection

  • PTOI was $283 million versus $163 million in the prior year. Excluding significant items, PTOI improved 21 percent on strong sales growth.
  • Second quarter sales were $1.4 billion, up 19 percent on 9 percent higher USD selling prices and 10 percent higher volumes.
  • Each component business realized double-digit sales growth on price and volume gains. Unit costs rose reflecting higher raw material costs in certain businesses.
  • 60 new products were introduced during the quarter, with multiple introductions in each business.

Additional information on segment performance is available on the DuPont Investor Center at www.DuPont.com.

Outlook

"Pricing, new products, growth in emerging markets and productivity gains will overcome more than $1 billion in higher energy and ingredients costs this year," said Holliday. "We remain confident that in 2005 we will exceed our sustainable earnings growth goal of 10 percent."

Three key assumptions have changed since the original guidance provided six months ago about the company's expected 2005 results:

  • The company improved local pricing 5 percent in the first half 2005 versus prior year, compared to an original assumption of about half that rate of increase. The company still expects positive pricing momentum to continue in the second half.
  • Energy and ingredient costs are much higher than originally expected. Six months ago the company's outlook assumed costs for oil and U.S. natural gas in 2005 would average $43 per barrel and $6.80 per million btu, respectively. The company now expects its energy and ingredient costs to be at least $1 billion higher than 2004, approximately double the original assumption.
  • Volume is down in two discrete market segments. In the motor vehicle market segment, auto builds by certain OEMs declined. The volume impact is primarily reflected in the company's Coatings & Color Technologies and Performance Materials segments. In the agricultural market segment, corn seed volume was below expectations due to lower corn acreage in Europe (due to weather) and lower share in North America. Volume expectations for the southern hemisphere growing season are unchanged.

Pricing and productivity in first half of 2005 more than offset cost increases from raw materials and inflation. Adding to this improvement in earnings were significant items (gains on asset sales and a favorable tax settlement partly offset by a restructuring charge).

Considering the above, the company now expects full-year 2005 reported earnings per share of $2.75 to $2.80, including $.11 per share in significant items recorded in the second quarter. In addition, the company expects third quarter earnings per share to be roughly 40 percent of the second half 2005 earnings. (This outlook excludes any potential impact from actions that might be taken in connection with the American Jobs Creation Act). In 2004, DuPont reported earnings per share of $1.77, and earnings per share before significant items of $2.38 which included $.13 per share attributable to the divested T&I businesses.

American Jobs Creation Act
The company continues to review alternatives to repatriate foreign earnings under the American Jobs Creation Act of 2004 (the "Act"). No decision to repatriate earnings has been made. However, should the company decide to repatriate earnings under the Act, it would expect to repatriate between $8 and $10 billion over the remainder of 2005, the upper end of the range previously disclosed. A preliminary assessment indicates that the tax cost will be between 3 percent and 4 percent of the amount repatriated. Currently these earnings are considered to be permanently reinvested and no taxes have been reserved. The company expects to finalize its decision during the third quarter.

Use of Non-GAAP Measures
Management believes that measures of income excluding significant items ("non-GAAP" information) are meaningful to investors because they provide insight with respect to ongoing operating results of the company. Such measurements are not recognized in accordance with generally accepted accounting principles (GAAP) and should not be viewed as an alternative to GAAP measures of performance. A reconciliation of non-GAAP measures to GAAP is provided in Schedule E.

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 protective 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; and seasonality of sales of agricultural products.

 

Financial Schedule Attachments (In PDF Format, Adobe Acrobat Reader required) available here.

Earnings Report available here. 

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07/26/05