DuPont raises profit forecast, says Dow merger may get delayed
(Reuters) DuPont raised its full-year adjusted profit forecast as it cuts costs ahead of its merger with Dow Chemical Co., but said the deal may not close by the end of this year as planned.
Shares of DuPont, which reported a higher-than-expected quarterly profit on lower expenses and higher sales volumes, were marginally lower at $69.81 in morning trading.
The $130-B merger of Dow Chemical and DuPont is being scrutinized by regulators world over, with EU antitrust officials expected to decide the deal by February 6.
"We continue to work constructively with regulators in key jurisdictions to close the merger as soon as possible," Chief Executive Ed Breen said in a statement.
"In the event that regulators in those jurisdictions use their full allotted time, closing would be expected to occur in 1Q of 2017."
DuPont and Dow plan to merge and then break up the combined company into three businesses focused on agriculture, material science and specialty products over 18 months after the deal closes.
The company, which is looking to cut $1 B of costs by the end of this year on a run-rate basis, said operating costs declined by $235 MM in the three months ended September 30.
Strict cost control encouraged DuPont to forecast full-year operating earnings of $3.25/share, higher than its previous estimate of $3.15-$3.20/share.
Net sales rose marginally to $4.92 B in 3Q, aided by a 3% rise in sales volumes, helping the company top analysts' average estimate of $4.87 B, according to Thomson Reuters.
"This reinforces our view that Breen's management is leading to top-line improvement, not just cost-cutting," Bernstein analyst Jonas Oxgaard wrote in a note.
Revenue in DuPont's performance materials business rose 2.5% - accounting for more than 27% of the company's total revenue - helped by increased demand in automotive markets.
Revenue in the agriculture business rose 2.4% as higher volumes partially offset lower prices. The unit made up for 23% of the company's total revenue.
Net income attributable to DuPont shareholders slumped to $2 MM, or breakeven on a per share basis, in the quarter, from $235 MM, or $0.26/share, a year earlier.
Excluding a $172-MM net charge related to employee severance and asset writedowns, profit from continuing operations was $0.34/share. That was much higher than the analysts' average estimate of $0.21/share.
Reporting by Arathy S Nair; Editing by Anil D'Silva, Swetha Gopinath and Saumyadeb Chakrabarty
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