Industryweek 25532 Dupont Plant 1

DowDuPont Cuts Jobs, Closes Plants in Breen’s Plan for Breakup

Nov. 2, 2017
DowDuPont projected about $2 billion in restructuring charges, with as much as $975 million going toward severance payments and related benefits costs.

DowDuPont Inc. disappointed investors with its first earnings report after the world’s biggest chemical merger.

The company set out a longer timeline for dividing the company into three, even as it cuts jobs and closes factories as part of a $3 billion savings plan. Plans to repurchase $4 billion in shares fell short of expectations.

The developments highlight the pressure on CEO Ed Breen, who is attempting to boost results after facing heat from activist investors over the blueprint for the three-way split. Many analysts had expected a heftier share buyback as DowDuPont frees up funds by wrapping up construction of major projects such as petrochemical facilities in Texas and Saudi Arabia.

“I’m still confident we will get a bigger buyback number eventually,” said Jonas Oxgaard, an analyst at Sanford C. Bernstein & Co., who had predicted a repurchase program of at least twice the size DowDuPont is targeting.

Alembic Global Advisors analyst Hassan Ahmed had assumed $5 billion to $10 billion. The buyback represents about 2% of the company’s market value at the end of trading on Nov. 1.

Breen said the three-way split is on track to be completed by August 2019, six months later than the company predicted as recently as September.

DowDuPont projected about $2 billion in restructuring charges, with as much as $975 million going toward severance payments and related benefits costs. The company didn’t say how many jobs will be lost.

Biofuel Operation

DowDuPont also said it plans to sell its cellulosic ethanol business, which converts the inedible parts of the corn plant into motor fuel, including a $200 million Iowa biorefinery that opened in 2015.

“It’s just not going to be core to our future,’’ Breen said on a conference call with analysts.

The operation was a target of activist investor Nelson Peltz, the head of Trian Fund Management, who had criticized the $500 million spent on cellulosic ethanol as an example of DuPont’s “speculative and expensive corporate science projects.” The Iowa facility can churn out 30 million gallons a year of ethanol using corn stalks, leaves and cobs left in the field after harvest.

The company is in the process of shutting a manufacturing facility in La Porte, Texas, and a Kevlar factory in Charleston, S.C., Breen said.

Peltz and Third Point founder Dan Loeb successfully pushed DowDuPont to change its plan for splitting up. Those changes added complexity to the spinoffs and are partly responsible for the longer timeline, Breen said.

Sales Climb

Third-quarter adjusted revenue increased 7.6% to $18.3 billion, compared with the $18 billion average of analyst estimates compiled by Bloomberg. Sales volume rose 4%, and average prices climbed 3%, on an adjusted basis, the company said.

Earnings excluding certain items rose to 55 cents a share, matching the preliminary results that DowDuPont reported last week. Of the $2 billion in restructuring charges, $180 million was slated for the third quarter and $1 billion for the fourth.

The board declared a fourth-quarter dividend of 38 cents a share, payable to shareholders of record on Nov. 15.

By Jack Kaskey

Popular Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!