Chemical giant DuPont (DD) has highlighted its strategy, growth potential and macroeconomic expectations for 2014. Its Vice President and Chief Financial Officer Nicholas C. Fanandakis, at the Bank of America Merrill Lynch U.S. Basic Materials Conference, reviewed the company’s strategies for leveraging significant growth opportunities.
Fanandakis noted that DuPont is catering to markets where growing demand for healthier food, renewably sourced materials and fuels, and advanced industrial materials is generating significant growth opportunities for the company. DuPont has redeployed capital and resources and cut cost structure and working capital levels to capitalize on these opportunities.
Fanandakis added that DuPont’s strategy has allowed it to outperform its peers as well as the broader market by delivering better results and boosting shareholder returns.
Fanandakis also unveiled, at the conference, DuPont’s macroeconomic growth expectations for various regions of the world for the next year. The company sees improving global growth and expects GDP to increase 3% in 2014. It also expects industrial production to rise roughly 4% next year on the back of recovery across Europe and Japan from recession and stronger growth in China.
DuPont expects most of the growth to come from the U.S. and Europe and sees economic improvement to be positive across established and emerging markets. It expects modest growth in Latin America next year.
Fanandakis also highlighted three strategic priorities that are aimed at boosting shareholder value and driving multi-year sales and earnings. These are – expansion of the company’s leading footprint across the food value chain, reinforcing its leadership position as a provider of differentiated, high-value advanced materials, and development of leading industrial biotechnology capabilities.
Moreover, DuPont reaffirmed, at the meet, its compound annual growth rate (CAGR) targets for sales and operating earnings per share of 7% and 12%, respectively.
With respect to end markets, DuPont envisions light vehicle builds to rise around 4% in 2014. It sees continued recovery in U.S. housing market and strong growth in electronics.
DuPont is witnessing strength in its agriculture business, reflected by higher corn seeds and crop protection sales. Despite higher input costs, the Agriculture segment saw double-digit rise sales in the third quarter of 2013, buoyed by higher volume and strong performance of the crop protection business.
A strong start in the North American growing season is boosting the agriculture business. DuPont is seeing healthy demand for its corn hybrids and expects continued strong growth in crop protection driven by new products. It has numerous new products in its pipeline that are expected to create value for its customers.
DuPont it is banking heavily on its agriculture chemical and nutrition businesses to cut its exposure on weak markets including titanium dioxide. Lower titanium dioxide pricing hurt the results in its performance chemical business in the third quarter.
DuPont’s Board has approved the spin off of the struggling performance chemicals unit. The move represents a part of the company’s strategy to gradually shift focus to high growth businesses. Separation of the unit is expected to complete in around 18 months.
DuPont is a Zacks Rank #3 (Hold) stock.
Other companies in the chemical industry worth considering include Asahi Kasei (AHKSY), Johnson Matthey plc. (JMPLY) and BASF SE (BASFY). While Asahi Kasei and Johnson Matthey carry a Zacks Rank #1 (Strong Buy), BASF holds a Zacks Rank #2 (Buy).
Read the Full Research Report on BASFY
Read the Full Research Report on AHKSY
Read the Full Research Report on JMPLY
Zacks Investment Research
- Basic Materials Industry
- Investment & Company Information