After years of cutting jobs, closing plants and shifting operations into joint ventures, the Wilmington, Del.-based firm has merged all its textile-related operations into one $6.5 billion unit, DuPont Textiles & Interiors.
The company said it hired Morgan Stanley to explore the possibility of an initial public offering for the unit.
“We’ll consider a full range of options for DTI, including [an initial public offering], with the intention of full or partial separation by yearend 2003. Of course, that’s dependent on market conditions,” said chairman and chief executive officer Charles O. Holliday Jr., in one of several conference calls company executives held with financial analysts and journalists.
Holliday said one of the advantages of spinning off the textile unit — which will include all the company’s polyester, nylon and spandex fiber businesses as well as some resins and intermediates, targeting the apparel, home, industrial and flooring businesses — will be to create a business that’s clearly focused on textiles.
“The questions that have been floating around the trade about our commitment to these businesses are cleared up,” he said. “Our customers have seen us just shutting down plant after plant and withdrawing from these businesses and were not sure about our long-term commitment. Now our long-term commitment is clear.”
Since 1999, DuPont has slashed about 7,500 staff and contract workers from its fibers payroll, at the same time shifting most of its polyester businesses into joint ventures. A year ago, it merged its remaining polyester, selected nylon fibers and its spandex operations into a strategic business unit called DuPont Apparel & Textile Sciences.
The advantage of that unit was said to be that customers could deal with just one sales rep to buy DuPont fibers, rather than dealing with the separate polyester, nylon and spandex divisions. It also allowed the company to cut its head count, as margins in the fibers business became tighter.
The theme of cost cutting will remain a key one at the new textile division, which currently employs 22,000 workers in 50 countries. While not offering specifics, division executives acknowledged that the new unit’s overall revenues were down in 2001.
“They will be a lower-cost organization than they have been in the past,” said Holliday. “The first thing we’ll be doing is getting the cost structure right for the textile industry, starting day one. It will take some time, until 2003, before we have our financials right for an IPO.”
Richard Goodmanson, executive vice president and chief operating officer and DuPont’s number two executive, heads up the new division. He and his staff, which includes Steve McCracken, the group vice president who served as president of the former Apparel & Textile Sciences unit, have set a six- to eight-week timetable to come up with a plan to cut operating costs.
Although he didn’t offer many details about what sort of cost-cutting steps he expected to take, Goodmanson said the company would focus on low-cost production.
“The strategy is to source from the lowest possible cost opportunity, whether that is from our own captive plants or co-manufacturing in Asia or having contract production,” he said.
McCracken said the new unit would continue to hone the marketing approach that Apparel & Textile Sciences had taken, instead of the more traditional manufacturing-focused DuPont approach, which he described as: “We’ve got a bunch of molecules here. How can we sell them?”
Bill Ghitis will continue to serve as president of the $2.5 billion apparel component of the new unit. He reports to McCracken, who also is responsible for the home, industrial and flooring businesses. George McCormack, formerly group vice president and general manager of DuPont chemicals and polyester, will oversee intermediates and other chemical markets.
DuPont officials declined to offer any details on what the business would be named after it was spun off, what executives will go with the spin-off or how they expected to value the company.
U.S. textile stocks have not performed well in recent years nor has the industry as a whole. Of the eight mills that produce apparel fabrics whose stocks still trade publicly, five are currently trading at well under a dollar.
However, fiber-related stocks have done better. Shares of polyester maker Unifi Inc., which has production alliances with DuPont, closed unchanged at $7.35 in New York Stock Exchange trading Monday, with a market capitalization of $395.1 million. Another maker of polyester fibers and resins, Wellman Inc., saw its shares rise 32 cents, to $13.90, with a market capitalization of $442.5 million, on the NYSE. Shares of chemicals maker Celanese AG, which produces acetate, rose 31 cents, to $19.33, for a market capitalization of $972.9 million in NYSE trading.
DuPont shares rose $1.84, to $44.56, on the news. DuPont’s market capitalization is $45.68 billion.
McCracken said the division this year plans to spend $170 million on research and development and $300 million promoting its key brands, including Lycra, Teflon and Stainmaster.
DuPont revealed its plans for the spinoff as it said it was restructuring itself into five new units. They are electronic and communication technologies; performance materials; coatings and color technologies; safety and protection, and agriculture and nutrition.
Results at DuPont’s polyester, nylon and specialty fibers units have lagged both results at the company’s other businesses and its growth targets in recent years.
Last year, all three units saw sales decline. Polyester and nylon reported aftertax operating losses, while the specialty fibers unit — which included Apparel & Textile Sciences — saw its operating income drop 50.9 percent, to $356 million, on sales of $4.42 billion, which were down 10.9 percent.
DuPont’s net income for 2001 came down $4.34 billion on net revenues of $25.37 billion. Holliday has set the company’s targeted earnings-per-share growth at 10 percent.
He said he was convinced that the new textile unit would also be able to grow on its own.
“This wasn’t just taking out low-growth businesses,” he said of the decision to spin off the businesses. “That wasn’t our mind-set.”
The DuPont Years: 1802-2002
Eleuthere Irenee du Pont de Nemours begins construction on a gunpowder plant in Delaware. He issues 18 shares, at $2,000 each. For the next century, the company’s business is the making and selling of explosives, diversifying into black powder and TNT.
DuPont Mexico is formed. Serving the mining industry, it is the firm’s first venture south of the border.
DuPont scientist Julian Hill discovers the first synthetic fiber, a precursor to nylon.
DuPont scientists Gerald Berchet and Wallace Carothers discover “synthetic silk,” or nylon, but Carothers deems the product useless.
After changing his mind about nylon’s utility and filing a patent application, Carothers commits suicide at the age of 41.
The company unveils the first consumer product made of its new fiber — stockings — at the New York World’s Fair. During World War II, the U.S. military buys all the nylon DuPont can produce, making it unavailable for consumers. After V-J day, women form block-long lines to renew their supplies of “nylons.”
DuPont introduces its first commercial version of polyester, using the Dacron name, five years after the company bought the chemistry from an English firm. According to corporate legend, the brand name is an acronym for “DuPont Always Chooses Right On Names.”
DuPont begins producing neoprene at its first European plant, in Londonderry, Northern Ireland.
The company introduces Lycra brand spandex.
DuPont unveils the first bullet-proof vests using its Kevlar aramid fiber. Kevlar is one of the few fibers the company will retain in its portfolio after spinning off the new textiles division. Polyester becomes a huge fashion staple and DuPont rises as a powerhouse of the textile industry.
With its fibers workforce topping 30,000, DuPont starts cutting its nylon and polyester operations, partly in an effort to improve margins following its acquisition of ICI’s European nylon business.
DuPont’s sales peak at $45.08 billion. A year later, the company announces its new focus will be on science, and spins off its Conoco oil operations in a $4.2 billion initial public offering. Also this year, the Asian financial crisis begins, provoking a flood of low-priced fiber, fabric and apparel imports and rocking the textile industry.
Chairman and chief executive officer Charles O. Holliday Jr. says the company needs to find a less capital-intensive way to run its polyester business — over the course of the year, DuPont moves the bulk of its polyester production into joint ventures.
DuPont Apparel & Textile Sciences is created. Headed by Steve McCracken, it begins with $3 billion in revenue and about 10,000 employees, but trims both those numbers back in the next year in an effort to cut costs.
DuPont decides to spin off all its textile-related businesses in an initial public offering. The new firm, with 22,000 employees and $6.5 billion in sales, will seek ways to cut costs and remain competitive in the global industry.