11.03.17
DowDuPont reported its results for the third quarter of 2017. DowDuPont reported GAAP diluted earnings per share of $0.32. Pro forma adjusted earnings per share of $0.55 increased 10% compared to the year-ago period.
GAAP net sales increased 23%. Pro forma net sales increased to $18.3 billion, up 8% versus the year-ago period, led by gains in the Materials Science segments Industrial Intermediates & Infrastructure (16%), Packaging & Specialty Plastics and Performance Materials & Coatings (8% each), and the Specialty Products segments Transportation & Advanced Polymers (9%) and Safety & Construction (6%).
Sales rose double-digits in Europe, Middle East and Africa (EMEA) (16%) and in Asia Pacific (10%). Sales in North America grew 4%, while sales in Latin America declined driven by weakness in Agriculture due to expected lower corn area and a delayed start to the summer season in Brazil.
Pro forma volume grew 4%, reflecting consumer-led demand in packaging, electronics, transportation, oil and gas, building and construction, and consumer care end-markets. Volume grew in almost all operating segments, led by Electronics & Imaging (13%), as well as Packaging & Specialty Plastics and Safety & Construction (6% each).
Pro forma operating EBITDA increased 7% to $3.2 billion, driven by volume and price gains; higher equity earnings; and lower pension/OPEB costs due to purchase accounting. These gains more than offset higher feedstock costs, weak conditions in agriculture markets, the unfavorable impact of hurricanes, and startup costs related to new assets on the U.S. Gulf Coast.
“We delivered top- and bottom-line growth in the third quarter – a solid start for our newly-formed company,” said CEO Edward Breen. “Our operating earnings increase was the result of broad-based demand growth in most of our core end-markets and disciplined margin management, which more than offset several headwinds, from multiple hurricanes to higher feedstock costs and a delayed start to the summer agriculture season in Brazil. Moreover, we delivered these results while advancing several value-creating initiatives, including: closing the merger, completing our comprehensive portfolio review, and defining the new synergy targets for each division. Going forward, you should expect us to remain focused on executing on our $3 billion cost synergy commitment and advancing preparations to create three focused growth companies in Agriculture, Materials Science, and Specialty Products.”
Third Quarter Segment Information
• Agriculture: The segment reported pro forma net sales of $1.9 billion, down from $2.0 billion in the year-ago period. Pro forma volume and pro forma local price declines of 5% and 4%, respectively, more than offset portfolio and currency benefits. Pro forma operating EBITDA for the segment was a loss of $239 million, versus a loss of $172 million in the year-ago period.
Materials Science
• Performance Materials & Coatings: Performance Materials & Coatings reported pro forma net sales of $2.2 billion, up from $2.0 billion in the year-ago period. Pro forma net sales growth of 8% was primarily driven by gains in both businesses as well as double-digit growth in EMEA.
Consumer Solutions delivered sales growth in all businesses, led by volume gains in most geographies, increased local pricing and disciplined price/volume management in upstream silicone intermediate products. Coatings & Performance Monomers achieved higher sales. Pro forma operating EBITDA increased to $487 million, up from $345 million in the year-ago period.
• Industrial Intermediates & Infrastructure: Industrial Intermediates & Infrastructure reported pro forma net sales of $3.2 billion, up from $2.8 billion in the year-ago period. Polyurethanes & Chlor-Alkali and Vinyl (CAV) grew sales on double-digit gains in all geographies. CAV achieved double-digit sales gains in vinyl chloride monomer and caustic soda, resulting from tighter supply/demand fundamentals, especially in EMEA. Industrial Solutions also delivered sales gains, led by glycol ethers, ethylene glycol and oxo alcohols in consumer-driven market segments of electronics processing and food and pharmaceutical applications. Construction Chemicals achieved sales growth, driven by demand for methyl cellulosics in EMEA and acrylics-based products in North America. Energy Solutions reported lower sales from reduced project activity in energy market sectors, in part due to hurricane-related disruptions in the United States.
The segment achieved pro forma operating EBITDA of $676 million, up from $401 million in the year-ago period.
• Packaging & Specialty Plastics
The Packaging & Specialty Plastics segment reported pro forma net sales of $5.5 billion, up from $5.1 billion in the year-ago period. The segment achieved pro forma net sales growth of 8%. Notable demand highlights included double-digit volume growth in health and hygiene end-markets in the Americas; strong demand in food and specialty packaging solutions, particularly in Asia Pacific; and greater use of elastomers in packaging and footwear applications. Polyethylene and ethylene copolymers sales volume in North America and Latin America declined year-over-year.
Pro forma operating EBITDA for the segment was $1.1 billion, down from $1.4 billion in the year-ago period..
Specialty Products
• Electronics & Imaging: Electronics & Imaging delivered pro forma net sales of $1.2 billion, up from $1.1 billion in the year-ago period. Price declines were driven by pressure in photovoltaics and advanced printing applications.
The segment achieved broad-based volume growth across key end-markets, led by double-digit gains in semiconductor, consumer electronics, industrial, photovoltaics and display end-markets across almost all geographies, primarily in Asia Pacific. Continued demand for mobile phones and other consumer electronics, as well as automotive applications drove sales gains. Growth in photovoltaics led by demand for Tedlar film was partially offset by declines in Solamet paste. The portfolio impact from the sales of Display Films and the Authentications business also negatively impacted results.
Pro forma operating EBITDA for the segment was $382 million, up from $341 million in the year-ago period.
• Nutrition & Biosciences: Nutrition & Biosciences reported pro forma net sales of $1.5 billion, flat with the year-ago period. Pro forma operating EBITDA for the segment was $315 million, down from $321 million in the year-ago period.
• Transportation & Advanced Polymers: Transportation & Advanced Polymers achieved pro forma net sales of $1.3 billion, up from $1.2 billion in the year-ago period. Volume growth was driven by strength in the automotive market as demand for engineering polymers, structural adhesives and MolyKote lubricants outpaced global auto build rates.
Pro forma operating EBITDA increased to $325 million, up from $303 million in the year-ago period.
• Safety & Construction: The Safety & Construction segment reported pro forma net sales of $1.3 billion, up from $1.2 billion in the year-ago period. The segment delivered pro forma net sales growth of 6%, driven by a pro forma volume increase of 6%, with gains in all geographies. Regionally, volume gains came from Nomex thermal apparel in North America, Kevlar high-strength materials in Asia Pacific and Latin America, and Tyvek protective materials for graphics and house wrap in EMEA and Asia Pacific.
Stronger demand from industrial markets, particularly oil and gas, contributed to double-digit gains in Nomex thermal-resistant garments and mid-single-digit gains in Kevlar high-strength materials, including umbilicals for deep sea drilling, as well as higher sales of intermediates. Mid-single-digit gains in Tyvek protective materials reflected growth in graphics and house wraps. Pro forma operating EBITDA rose to $351 million, compared with $282 million in the year-ago period.
“Consumer-led demand continues to drive global economic activity, which remains robust across most major economies, including Europe, China and the United States. Our demand outlook is positive for the majority of our key end-markets,” said Andrew Liveris, executive chairman of DowDuPont. “We still see some market headwinds, the most notable for us being in agriculture, where we continue to closely monitor the situation in Brazil due to the slow start to the summer season. But we remain confident that we will have a solid year across our newly combined Ag division.”
GAAP net sales increased 23%. Pro forma net sales increased to $18.3 billion, up 8% versus the year-ago period, led by gains in the Materials Science segments Industrial Intermediates & Infrastructure (16%), Packaging & Specialty Plastics and Performance Materials & Coatings (8% each), and the Specialty Products segments Transportation & Advanced Polymers (9%) and Safety & Construction (6%).
Sales rose double-digits in Europe, Middle East and Africa (EMEA) (16%) and in Asia Pacific (10%). Sales in North America grew 4%, while sales in Latin America declined driven by weakness in Agriculture due to expected lower corn area and a delayed start to the summer season in Brazil.
Pro forma volume grew 4%, reflecting consumer-led demand in packaging, electronics, transportation, oil and gas, building and construction, and consumer care end-markets. Volume grew in almost all operating segments, led by Electronics & Imaging (13%), as well as Packaging & Specialty Plastics and Safety & Construction (6% each).
Pro forma operating EBITDA increased 7% to $3.2 billion, driven by volume and price gains; higher equity earnings; and lower pension/OPEB costs due to purchase accounting. These gains more than offset higher feedstock costs, weak conditions in agriculture markets, the unfavorable impact of hurricanes, and startup costs related to new assets on the U.S. Gulf Coast.
“We delivered top- and bottom-line growth in the third quarter – a solid start for our newly-formed company,” said CEO Edward Breen. “Our operating earnings increase was the result of broad-based demand growth in most of our core end-markets and disciplined margin management, which more than offset several headwinds, from multiple hurricanes to higher feedstock costs and a delayed start to the summer agriculture season in Brazil. Moreover, we delivered these results while advancing several value-creating initiatives, including: closing the merger, completing our comprehensive portfolio review, and defining the new synergy targets for each division. Going forward, you should expect us to remain focused on executing on our $3 billion cost synergy commitment and advancing preparations to create three focused growth companies in Agriculture, Materials Science, and Specialty Products.”
Third Quarter Segment Information
• Agriculture: The segment reported pro forma net sales of $1.9 billion, down from $2.0 billion in the year-ago period. Pro forma volume and pro forma local price declines of 5% and 4%, respectively, more than offset portfolio and currency benefits. Pro forma operating EBITDA for the segment was a loss of $239 million, versus a loss of $172 million in the year-ago period.
Materials Science
• Performance Materials & Coatings: Performance Materials & Coatings reported pro forma net sales of $2.2 billion, up from $2.0 billion in the year-ago period. Pro forma net sales growth of 8% was primarily driven by gains in both businesses as well as double-digit growth in EMEA.
Consumer Solutions delivered sales growth in all businesses, led by volume gains in most geographies, increased local pricing and disciplined price/volume management in upstream silicone intermediate products. Coatings & Performance Monomers achieved higher sales. Pro forma operating EBITDA increased to $487 million, up from $345 million in the year-ago period.
• Industrial Intermediates & Infrastructure: Industrial Intermediates & Infrastructure reported pro forma net sales of $3.2 billion, up from $2.8 billion in the year-ago period. Polyurethanes & Chlor-Alkali and Vinyl (CAV) grew sales on double-digit gains in all geographies. CAV achieved double-digit sales gains in vinyl chloride monomer and caustic soda, resulting from tighter supply/demand fundamentals, especially in EMEA. Industrial Solutions also delivered sales gains, led by glycol ethers, ethylene glycol and oxo alcohols in consumer-driven market segments of electronics processing and food and pharmaceutical applications. Construction Chemicals achieved sales growth, driven by demand for methyl cellulosics in EMEA and acrylics-based products in North America. Energy Solutions reported lower sales from reduced project activity in energy market sectors, in part due to hurricane-related disruptions in the United States.
The segment achieved pro forma operating EBITDA of $676 million, up from $401 million in the year-ago period.
• Packaging & Specialty Plastics
The Packaging & Specialty Plastics segment reported pro forma net sales of $5.5 billion, up from $5.1 billion in the year-ago period. The segment achieved pro forma net sales growth of 8%. Notable demand highlights included double-digit volume growth in health and hygiene end-markets in the Americas; strong demand in food and specialty packaging solutions, particularly in Asia Pacific; and greater use of elastomers in packaging and footwear applications. Polyethylene and ethylene copolymers sales volume in North America and Latin America declined year-over-year.
Pro forma operating EBITDA for the segment was $1.1 billion, down from $1.4 billion in the year-ago period..
Specialty Products
• Electronics & Imaging: Electronics & Imaging delivered pro forma net sales of $1.2 billion, up from $1.1 billion in the year-ago period. Price declines were driven by pressure in photovoltaics and advanced printing applications.
The segment achieved broad-based volume growth across key end-markets, led by double-digit gains in semiconductor, consumer electronics, industrial, photovoltaics and display end-markets across almost all geographies, primarily in Asia Pacific. Continued demand for mobile phones and other consumer electronics, as well as automotive applications drove sales gains. Growth in photovoltaics led by demand for Tedlar film was partially offset by declines in Solamet paste. The portfolio impact from the sales of Display Films and the Authentications business also negatively impacted results.
Pro forma operating EBITDA for the segment was $382 million, up from $341 million in the year-ago period.
• Nutrition & Biosciences: Nutrition & Biosciences reported pro forma net sales of $1.5 billion, flat with the year-ago period. Pro forma operating EBITDA for the segment was $315 million, down from $321 million in the year-ago period.
• Transportation & Advanced Polymers: Transportation & Advanced Polymers achieved pro forma net sales of $1.3 billion, up from $1.2 billion in the year-ago period. Volume growth was driven by strength in the automotive market as demand for engineering polymers, structural adhesives and MolyKote lubricants outpaced global auto build rates.
Pro forma operating EBITDA increased to $325 million, up from $303 million in the year-ago period.
• Safety & Construction: The Safety & Construction segment reported pro forma net sales of $1.3 billion, up from $1.2 billion in the year-ago period. The segment delivered pro forma net sales growth of 6%, driven by a pro forma volume increase of 6%, with gains in all geographies. Regionally, volume gains came from Nomex thermal apparel in North America, Kevlar high-strength materials in Asia Pacific and Latin America, and Tyvek protective materials for graphics and house wrap in EMEA and Asia Pacific.
Stronger demand from industrial markets, particularly oil and gas, contributed to double-digit gains in Nomex thermal-resistant garments and mid-single-digit gains in Kevlar high-strength materials, including umbilicals for deep sea drilling, as well as higher sales of intermediates. Mid-single-digit gains in Tyvek protective materials reflected growth in graphics and house wraps. Pro forma operating EBITDA rose to $351 million, compared with $282 million in the year-ago period.
“Consumer-led demand continues to drive global economic activity, which remains robust across most major economies, including Europe, China and the United States. Our demand outlook is positive for the majority of our key end-markets,” said Andrew Liveris, executive chairman of DowDuPont. “We still see some market headwinds, the most notable for us being in agriculture, where we continue to closely monitor the situation in Brazil due to the slow start to the summer season. But we remain confident that we will have a solid year across our newly combined Ag division.”
