DuPont Closes Coatings Biz Sale

Zacks

DuPont (DD) has completed the earlier announced divestiture of its performance coatings business to private equity firm Carlyle Group for $4.9 billion in cash. The company, in Aug 2012, announced its plans to divest the unit which supplies vehicle and industrial coating systems.

The sale will allow DuPont to better focus on accretive businesses like agriculture and nutrition, bio-based industrials and advanced materials. Beginning with third-quarter 2012 results, the performance coatings unit has been classified as discontinued operations and is excluded from the company's continuing operations results, on a retroactive basis.  

DuPont plans to utilize a part of the proceeds from the sale to repurchase shares worth $1 billion during first-half 2013. Moreover, it expects to use the remaining portion of the proceeds to reinforce its balance sheet, which will enable it to invest in selective growth opportunities.

DuPont also noted that it will continue to serve the automotive industry and expects to generate over $3 billion in revenues from advanced materials sold to the auto industry annually.

DuPont, on Jan 22, posted adjusted earnings from continuing operations (excluding the performance coatings business) of 11 cents per share for fourth-quarter 2012, beating the Zacks Consensus Estimate by a couple of cents. Net sales were essentially flat year over year at $7,325 million but exceeded the Zacks Consensus Estimate of $7,253 million.

DuPont is witnessing strength in its agriculture and food businesses. Moreover, it should continue to benefit from the synergies of Danisco acquisition. However, the company is exposed to weakness across titanium dioxide and photovoltaic markets, raw material cost inflation and currency headwinds.

DuPont currently holds a short-term Zacks Rank #3 (Hold).

Other companies in the chemical industry with favorable Zacks Rank are Arkema S.A. (ARKAY), BASF SE (BASFY) and Air Products (APD). While both Arkema and BASF retains a Zacks Rank #1 (Strong Buy), Air Products holds a Zacks Rank #2 (Buy).

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Read the Full Research Report on BASFY

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