APPAREL DEMAND HELPS DUPONT FIBERS RECORD BEST QUARTER SINCE ’89
Byline: Michael McNamara With contributions from Thomas J. Ryan
NEW YORK — The once sagging fiber business of DuPont has just completed its most successful quarter in four-and-a-half years, with improved demand in apparel markets a big help.
In addition to higher volumes, lower costs — particularly in its Lycra spandex and nylon operations — along with benefits of an ongoing restructuring, pushed operating earnings in DuPont’s fibers up 60.9 percent in the second quarter ended June 30.
Despite a softness in DuPont’s earnings in DuPont’s fibers up 60.9 percent in the second quarter ended June 30.
Despite a softness in DuPont’s
Dacron polyester business, the quarter marked the company’s strongest in the fiber sector since the fourth quarter of 1989. However, DuPont executives said the polyester market, particularly in apparel, is improving.
The performance in fibers was in line with robust results for all of DuPont, which posted the best quarterly profits in its history.
For fibers, the after-tax operating profits in the quarter came to $177 million compared with $102 million a year earlier.
Sales increased 12.5 percent to $1.7 billion from $1.5 billion. Excluding additional sales from DuPont’s acquisition of ICI’s nylon business in Europe, sales volume was up 3 percent.
Higher fiber volumes and reduced costs more than offset a 3 percent decline in fiber prices and weak currency translations, said Bruce Beardwood, DuPont’s vice president of investor relations. Beardwood added that of the gains made in fiber profits, two-thirds were attributed to higher volume, one-third to reduced costs.
In the half, fiber’s operating income climbed 51.4 percent to $321 million from $212 million. Sales increased 13.1 percent to $3.4 billion from $2.98 billion.
Nylon, which makes up $4.2 billion of DuPont’s $6.2 billion in fiber sales, underscores the dramatic changes the company has made since it began restructuring its fibers unit 13 months ago.
“We’ve improved the competitiveness of our nylon business,” said Bob Pruyn, marketing director of DuPont textiles, in a telephone interview Wednesday from DuPont’s Wilmington, Del., headquarters. “The focus we have is to maintain our competitiveness and to look at all growth opportunities, along with examining markets around the world we need to get into.”
DuPont’s latest move in nylon, as reported, is a joint venture in India, Thapur DuPont Ltd. The other lead partner is Balarpur Industries, New Delhi. The plant, slated to go on line some time next year, will produce type 6,6 nylon for textiles and tire cord.
“Lots of our costs are down in nylon, and revenues are up,” said Pruyn, “and the market around the world is improving. Add those things up and the outlook is bright for our nylon business.”
The cost-cutting measures undertaken by DuPont in the nylon area include slashing its work force by about 2,900. The move, which began in September 1993 and is continuing, “has helped our bottom line,” Beardwood said.
Lycra, which dramatically hindered DuPont in 1993 with especially poor results in Europe, continues to show improvement, recovering from currency fluctuations and lower pricing — items that depressed year-ago results, Pruyn said. Europe accounts for about 50 percent of DuPont’s total Lycra business.
“The U.S business,” said Pruyn, “is changing. Two competitors [Globe Manufacturing and Miles Inc.] are putting more spandex into the market, which may create some instability in the market for a little while.
“We have factored that instability into our future business plans, so there won’t be any surprises,” Pruyn added. Pruyn also said that while the hosiery market remains weak, “virtually all other markets for Lycra are strong.”
“Activewear and swimwear continue to be the driving forces behind Lycra,” he said, “but it is also beginning to get some ready-to-wear play.”
Beardwood said profits in Lycra “were up smartly,” estimating the gain at about 15 to 20 percent. As for DuPont’s Dacron business, despite a relatively weak quarter, the outlook is bright, Pruyn said, noting that while polyester staple has been struggling, polyester filament continues to do well.
“Worldwide, demand is outstripping supply for [polyester for] apparel products,” said Pruyn. “That’s somewhat been caused by the cotton shortages, and people moving into heavier blends with polyester.
“The biggest issue we’re facing, though, is the increased prices of the raw materials that make up polyester.”
Increased prices on polyester are being resisted by the manufacturers and the retailers, Pruyn said.
“Still, the outlook is better than it was last year for polyester,” he added.
DuPont increased the price of its polyester by 7 percent in the second quarter, “and that has improved our results a little bit,” Pruyn said. “But it’s still too early to tell how much.”
Overall, DuPont said it notched its strongest quarter in its 192-year history, benefiting from its company-wide restructuring started in 1991 that reduced DuPont’s employee count to 114,000 from 133,000.
Earnings in the quarter rose to $792 million, or $1.16 a share, from $516 million, or 76 cents, a year earlier. Sales gained 6.4 percent to $10.2 billion from $9.5 billion.
In the six months, profits climbed to $1.4 billion, or $2.10, from $1 billion, or $1.49, a year earlier. Sales rose 3.9 percent to $19.4 billion from $18.6 billion.
“This impressive performance reflects tremendous efforts by our employees to improve productivity and grow our businesses, while maintaining tight constraints on spending in a very competitive market,” said DuPont’s chairman, Edgar Woolard Jr.
DuPont also increased its quarterly dividend 7 percent to 47 cents from 44 cents.
Despite all the good news, DuPont’s shares, trading on the New York Stock Exchange, fell 3/8 to 59 7/8 Wednesday.