WILMINGTON, Del. — Cost-cutting measures undertaken by DuPont over the past two years have begun to show positive results, particularly in the company’s $6.2 billion fibers business, its chairman said Wednesday.
At a relatively quiet annual meeting at the Playhouse Theater here — one that lasted about 90 minutes — Edgar S. Woolard Jr. said that despite poor economic conditions around the globe and excess inventories, “the restructuring efforts we have had, although not complete, will continue to have tremendous positive impact on the bottom line.”
As reported, operating earnings in DuPont’s fibers unit rose 42 percent in the first quarter ended March 31. For the quarter, the fibers segment posted after-tax operating earnings of $144 million, compared with $102 million in 1993. The recent quarter was the strongest for DuPont fibers since the second quarter of 1992.
“We are seeing strong momentum in both nylon and Lycra spandex, while Dacron polyester is still somewhat difficult right now,” said Woolard, who at last year’s parley did not talk about DuPont’s fibers business.
Woolard opened the gathering by recognizing the death of former president Richard M. Nixon, noting, “We decided even though this is a day of mourning, to proceed with the meeting. It is a solemn day for the citizens of the United States.
“We are engaged in a worldwide business war,” Woolard told the 1,200 or so stockholders in attendance. “But we have taken actions, many of them painful, but ones that have begun to pay off.”
Woolard said one decision was the divestiture of DuPont’s acrylic business and reduction of its global nylon work force by about 2,900 people.
The executive also pointed out that the reorganization last year of DuPont’s fibers business into what the company calls a strategic business unit “has helped streamline the operation, made it more cost effective and more responsive to the customer.”
Woolard then went on to talk about the other aspects of DuPont’s business, and fielded questions regarding health, environmental and compensation issues. One stockholder asked whether there were any plans to move company headquarters to Canada, to which Woolard responded, “We have no plans to move it out of Wilmington. I’m from North Carolina, so if we were going to go anywhere, I hope we’d move it South.”
In an interview following the meeting, senior vice president Jerald A. Blumberg, who oversees DuPont’s fibers operations, and Gary M. Pfeiffer, vice president and general manager, DuPont Nylon North America, discussed the company’s fibers business.
“Nylon should have a good year, but we wouldn’t characterize it as a skyrocketing year,” said Pfeiffer. “While we see an improvement, it will be tough to match the first-quarter performance, which was outstanding. In Europe, a lot of how we do will depend on the economy, particularly for textile nylon.”
Pfeiffer and Blumberg said the most problematic area for the $4.2 billion nylon business is the hosiery market. Carpet, industrial, automotive and most apparel applications were expected to perform well for the balance of 1994, they said.
Blumberg also noted that the 40 percent downsizing of the Martinsville, Va., plant, which should be completed by July 1, “will help the bottom line further, and the ICI business is also showing a better performance.”
DuPont, as reported, purchased ICI’s European nylon operations last July.
Blumberg also said Lycra, which was dogged by poor European sales for most of 1993, was gaining momentum there as well as in Asia.
“Since roughly 50 percent of our Lycra business is done in Europe, it’s very difficult when that part of the world is having a tough time,” Blumberg said, adding that the turnaround for Lycra in Europe began at the end of 1993 “and has come on particularly strong in the first quarter of 1994.”
The biggest potential trouble spot for the fibers business could come in Dacron polyester, the executives said. Polyester staple, they said, could feel tremendous price pressures because of the rising costs of raw materials.
“We are raising the price of polyester staple 7 percent, and that should help,” Blumberg said. “Still, the high price of raw materials is a drawback.
“But what we feel will help are the capital investments we have made in Dacron, which will begin to pay off soon, most notably in our filament area, with the expansion of the Kinston, N.C., plant coming on line in mid-1995,” Blumberg said.
“Exports of textured polyester filament are doing well, and polyester is doing well in the U.S. home furnishings and industrial markets,” he continued. “But when 90 percent of your business is domestic, you have to look at other areas. We are looking at Asia. Although nothing is being done right now, a move there is not out of the question; exactly when, I don’t know.
“We’ve done a lot of the cost-cutting and now it’s time to really get going in a positive direction. Based on the first-quarter numbers, we have started to do that. Still, we are a long way from where we want to be. We’ve had to play catch-up, and when you have a company the size of ours, that becomes a project in and of itself.”