NEW YORK — Improved volumes and prices for nylon and spandex products helped the DuPont Textiles & Interiors division (DTI) contribute positively to the firm’s fourth-quarter profits — though overall earnings fell due to a one-time year-ago gain.
This story first appeared in the January 29, 2003 issue of WWD. Subscribe Today.
DTI’s recent strength notwithstanding, the Wilmington, Del.-based chemicals giant reiterated its intention to divest itself of the unit this year, possibly through an initial public offering.
DTI’s aftertax operating profits of $44 million compared favorably with year-ago losses of $1 million. Before special items related to the firm’s restructuring initiatives, DTI’s aftertax operating income rose to $36 million versus a loss of $11 million a year ago.
Driving the bottom line were volume upticks in nylon and spandex products in apparel, as well as increased volume in flooring and intermediates. The volume improvements more than offset the negative impact of higher raw material costs in intermediates, as well as other expenses.
DTI’s sales for the quarter ended Dec. 31 ascended 4.5 percent to $1.55 billion from $1.49 billion and reflected a 4 percent volume gain and 1 percent price increase.
On a conference call, Ann Gualtieri, vice president of investor relations, conceded that the period benefited from comparisons with a “very weak final quarter last year.” However, DTI’s quarterly results were hampered by a drop-off in flooring volumes, increased raw material costs in intermediates and charges associated with inventory, and obsolete equipment adjustments related to the firm’s restructuring, she said.
“Our overall volume outlook for DTI reflects modest and gradual improvement in the global economy,” said Gualtieri. However, the outlook for apparel volumes and pricing is weak.
“Higher raw materials costs, which began to affect the bottom line in the fourth quarter, will increasingly impact margins across all DTI businesses in the first quarter,” she said.
Chief financial officer and senior vice president Gary Pfeiffer added, “Nothing has changed in our previously announced strategy to separate DTI, market conditions permitting, by the end of the year.”
Overall, DuPont endured a 91.1 percent skid in net profits to $350 million, or 35 cents a diluted share. This compared with year-ago earnings of $3.92 billion, or $3.82, which included a $3.82 billion aftertax gain on the sale of the firm’s pharmaceuticals unit to Bristol-Myers Squibb. Before special items, the firm’s diluted EPS rose to 34 cents for the quarter, up from 12 cents a year ago. Earlier this month, the company reduced its earning predictions slightly to between 31 and 33 cents a share.
DuPont’s overall sales advanced 9.5 percent in the quarter to $5.86 billion from $5.35 billion a year ago.
Investors traded shares of the firm up 27 cents, or 0.7 percent, to close at $38.73 on the New York Stock Exchange Tuesday. The Blue Chip stock contributed to the Dow Jones Industrial Average’s 99.28 point, or 1.2 percent, ascent to 8,088.84.
For 2002, DTI’s aftertax operating profits of $72 million compared with the previous year’s loss of $340 million. Results include charges of $100 million related to separation costs for about 2,000 employees, $43 million for facility shutdowns and $29 million to withdraw from a polyester joint venture in China. Offsetting these charges was a $19 million gain from a favorable litigation settlement associated with the exit of a nylon joint venture in China.
Before special items, the unit’s aftertax operating income bounded up 208.6 percent to $216 million from $70 million. Sales for the division dipped 3.1 percent over the 12 months to $6.28 billion from $6.48 billion in 2001.
Overall, DuPont’s net losses in 2002 were $1.1 billion, or $1.11 a diluted share. This compared with earnings of $4.34 billion, or $4.16, in 2001. Before special items, DuPont’s diluted EPS rose to $2 for the year from $1.19.
“Barring war or economic disruptions,” Gualtieri said DuPont in the new year should post earnings per share on par with the 55 cents it pulled in a year ago, before special items.
Also playing into the DuPont’s 2003 results will be the negative impact of pension and other post-retirement expenses, which aren’t recorded as cash and will reduce earnings for the year by 34 to 39 cents a share. However, the DuPont’s income tax rate is estimated at 30 percent, down from the average actual base rate of 31.4 percent for the 1999-2001 period, thanks to a number of initiatives to improve the firm’s tax position.