DuPont Reports Second-Quarter and First-Half Results

WILMINGTON, Del., July 25, 2017 /PRNewswire/ --

Second-Quarter Highlights

• GAAP¹ earnings per share decreased 16 percent to $0.97 from $1.16 in prior year. Operating earnings² per share increased 11 percent to $1.38 from $1.24 in prior year.

• Sales of $7.4 billion increased 5 percent on a 6-percent benefit from volume partially offset by a 1-percent decline in local price. Volume grew in all reportable segments, primarily led by Agriculture, Electronics & Communications and Protection Solutions.

• Segment operating margins expanded by about 80 basis points, led by improvements in Electronics & Communications, Industrial Biosciences and Agriculture.

First-Half Highlights

• GAAP¹ earnings per share decreased 2 percent to $2.50 from $2.55 in prior year. Operating earnings² per share increased 21 percent to $3.02 from $2.50 in prior year.

• Sales of $15.2 billion increased 5 percent driven by volume growth. Sales grew in most segments, led by Agriculture, Performance Materials and Electronics & Communications.

• Agriculture sales increased 5 percent on a 5-percent benefit from volume and a 1-percent benefit from local price, partially offset by a 1-percent negative impact from portfolio. Volume growth was driven by a benefit from the timing of seed deliveries, including the route-to-market change in the southern U.S., increased insecticide and fungicide sales, higher soybean sales in North America, and increased sunflower and corn seed sales in Europe. This growth was partially offset by the expected decline in corn volume related to reduced corn area in North America.

• Total company gross margin expanded by 45 basis points. Segment operating margins expanded by about 170 basis points, led by improvements in Electronics & Communications, Performance Materials and Agriculture.

• Free cash flow³ improved by about $200 million, excluding about $2.8 billion of increased pension contributions.

DuPont (NYSE: DD), a science company that brings world-class, innovative products, materials, and services to the global marketplace, today announced second-quarter 2017 GAAP¹ earnings from continuing operations of $0.97 per share and operating earnings² of $1.38 per share.  Prior year GAAP¹ and operating earnings² were $1.16 per share and $1.24 per share, respectively.  Refer to Schedule B for details of significant items excluded from operating earnings per share.

For first-half 2017, DuPont delivered GAAP¹ earnings from continuing operations of $2.50 per share and operating earnings² of $3.02 per share. Prior-year GAAP¹ and operating earnings² per share were $2.55 and $2.50, respectively.

Second-quarter sales totaled $7.4 billion, up 5 percent versus prior year on a 6-percent benefit from volume partially offset by a 1-percent decline in local price.  Volume grew in all reportable segments, led by Agriculture, Electronics & Communications and Protection Solutions. First-half sales of $15.2 billion increased 5 percent versus prior year on a 5-percent benefit from volume. Sales grew in most segments, led by Agriculture, Performance Materials and Electronics & Communications.  Agriculture sales were positively impacted by the change in timing of seed deliveries, including the southern U.S. route-to-market change, which benefitted first-half sales by approximately $200 million, or about 1 percent. 

"Our increased operating earnings per share and strong sales growth of 5 percent were driven by volume growth from our highly productive innovation pipeline," said Ed Breen, chairman and CEO of DuPont.  "We continue to see the results of the focus, efficiency and productivity our teams are delivering as we move toward the expected August closing of the merger with Dow. Our integration planning will enable us to begin implementation quickly, including launching the projects to achieve our $3 billion cost synergies target, and move toward standing up the strong, independent companies we intend to create."

Global Consolidated Net Sales – 2nd Quarter

Global Consolidated Net Sales – First Half

Segment Net Sales – 2nd Quarter

Segment Net Sales – First Half

Operating Earnings – 2nd Quarter

Operating Earnings – First Half

The following is a summary of business results for each of the company's reportable segments comparing the second quarter and first half with the prior year, unless otherwise noted.

Agriculture – Second-quarter 2017 operating earnings of $963 million increased $98 million, or 11 percent, on volume growth, partially offset by declines in local price and higher product costs.  Volume growth was driven by increased insecticide and fungicide sales, a benefit from the southern U.S. route-to-market change and higher soybean sales in North America, driven by the increase in planted area.  Reductions in local price reflected declines in crop protection and increased product costs mainly driven by higher soybean royalties.  Operating margins expanded by about 105 basis points.

First-half operating earnings of $2,199 million increased $233 million, or 12 percent, on growth in volume and local price.  Volume growth was driven by a benefit from the change in timing of seed deliveries including the southern U.S. route-to-market change, increased insecticide and fungicide sales, higher soybean sales in North America, and increased sunflower and corn seed sales in Europe.  Volume growth was partially offset by the expected decline in corn volume related to reduced corn area in North America. Pricing growth was realized by double-digit increases in Brazil driven by the company's newest corn hybrids and lower product cost within crop protection, partially offset by price declines in Latin America and Asia and higher soybean royalties.  Operating margins expanded by about 175 basis points.

Electronics & Communications – Second-quarter 2017 operating earnings of $116 million increased $23 million, or 25 percent, as volume growth more than offset a decline in local price.  Volume growth was due to increased demand in consumer electronics and semiconductor markets, as well as stronger photovoltaic sales.  Operating margins expanded by about 240 basis points.

First-half operating earnings of $205 million increased $53 million, or 35 percent, on volume growth and the absence of a $16 million prior-year litigation expense, partially offset by lower local price.  Operating earnings included a gain on the sale of a business offset by costs associated with a legal matter.  Operating margins expanded by 335 basis points.

Industrial Biosciences - Second-quarter 2017 operating earnings of $76 million increased $14 million, or 23 percent, on volume growth and mix enrichment, partially offset by higher costs due to growth investments.  Broad-based volume growth was driven by increased demand for biomaterials in apparel and carpeting, bioactives in the grain processing market, and CleanTech.  Operating margins expanded by about 180 basis points.

First-half operating earnings of $151 million increased $26 million, or 21 percent, on volume growth and mix enrichment, partially offset by higher costs due to growth investments.  Volume growth was driven by increased demand for biomaterials in apparel and carpeting and bioactives in the grain processing market.  Operating margins expanded by about 210 basis points.

Nutrition & Health – Second-quarter 2017 operating earnings of $135 million increased $5 million, or 4 percent, on volume growth.  Increased demand in probiotics was partially offset by declines in systems and texturants and protein solutions.  Operating margins expanded by about 95 basis points.

First-half operating earnings of $256 million increased $22 million, or 9 percent, on plant productivity, mix enrichment and cost savings, partially offset by a $6 million negative impact from portfolio.  Volume growth in probiotics was offset by declines in systems and texturants and protein solutions.  Operating margins expanded by about 165 basis points.

Performance Materials - Second-quarter 2017 operating earnings of $329 million increased $4 million, or 1 percent, as volume growth, higher local price, and the absence of costs associated with a contractual claim were largely offset by higher raw material costs and the planned turnaround of the ethylene cracker.  Increased demand for polymers in automotive markets and increased demand for high-performance parts in semiconductor and aerospace markets drove the higher volumes.  Operating margins contracted by about 50 basis points.

First-half operating earnings of $684 million increased $86 million, or 14 percent, driven by volume growth, cost savings and the absence of costs associated with a contractual claim, partially offset by higher raw material costs and the planned turnaround of the ethylene cracker.  Volume growth was driven by increased demand for polymers in automotive markets and high-performance parts in semiconductor and aerospace markets.  Operating margins expanded by about 175 basis points.

Protection Solutions – Second-quarter 2017 operating earnings of $191 million increased $3 million, or 2 percent, as volume growth more than offset lower local price and product mix and higher costs due to growth investments.  Volume growth reflected improved demand for Tyvek^® protective material in medical packaging and protective apparel and Nomex^® thermal-resistant fiber in oil and gas markets.  Operating margins contracted by about 5 basis points.

First-half operating earnings of $368 million increased $4 million, or 1 percent, as volume growth was partially offset by lower local price and product mix as well as higher raw material costs.  Volume growth was primarily driven by increased demand for Nomex^® in oil and gas markets, Kevlar^® high-strength materials, and Tyvek^®.  Operating margins contracted by about 25 basis points.

DuPont will hold a conference call and webcast on Tuesday, July 25, 2017, at 8:00 AM ET to discuss this news release. The webcast and additional presentation materials can be accessed by visiting the company's investor website (Events & Presentations) at www.investors.dupont.com. A replay of the conference call webcast will be available for 90 days by calling 1-630-652-3042, Passcode 9189324#.  For additional information see the investor center at http://www.dupont.com.

Use of Non-GAAP Measures
This earnings release includes information that does not conform to U.S. generally accepted accounting principles (GAAP) and are considered non-GAAP measures.  These measures include the company's consolidated results and earnings per share on an operating earnings basis, which excludes significant items and non-operating pension and other post-employment benefit costs (operating earnings and operating EPS), total segment pre-tax operating earnings, operating costs and corporate expenses on an operating earnings basis.  Management uses these measures internally for planning, forecasting and evaluating the performance of the company's segments, including allocating resources and evaluating incentive compensation.  From a liquidity perspective, management uses free cash flow, which is defined as cash provided by/used for operating activities less purchases of property, plant and equipment.  Free cash flow is useful to investors and management to evaluate the company's cash flow and financial performance, and is an integral financial measure used in the company's financial planning process. Management believes that these non-GAAP measurements are meaningful to investors as they provide insight with respect to ongoing operating results of the company and provide a more useful comparison of year-over-year results.  These non-GAAP measurements supplement our GAAP disclosures and should not be viewed as an alternative to GAAP measures of performance.  Reconciliations of non-GAAP measures to GAAP are provided in schedules A, C and D.  Details of significant items are provided in schedule B.

About DuPont
DuPont (NYSE: DD) has been bringing world-class science and engineering to the global marketplace in the form of innovative products, materials, and services since 1802.  The company believes that by collaborating with customers, governments, NGOs, and thought leaders we can help find solutions to such global challenges as providing enough healthy food for people everywhere, decreasing dependence on fossil fuels, and protecting life and the environment.  For additional information about DuPont and its commitment to inclusive innovation, please visit http://www.dupont.com.

Forward-Looking Statements: 
On December 11, 2015, DuPont and The Dow Chemical Company ("Dow") announced entry into an Agreement and Plan of Merger, as amended on March 31, 2017, and as may be amended from time to time in accordance with its terms, (the "Merger Agreement") under which the companies will combine in an all-stock merger (the "Merger Transaction"), subject to satisfaction of closing conditions, including receipt of regulatory approval. Dow and DuPont have obtained conditional approval for the Merger Transaction from the antitrust regulatory authorities in the United States, Brazil, Canada and China, among others. The conditional approvals were granted based on the companies fulfilling their commitments to divest certain assets, among other conditions (the "Conditional Commitments"). In connection with the Conditional Commitments, DuPont entered into a definitive agreement (the "FMC Transaction Agreement") with FMC Corporation (FMC). Under the FMC Transaction Agreement subject to the closing of the Merger Transaction in addition to customary closing conditions, including regulatory approval, FMC will acquire certain Crop Protection business and R&D assets from DuPont and DuPont has agreed to acquire certain assets relating to FMC's Health and Nutrition segment (collectively, the "FMC Transactions"). The combined company will be DowDuPont Inc. DuPont and Dow intend, following consummation of the Merger Transaction, that DowDuPont Inc. will pursue, subject to the receipt of approval by the board of directors of DowDuPont, the separation of the combined company's agriculture business, specialty products business, and materials science business through a series of tax-efficient transactions (collectively, the "Intended Business Separations"). For more information, please see DuPont's latest annual, quarterly and current reports on Forms 10-K, 10-Q and 8-K, as well as the joint proxy/prospectus included in the DowDuPont Registration Statement on Form S-4 filed in connection with the Merger Transaction.

This document contains forward-looking statements which may be identified by their use of words like "plans," "expects," "will," "believes," "intends," "estimates," "anticipates" or other words of similar meaning. All statements that address expectations or projections about the future, including statements about the company's strategy for growth, product development, regulatory approval, market position, anticipated benefits of recent acquisitions, timing of anticipated benefits from restructuring actions, outcome of contingencies, such as litigation and environmental matters, expenditures, financial results and timing of, as well as expected benefits, including synergies, from the Merger Transaction and the Intended Business Separations, are forward-looking statements. These and other forward-looking statements, including the failure to consummate the Merger Transaction, the Intended Business Separations, the FMC Transactions or the Conditional Commitments, to make or take any filing or other action required to consummate such transactions in a timely manner or at all, are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements. Forward-looking statements are not guarantees of future performance and are based on certain assumptions and expectations of future events which may not be realized. Forward-looking statements also involve risks and uncertainties, many of which are beyond the company's control. Some of the important factors that could cause the company's actual results to differ materially from those projected in any such forward-looking statements are: fluctuations in energy and raw material prices; failure to develop and market new products and optimally manage product life cycles; ability to respond to market acceptance, rules, regulations and policies affecting products based on biotechnology and, in general, for products for the agriculture industry; outcome of significant litigation and environmental matters, including realization of associated indemnification assets, if any; failure to appropriately manage process safety and product stewardship issues; changes in laws and regulations or political conditions; global economic and capital markets conditions, such as inflation, interest and currency exchange rates; business or supply disruptions; security threats, such as acts of sabotage, terrorism or war, natural disasters and weather events and patterns which could affect demand as well as availability of products for the agriculture industry; ability to protect and enforce the company's intellectual property rights; successful integration of acquired businesses and separation of underperforming or non-strategic assets or businesses; and risks related to the Merger Transaction, the Intended Business Separations, the FMC Transactions and the Conditional Commitments. These risks, as well as other risks associated with the Merger Transaction, the Intended Business Separations, the FMC Transactions and the Conditional Commitments, are or will be more fully discussed in (1) DuPont's most recently filed Form 10-K, 10-Q and 8-K reports, (2) DuPont's subsequently filed Form 10-K and 10-Q reports and (3) the joint proxy statement/prospectus included in the Registration Statement filed with the SEC about the Merger Transaction. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, monetary loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on DuPont's consolidated financial condition, results of operations, credit rating or liquidity. The company assumes no obligation to publicly provide revisions or updates to any forward-looking statements, whether because of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws.