CEO DESCRIBES DUPONT’S GROWTH PLANS
Byline: Scott Malone
WILMINGTON, Del. — The day after reporting impressive 21 percent first-quarter earnings growth, DuPont’s chairman and chief executive officer, Charles O. Holliday Jr., sketched out the company’s ambitious growth plans for the year.
Noting that DuPont has set an overall target of 10 percent annual earnings-per-share growth, he said the company expected to far exceed that level this year. He projected an overall income rise of 17 to 20 percent.
“We’re going to beat that 10 percent goal,” he said at the company’s annual shareholders’ meeting, held Wednesday at the Hotel DuPont here.
In pursuing that goal, and to drive earnings in the years ahead, he said DuPont was pursuing a number of strategies. Among them, the company wants to increase its e-business efforts and to make its operations more “knowledge-intensive.”
“We’re trying to get paid for what we know, not only for the products we sell,” Holliday said.
However, products remain the core of DuPont’s revenues today, and Holliday added that developing new products remained a top focus. In 1999, he said, 20 percent of revenues came from products developed in the past five years.
During the meeting, which ran slightly over an hour, Holliday singled out the company’s Lycra spandex division as a leader in that area; 70 percent of its 1999 sales came from new offerings.
The ceo also acknowledged that the rising cost of oil had taken a toll on many of DuPont’s petroleum-related products in recent quarters, including polyester. But he added that results in the polyester business were improving.
“Our folks in polyester are not where they want to be yet,” Holliday said, “but we’ve had two profitable quarters in a row.”
In an interview after the meeting, a group of the company’s top fiber executives offered their outlook on the year ahead and explained how the fiber operations were participating in DuPont’s knowledge and e-commerce initiatives.
They also addressed the price crunch. W. Donald Johnson, group vice president for nylon, said the company had not been able to raise nylon prices enough in the first quarter to offset rising raw materials costs and warned that further efforts to raise prices would likely be made in the second quarter.
Harry Parker, vice president and general manager for Dacron polyester, blamed the company’s inability to raise fiber prices as quickly as raw material costs over the past year for the polyester fiber operation’s break-even first-quarter results.
Asked if he expected the polyester fiber unit to become profitable this year, he said, “We have every intention to,” and added that the business would probably continue to raise prices to improve margins.
The executives said they were working on a unified e-commerce strategy for DuPont in the textile fibers arena.
Steve McCracken, president of DuPont Lycra worldwide, contended that the fragmented nature of the apparel-sourcing chain made it a natural for an industry-wide e-commerce portal.
“I don’t know of another industry that has as many middlemen as the textile industry,” he said.
The executives said they were looking at several industry models — including the partnership VF Corp. recently announced with i2 Technologies, as well as services DuPont had founded in other industries, including Rooster.com, serving the farm community — in deciding what to pursue. They said the company hadn’t yet decided whether it would seek to start something from scratch or join another effort under way in the apparel industry.
They have not yet determined a timeline for this effort. Johnson said the company hoped to move “fast enough not to be left out,” but didn’t want to introduce a system that would quickly be outdated.
The challenges to an industry-wide online sourcing network are large, and not solely technological, the executives agreed. McCracken noted that any effective sourcing network would have to offer both “transparency,” so buyers could quickly comparison shop for quality and prices around the world, and “secrecy,” so that large manufacturers could continue to work out deals with key customers.
Johnson noted that while DuPont is ready to play a key role in helping to get any online sourcing system up and running, it’s not terribly interested in operating such a venture.
“We’re very open to owning a minority slice of something as opposed to controlling it,” he said.
On the knowledge-intensity front, McCracken outlined a new mill-certification program his company is launching. Called Lycra Assured, it’s intended to provide fabric buyers with a network of accredited mills experienced in using stretch fibers.
“The downstream brands and retailers are consistently asking us, ‘Where do we go to get quality items we’re not going to get burned by?”‘ said McCracken. Through the Lycra Assured program, DuPont officials will evaluate the quality levels of mills using Lycra fibers and also work closely with them to keep them abreast of the latest in stretch-fiber technology.
McCracken described the program as a way of selectively sharing DuPont’s knowledge about fiber management with customers.
In addition to working with mills Lycra already supplies, the program will be open to mills recommended by downstream Lycra customers, such as retailers and brand marketers.
The company expects to accredit about 300 to 500 mills around the world in the next year to year and a half.
Shareholders at the meeting voted on a few issues.
In addition to the election of directors and the ratification of DuPont’s accounts — they followed the board’s recommendations — they voted down three stockholder proposals related to nonpartisanship, employment practices and plant closings.
The closings proposal recommended that DuPont appoint a committee to assess the effect plant shutdowns would have on their local communities before closing them. Speaking on behalf of the proposal, Jim Flickinger, vice president of the International Brotherhood of DuPont Workers, warned that the company faced “dangerously low levels of morale and employee mistrust” after the layoffs of recent years.