DUPONT NET INCOME RISES 21.1 PERCENT IN FIRST QUARTER
Byline: Scott Malone
NEW YORK — Despite weakness in its polyester and nylon fibers businesses, DuPont reported a 21.1 percent increase in first-quarter net income.
The Wilmington, Del.-based company reported net income of $803 million, or 76 cents per diluted share, for the three months ended March 31. That compared with $663 million, or 58 cents per diluted share, in the prior-year quarter.
In a conference call with reporters, DuPont senior vice president John Himes said the rising cost of its raw materials across all the company’s business segments reduced earnings by 7 cents per share. Results at the company’s foreign operations were also hurt by currency fluctuations, he noted.
Net sales, inclusive of extraordinary items, were $7.94 billion, up 25.8 percent from $6.3 billion a year ago.
The company’s nylon enterprise reported aftertax operating income of $87 million, off 14.7 percent from $102 million. Segment sales were $1.12 billion, up 1.8 percent from $1.1 billion. Increased volume offset a slight decline in global prices, which the company attributed to currency comparisons.
In a telephone interview, Bob Pruyn, business director for textile nylon, attributed the sharp margin erosion to the company’s inability to raise prices as quickly as its costs are rising.
“We’ve had some success [increasing prices], but because of the competitive environment, you never quite get all the increase you’re looking for,” he said. “But for the most part, we’ve been what we would consider successful. It’s a difficult situation, though, because most of our customers are having difficulty passing along the price increases to their customers.”
Nonetheless, he said, the continuing rise of raw materials costs and the fact that DuPont hasn’t yet caught up with the cost increases it’s already experienced most likely mean further nylon price hikes are on the way.
“We’re still not ahead of our ingredient cost increases,” he said, “which means we’re probably going to continue to be very aggressive on pricing.”
Pruyn said sales of nylon into the woven-fabrics market have dropped off over the last month or two, a trend he attributes to a dip in the popularity of nylon cargo pants and board shorts. However, sales in the knitted-apparel market remain strong, he added.
DuPont’s specialty fibers segment — which includes the Lycra spandex business — reported aftertax operating income of $201 million, up 11 percent from $181 million. Sales were $905 million, up 4.9 percent from $863 million.
Steve McCracken, president of DuPont’s Lycra operations, said that spandex fiber is not as dependent on oil as a raw material as other synthetic fibers are. He added that by improving operating efficiencies, the operation has actually decreased its per-unit manufacturing cost over the past year.
By region, he said that over the last quarter, Lycra’s “hottest spot by far is Asia.” In addition, sales into Europe had improved after last year’s softness. South and North American sales were also up, though sales into the U.S. were flat, a development he attributed to the movement of apparel manufacturing out of the U.S.
Both McCracken and Pruyn reported a slight slowdown in the intimate apparel business.
The polyester enterprise reported $9 million in aftertax operating income for the quarter, compared with a $6 million aftertax operating loss last year. Sales were $589 million, off 5.6 percent from $624 million.
DuPont attributed the bottom-line improvement to the company’s having put the bulk of its polyester restructuring — which put about half the business into joint ventures — behind it. Himes said the sales decline relates to the company’s selling down its stakes in those ventures.
The company also noted that its efforts to increase polyester prices “helped to dampen the negative impact of higher raw material costs.”
Despite the bottom-line improvement, DuPont shares fell 5 1/6 to close at 50 15/16 on the Big Board Tuesday.