DuPont Names Edward Breen Permanent Chairman and CEO
DuPont DD has appointed Edward D. Breen as its chairman and CEO, effective immediately. Breen has served as Interim Chair and CEO of DuPont since Oct 16 following the sudden retirement of Ellen Kullman. He also joined the company’s board in Feb 2015.
Breen served as the CEO of Tyco International TYC from 2002 to 2012. During his tenure, Breen oversaw two break-ups of Tyco, leading to the spin-offs of Covidien, ADT Corporation and Tyco Connectivity as well as and the merger of Tyco Flow Control with Pentair. Breen also held senior management positions at Motorola and General Instrument Corporation.
DuPont’s share rose 1% to close at $66.77 on Nov 9.
Under Kullman’s leadership, DuPont faced intense pressure from legendary activist investor Nelson Peltz’s Trian Fund Management. Trian, which is among DuPont’s biggest shareholders, pushed the 200-plus year old company to break itself up into two distinct entities through the separation of its high-growth businesses such as agriculture and nutrition & health from its cyclical businesses like performance materials.
Trian argued that DuPont’s current conglomerate structure and flawed business plans are destroying its shareholder value. It also claimed that DuPont’s board is unwilling to hold its management responsible for its sustained underperformance and failures to meet sales and earnings targets.
However, DuPont prevailed in a prolonged proxy battle with Trian in May 2015 after its shareholders elected all of its 12 director nominees at its 2015 annual meeting while rejecting the Trian nominees. That ended Trian’s campaign to secure four seats on DuPont’s board.
DuPont remains hamstrung by sustained weakness in its agriculture business. Lower farm commodity prices are weighing on its profits. The company’s profits tumbled year over year in third-quarter 2015, hurt by bigger operating loss in its agriculture business.
DuPont is exposed to a challenging operating environment in the agricultural market. Agricultural market conditions remain particularly weak in Brazil. Tighter profit margins and credit are making growers in that country more cautious in their spending. Lower insect pressure and reduced seed volumes are also contributing to a weakening demand for crop protection products.
DuPont also faces significant currency headwinds, stemming from continued strengthening of the U.S. dollar versus currencies in emerging markets, mainly the Brazilian real. A stronger greenback is expected to considerably weigh on its top line in 2015.
In response to these headwinds, DuPont has accelerated its operational redesign cost reduction actions and now expects to attain $1.3 billion of cost savings on a run rate basis by the end of the next year, a year ahead of earlier expectations. DuPont is also targeting additional cost savings of roughly $1.6 billion by end-2017.
Breen, in the third-quarter earnings call, noted last month that the company will take a fresh look at its cost structure and capital allocation strategy to improve returns to shareholders amid the current difficult operating backdrop.
DuPont, last week, declared that it would consolidate its packaging & industrial polymers business with its performance polymers business as well as its protection technologies business with the building innovations business. The combinations, effective Jan 1, 2016, are expected to create greater efficiency and capabilities to better serve customers.
DuPont is also reportedly looking to cut major agricultural deals with Syngenta SYT and Dow Chemical DOW as it is grappling with lower crop prices.
DuPont is a Zacks Rank #4 (Sell).
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