DowDuPont Reports 4Q, Full Year 2017 Results

DowDuPont reported a GAAP loss per share from continuing operations of $0.52 during the fourth quarter of 2017. Adjusted earnings per share increased 41% to $0.83, compared with pro forma adjusted earnings per share in the year-ago period of $0.59. Adjusted earnings per share excludes significant items in the quarter totaling net charges of $1.26 per share, as well as a $0.09 per share charge for DuPont amortization of intangible assets.
 
Net sales increased 13% to $20.1 billion, with gains in all operating segments and geographies, from pro forma net sales of $17.7 billion in the year-ago period. The primary sales growth drivers by division were: Materials Science – Industrial Intermediates & Infrastructure (27%) and Packaging & Specialty Plastics (17%); Specialty Products – Transportation & Advanced Polymers and Nutrition & Biosciences (10% each); and Agriculture (5%). Regional sales increases were led by Europe, Middle East and Africa (EMEA) (25%) and North America (10%), with gains in all divisions, led by the Materials Science operating segments.
 
Volume grew 6% on a pro forma basis, with increases in all operating segments and geographies on broad-based, consumer-led and investment-driven demand. Volume gains were led by Industrial Intermediates & Infrastructure (13%), Packaging & Specialty Plastics (8%), Electronics & Imaging (6%) and Transportation & Advanced Polymers (5%). Regional volume growth was led by EMEA (10%) and Asia Pacific (6%).
 
Operating EBITDA increased 24% on a pro forma basis to $3.9 billion, driven by volume and price gains, including new capacity additions in the US Gulf Coast and Saudi Arabia.
 
The company achieved an annual cost synergy run-rate of more than $800 million and more than $200 million of realized savings in the fourth quarter. DowDuPont is increasing its cost synergy commitment from $3 billion to $3.3 billion.
 
Cash flow from operations in the quarter was $4.2 billion, driven by increased cash earnings and Agriculture’s seasonal cash inflow, partly offset by contributions to pension plans.
 
The company is announcing today that it has updated the timing and sequence of the intended separation of the companies: Materials Science is expected to separate by the end of the first quarter of 2019, and Agriculture and Specialty Products are expected to separate by June 1, 2019.
 
“Our fourth quarter operating results continued the strong performance that we delivered throughout 2017, as we grew our top and bottom lines by double digits in the quarter and the full year,” said Ed Breen, CEO of DowDuPont. “Our 2017 results reflect robust underlying demand for many of our products, the power of our innovation engine and our leading positions in growing markets. We delivered these results while completing our merger, realigning the business around key end-markets, and achieving more than $800 million in run-rate savings from our cost synergy programs. We also are making significant progress standing up the intended public companies, which we now expect to spin about 14 to 16 months from today.”
 
2017 Full-Year Highlights
 
GAAP earnings per share from continuing operations was $0.95 for the full year. Pro forma adjusted earnings per share increased 22% to $3.40 versus the year-ago period. Pro forma adjusted earnings per share excludes significant items totaling net charges of $1.90 per share, as well as a $0.33 per share charge for DuPont amortization of intangible assets.
 
GAAP net sales increased 30%. Pro forma net sales increased to $79.5 billion, up 12% versus the year-ago period, with gains in all operating segments and all geographies. Primary sales growth drivers were: Materials Science – Performance Materials & Coatings (37%), Industrial Intermediates & Infrastructure (17%) and Packaging & Specialty Plastics (13%); Specialty Products – Transportation & Advanced Polymers (14%) and Electronics & Imaging (12%); and Agriculture (2%). Sales rose double-digits in EMEA (17%), Asia Pacific (15%) and North America (10%). Sales in Latin America grew 5%.
 
Pro forma operating EBITDA increased 15% to $16.2 billion, driven by volume and price gains, including new capacity additions; cost synergies and productivity actions; higher equity earnings; lower pension/OPEB costs; and the full-year contribution of silicones. These gains more than offset higher feedstock costs, startup expenses on the US Gulf Coast and the unfavorable impact of hurricanes. Increases were achieved in most operating segments, led by double-digit growth in Performance Materials & Coatings; Industrial Intermediates & Infrastructure; Electronics & Imaging; Transportation & Advanced Polymers; and Agriculture.
 
Outlook
 
“The trajectory of global economic expansion has gained momentum – driven by robust fundamentals in consumer and business confidence, employment and wage growth and manufacturing and infrastructure investment activity,” said Andrew Liveris, executive chairman of DowDuPont. “In developed economies in particular, such as the United States, Germany, France, Canada and the UK, we continue to see strong leading indicators of broad-based growth. Furthermore, early signs from the business community point to US tax reform as a catalyst for further domestic capital investments, which will take advantage of enhanced competitiveness and pro-business incentives. Adding to this, the emerging middle class in developing economies, most notably in India and China, but also in Africa and the Middle East, continues to support sustainable growth.
 
“All of this bodes well for the products and technologies within DowDuPont’s portfolio, which are well positioned to meet growing needs in the Materials Science, Agriculture and Specialty Product sectors. Looking ahead, our levers of value creation are clear: continuing to further unlock the cost and growth synergies of this merger transaction, capitalizing on our early success and achieving the enhanced cost synergy commitment we are announcing today; delivering new products from our in-flight growth investments and powerful innovation pipeline; and quickly standing and separating into three industry-leading companies on the new accelerated timeline we announced today.”