Chemicals company DuPont said Tuesday that profits increased 26 percent in the first quarter, as strong sales of farming chemicals and seeds and brisk business overseas offset a slowdown in the U.S. economy.
Wilmington-based DuPont reported earnings of $1.19 billion, or $1.31 per share, up from $945 million, or $1.01, a year earlier. Excluding a charge in the prior year’s quarter, earnings per share increased 22 percent, the company said.
Sales in the latest period grew 9 percent to $8.6 billion, thanks largely to higher local selling prices and the weak dollar, which raises the value of overseas sales when converted back to U.S. currency. The favorable currency exchange offset a 1 percent decline in overall volume. Revenue totaled $8.77 billion, up from $8.16 billion.
The results exceeded analysts’ expectations. Analysts surveyed by Thomson Financial expected earnings of $1.28 per share on revenue of $8.61 billion.
DuPont shares fell $2.09, or 4 percent, to close at $50.16 Tuesday.
DuPont’s chairman and chief executive officer, Charles Holliday Jr., said the company was off to a strong start in 2008.
“Our investments in agriculture and emerging markets enabled us to capitalize on robust growth in those areas which, when combined with gains from our productivity improvement programs, more than offset higher ingredient costs and weakness in certain U.S. markets,” he said.
The company’s performance continues to be driven by its agriculture and nutrition unit and by growth outside the United States, with overseas sales accounting for almost two-thirds of total sales for the quarter. Volume in the U.S. was down 5 percent, while volume increased 4 percent in Europe and 6 percent in the Asia-Pacific region, the company said.
Sales outside the U.S. increased 16 percent, with sales in emerging markets growing 25 percent, led by Brazil, China, India and Eastern Europe.
“Emerging market growth in Central and Eastern Europe was especially strong,” said vice president of investor relations Carl Lukach.
Local selling prices increased 6 percent overall, more than offsetting higher ingredient costs.
Sales in the agriculture and nutrition unit increased 18 percent to $2.9 billion, reflecting strong global demand for DuPont’s seed technology and crop protection products, while continued strength in Asian and European automotive and packaging materials markets contributed to 8 percent sales growth in the performance materials unit, the company said.
Among the company’s five business segments, only agriculture and nutrition and electronics and communications technologies reported volume growth, which combined with higher selling prices to produce double-digit sales growth in both segments.
Chief financial officer Jeff Keefer said volume declines in coatings and color technology, and in safety and protection, reflected the weak North American construction and automotive markets. Volume in the performance materials unit was negatively affected by marketing decisions designed to increase pricing.
Ellen Kullman, head of sales for DuPont, said the company expects sluggish demand in the U.S. housing and automotive markets to shave earnings per share by about 20 cents this year, the same as 2007. The company reiterated its 2008 earnings outlook for $3.40 to $3.55 per share but said slowing U.S. demand will offset growth in agriculture and other markets outside the country.
DuPont officials noted that they expect raw material and energy costs to grow about 9 percent this year, about double the pace of last year.
Meanwhile, DuPont expects North American vehicle production to decline by 6 percent this year, and DuPont economist Robert Fry said spending on residential construction is likely to hit bottom in the second half of the year.
“We’re not immune to a weak economy, and we recognize these are still challenging times,” said Holliday, who nevertheless asserted that the company was well positioned for growth.
“We have a firm grip on the wheel of our productivity improvement, and we’re not turning loose,” he added, referring to an ongoing effort to cut fixed costs and find more efficiencies in manufacturing, distribution and support systems. The company has set a goal of finding at least $1.7 billion in savings by 2010.
