WILMINGTON, Del. — The fiber picture is brightening at DuPont, as a massive restructuring begun last year is starting to pay off.
Bolstered by improvements in its Lycra spandex and nylon operations — both domestically and abroad — and lower fixed costs, operating earnings in DuPont’s fibers unit jumped 42 percent in the first quarter ended March 31.
Despite a weakness in Dacron polyester, the quarter marked DuPont’s strongest in the fiber sector since the second quarter of 1992, reflecting the company’s restructuring efforts, said Edgar S. Woolard Jr., DuPont’s chairman.
For the quarter, the fiber segment posted after-tax operating earnings of $144 million compared with $102 million in 1993.
Sales increased 13.7 percent, to $1.65 billion from $1.45 billion. Excluding additional sales from DuPont’s 1993 acquisition of ICI’s nylon business in Europe, sales volume was up 6 percent.
Higher fiber volumes and reduced costs more than offset a 2 percent decline in fiber prices and weak currency translations, said Bruce Beardwood, DuPont’s vice president of investor relations.
“Our significant reduction in costs is having the desired effect on our earnings,” said Woolard in a statement, adding that DuPont is also benefiting from increasing demand in key markets, particularly in Lycra spandex.
“Not only is demand generally improved in the United States, but market conditions are better in Europe and Asia,” he said.
Lycra, which dramatically hindered DuPont in 1993, showed “marked improvement” in the quarter, recovering from lower pricing and currency fluctuations that depressed year-ago results, said Beardwood. DuPont’s Lycra business in Europe — which accounts for about 50 percent of DuPont’s total Lycra business — was a major drag on the fibers division last year, due to Europe’s crippling recession, wild currency fluctuations, excess inventories and declining demand.
“The good news is that the Lycra business has normalized and is going forward,” Beardwood said. “That fact that Europe has somewhat stabilized, and the tremendous negative currency impact is over, will help Lycra.”
Nylon, Beardwood said, benefited mainly from the acquisition of ICI — which added to the unit’s revenue base — improvement in the floorings business and lower costs. Since September 1993, DuPont has slashed its nylon work force by 2,900, “which has helped the bottom line for nylon,” Beardwood said.
Beardwood also said the restructuring of the $6.2 billion fibers’ unit, which began in June, eliminated significant overhead and duplication in Dacron and Lycra, which in turn bolstered the bottom line.
While nylon was hardest hit by DuPont’s restructuring, other measures included the consolidation of U.S. polyester operations, early retirement offers for long-time employees throughout the company, some plant and office closings and the reassignment of certain market responsibilities to regional managers.
Previously, the fibers operation — most notably nylon, which makes up $4.2 billion in fiber sales — was split among three units. They now operate in what DuPont calls a strategic business unit, with all segments of the fibers business reporting to senior vice president Jerald Blumberg. Dacron polyester was hurt by weaker price comparisons, particularly in polyester staple. The company said some ongoing initiatives to increase the price of polyester staple by 7 percent in the second quarter should improve results.
Overall, DuPont’s earnings rose 39 percent, to $642 million, or 94 cents a share, from a comparable profit of $461 million before a special charge a year earlier. The 1993 quarter included a $32 million gain from a sale that lifted the year-ago net to $493 million, or 73 cents. The 1994 quarter was the corporation’s best overall quarter since 1992’s second quarter.
Sales edged up 1 percent, to $9.2 billion from $9.08 billion.