DuPont is exploring the sale of its once-lucrative performance chemicals unit, turning its back on the unpredictable paint business to focus on its thriving food and agriculture products.
The largest U.S. chemical maker by market value said it would also consider spinning off the unit, which contributed a fifth of the company's total sales last year and makes the paint pigments used in sunscreen and car paint.
"We have been carefully weighing the strong cash generation of our performance chemicals businesses against their cyclicality and lower growth profile," DuPont Chief Executive Ellen Kullman said in a statement.
DuPont is part of an industry-wide shift among chemical makers, including rival Dow Chemical, into production of seeds and pesticides, which have proven to be less exposed to market ebbs and flows than the popular pigment titanium dioxide.
The global titanium dioxide industry, with Dupont, Saudi Arabia's Cristal Global, Tronox Ltd and Huntsman Corp as the largest players, has been in turmoil in recent years.
DuPont's performance chemicals unit, of which paints pigments are a big part, generated total sales of $7.2 billion in 2012. Revenue within the unit fell 8 percent last year.
Some investors have blamed the business for weighing on DuPont's shares, which trade at a discount to those of another rival in the agriculture business, Monsanto Co.
CNBC reported last week that Trian Fund Management, headed by investor Nelson Peltz, had amassed a "big stake" in DuPont, prompting several analysts to say he might be the push for the company to exit the paint pigment business.
Pesticides Beat Pigments
Wilmington, Delaware-based DuPont, a 211-year-old company, sold its car paint unit for $5 billion last year and bought nutritional supplements maker Danisco for $6 billion in 2011.
The company said July 23 it was restructuring its management team to tap the agriculture and nutrition markets, as well as industrial biosciences and advanced materials.
Sales of pesticides and other agricultural products helped DuPont's quarterly profit to scrape past analysts' estimates, as paint pigments once again lagged. Net income fell 13 percent to $1.03 billion in the second quarter.
Kullman said she expected earnings in the second half of the year to be "significantly better" than last year's second half, due to agricultural growth in Latin America and a strong start to the North American planting season.
DuPont also said it expected "modestly" higher full-year earnings as it overcomes steep declines in the titanium dioxide market and weak economic conditions in Europe and parts of Asia.
The company said agriculture sales rose 7 percent in the second quarter, while sales in the performance chemicals business fell 9 percent.
Source: agprofessional.com