DuPont An Investment Analysis Essay, Research Paper
DuPont makes a variety of high-value products for industry today, including
polymers, chemicals, fibers, and petroleum products…products for agriculture,
electronics, transportation, apparel, food, aerospace, construction, and health care.
DuPont serves customers in these and other industries every day, offering "better things
for better living" as the company prepares to begin its third century of scientific,
technological, commercial, and social achievement. DuPont is a research and technology
based chemical and energy company with its annual revenue exceeding $39 billion.
Eleuth?re Ir?n?e du Pont de Nemours, a French immigrant, established DuPont
in 1802 in a small Delaware town. E.I. du Pont was a student of Antoine
Lavoisier, the father of modern chemistry, and when he came to America he brought some of
the new ideas about the manufacturing of consistently reliable gun powder. His
product ignited when it was supposed to, in a manner consistent with expectations. This was
greatly appreciated by the citizens of the growing nation, including Thomas
Jefferson, who wrote thanking du Pont for the quality of his powder, which was being used to clear the land at Monticello. Many other heroes of early America owed their success, and their
lives, to the dependable quality of DuPont’s first product. This represents a good,
strong start for a company.
DuPont, which is moving through the last decade of the twentieth century and
toward its third century, emphasizes several things; competing globally;
sharpening its business focus; increasing productivity; committing to safety, health, and
environmental excellence; and continuing to extend its significant science and
technological achievement.
One of DuPont’s major strategies is to focus on businesses in which DuPont
has core competencies, where DuPont can build competitive advantage. The most
notable example of this focus was the 1993 transaction in which DuPont acquired ICI’s
nylon business and ICI acquired DuPont’s acrylics business. This strengthened the
company’s position in the global nylon business while divesting a business that no
longer fit its portfolio.
Another major factor in the transformation of the company in the1990s was
the focus on reducing costs and improving productivity. This was necessary to
give the company the flexibility for competitive pricing and to grow market share and
earnings.
DuPont had strong plants in several countries around the world for many
years, and their globalization trend continued in the 1990s. New plants opened in
Spain, Singapore, Korea, Taiwan, and China, and a major technical service center
opened in Japan. In 1994, a Conoco joint venture began producing oil from the Ardalin
Field in the Russian Arctic–the first major oil field brought into production by a
Russian/Western partnership since demise of the Soviet Union.
A further major development was the redemption of 156 million DuPont shares
from Seagram for $8.8 billion in cash and warrants — one of the largest
stock redemptions in history. This large block of shares was redeemed at a 13
percent discount to market price. While DuPont later sold some new shares, there are 18
percent fewer shares currently outstanding than just prior to the redemption. This resulted
in a significant opportunity for wealth creation for our stockholders. The share
redemption was made possible by four years of cost reduction, productivity improvement
and organizational change that have made DuPont strong financially and allowed
them to move decisively and quickly.
The DuPont that emerged from the company’s transformation in the 1990s has
often been described by people inside and outside the company as "the new
DuPont." This characterization is only partly appropriate, because while DuPont has
changed, there are many things that remain the same. The core competency in science and
technology, the commitment to safety, the concern for people, the feeling of community,
the emphasis on personal and corporate integrity, the future focus, and indeed
the willingness to change. DuPont is a company not only out for their own interest, but also
for the best interest of the world.
What has always set DuPont apart is the quality of the people, people
committed to making life easier and better for everybody, proud to be a part of an
enterprise making "better things for better living." That was true in 1802. And it is just as
true today.
In the second quarter of 1995 DuPont reported earnings per share of $1.70,
up 47 percent from the $1.16 earned in the second quarter 1994. Net income
totaled $938 million, compared to $792 million earned in 1994. Both earnings per share
and net income increased 27 percent."These outstanding results continue to reflect
strong revenue gains and ongoing productivity improvements," said DuPont Chairman
Edgar S.Woolard Jr. Sales for the second quarter were $11.1 billion, up 9 percent
from prior year.
The third quarter of the 1995 business year led DuPont to a $1.38 per share
earning. This number exceeded the $.95 earned in the third quarter of 1994
by more than 45%. Net income totaled $769 million compared to $647 million earned in
1994. Sales for the third quarter were $10.2 billion, up 4 percent from the prior year.
DuPont saw a drop in the earnings per share price for the fourth quarter of
1995. The $1.13 per share of the fourth quarter was $.25 lower than the third
quarters report. But the report was still $.18 higher than the fourth quarter report from
1994.
The average rise in earnings per share per quarter from 1994 to 1995 is
roughly $.40, which is not bad at all.
The full year’s earnings were $5.61 per share compared to $4.00 per share in
1994 (Graph 3). The average number of shares outstanding in 1995 declined 14
percent due to the redemption of stock from Seagram in 1995.
"This was our second consecutive year of record earnings and significant
year-over-year improvement," said John A. Krol, DuPont president and chief
executive officer. "These outstanding results are a tribute to the talent and
dedication of DuPont’s people worldwide. We are pleased with the progress we have made to increase profitability and expand our businesses globally."
In a day and age where any thing can happen, diversity in production is key.
No company comes close to the variance that DuPont expresses in their
production. Share earnings continue to rise throughout the past two years, as do the price per
share numbers (Graph1), and there is no reason for the pattern to change.
DuPont is obviously a company that is going places in the global community.
If something goes wrong with the clothing industry, they will still compete in
the construction industry. If something happens in transportation, electronics
will be there to hold strong for the company. With a company that is so diversified in its
production, DuPont is a smart investment, and I fully endorse it.