Leadership & People

DuPont Cutting 2,500 Jobs; Sees Fourth Quarter Loss

DuPont says it will cut approximately 2,500 employees and temporarily idle over 100 sites in order to address current market challenges and focus on maximizing cash flow. “We must get our cost and our cash in line with current reality,” says DuPont CEO Chad Holiday.

The company declined to specify which sites would close, pending notification of employees, but did say cuts would be primarily in business segments that serve the motor vehicle and construction markets in the U.S. 
DuPont says it expects a loss of 20 cts-30 cts/share for the fourth quarter, excluding an estimated 40 cts/share item charge for the company’s restructuring plan, on sales 15% lower than the same year-ago quarter. Analysts had expected DuPont to report earnings of 23 cts/share for the quarter, according to First Call (Boston).

“A steep global decline in construction and motor vehicle sales and consumer spending has resulted in declining industrial production, intensified by inventory reductions across most supply chains,” DuPont says. These conditions have precipitated a sharp downturn in demand during the fourth quarter,  the company says.

“With the major exceptions of pharmaceuticals and agriculture, we are facing revenue declines in industrial and consumer markets in all regions,” Holiday told analysts during a conference call last week. “In the face of these conditions, we are focused on what we can control - cost, capital spending, and working capital - in order to maximize cash flow.”

The company says the restructuring will deliver $600 million in fixed cost productivity improvements in 2009, a three-fold increase over its original goal of $200 million. The company says it will also reduce net working capital by $1 billion in 2009. The company expects to incur a pre-tax charge of $500  million (40 cts/share) in the fourth quarter associated with the restructuring plan.

The current global recession will continue well into 2009, DuPont says. As a result, 2009 earnings are expected to be in the range of $2.25-$2.75/share, compared with an expected 2008 EPS of $2.75-$2.85/share. DuPont says it will not cut its dividend.

Other restructuring actions include the reduction of 4,000 contractors by year-end, additional contractor reductions in 2009, work schedule reductions at some locations, and redeployment of more than 400 employees to productivity projections, DuPont says.

DuPont’s cuts closely follow BASF’s announcement that it would idle or reduce production at 180 sites, reducing its global production capacity 20%-25% and affecting 20,000 employees (CW, Nov. 24, p. 9). Dow Chemical has also said recently that it was reviewing cost-cutting measures and is prepared to take “necessary, bold, and proactive measures.”

Before DuPont’s announcement, Deutsche Bank lowered its 2009 EPS expectations for the company 16%, to $2.75, due to “broadly” falling global growth and industrial production. “With the global economic outlook weakening, and chemicals producers announcing aggressive actions over the past month to reduce capacity in line with a slowing demand environment, we [predict] DuPont’s portfolio (ex-Pioneer) will face similar stiff demand headwinds in 2009,” says David Begleiter, analyst at Deutsche Bank (New York).

Source: Chemical Week