By Jacob Bunge And Chelsey Dulaney
DuPont Co. projected declining sales across most of its
divisions over the coming months as the chemical company jousts
with an activist investor ahead of a key shareholder vote next
month.
The strengthening U.S. dollar, slowing corn-seed sales and
weakness in some chemical prices likely will remain challenges to
DuPont's agriculture and chemical divisions, executives said on
Tuesday as DuPont reported a 28% drop in first-quarter
earnings.
DuPont's results, which topped analysts' expectations, came as
Trian Fund Management LP prepared to host a town-hall meeting with
investors in New York on Tuesday. The Nelson Peltz-led activist
firm for months has sparred with DuPont over strategy and
structure, arguing that the chemical giant's board of directors
needs to push management to streamline operations and potentially
break up the 212-year-old company. Shareholders will vote May 13 on
director candidates nominated by Trian and DuPont's own slate.
Chief Executive Ellen Kullman said in an interview that DuPont's
pipeline of new agricultural pesticides, improving sales volumes in
safety products and stepped-up cost-cutting efforts reflected a
bright future and would resonate with investors.
"I tend to think about the proxy as not just a short-term,
one-quarter issue," Ms. Kullman said. "It's about where we are
going, and how we create value for shareholders."
DuPont, which has a market value of about $66 billion, reported
first-quarter profits of $1.03 billion, or $1.13 a share. That was
down from $1.44 billion, or $1.54 a share, a year earlier.
Excluding pension costs and other items, operating earnings were
$1.34 a share. Currency shifts trimmed 25 cents from per-share
earnings, DuPont said.
DuPont's revenue slipped 7.6% to $9.37 billion. Analysts polled
by Thomson Reuters had expected a profit of $1.31 a share and
revenue of $9.41 billion.
DuPont shares were 3% lower at $70.65 in midday trading.
Ed Garden, Trian's co-founder and chief investment officer, told
a gathering of investors and analysts Tuesday that DuPont's
earnings were "simply not good enough" and showed why Trian needs
to be on DuPont's board. The firm owns about 2.7% of DuPont
shares.
The activist firm said DuPont has a history of beating analyst
targets in its first quarter, which Mr. Garden called the most
important period, but then failing to hit estimates for the rest of
the year. Mr. Garden said Trian believes that DuPont will miss even
the lower end of the company's guidance this year.
"It's all about earnings," Mr. Garden said. "That's why Trian
and these board nominees are here."
The U.S. dollar's strength against other currencies has made
DuPont's seeds, crop sprays and chemical products more expensive
for overseas buyers and will remain a challenge in the second
quarter, the company said.
The Wilmington, Del., company forecast operating earnings from
its agricultural unit would decline by low- to mid-single digit
percentage points in the second quarter after the division's
earnings fell 21% in the first quarter, partly due to currency
shifts and a further reduction in corn planting as North American
farmers shift more fields toward soybeans. Corn generates the bulk
of big seed companies' sales.
Second-quarter sales in DuPont's performance materials likely
will be down by a "low-teens percent" due partly to lower ethylene
prices and currency shifts, the company said, though earnings would
increase in mid-single digit percentage points as sales volumes
improved.
Ms. Kullman said DuPont is focusing on rolling out new and
better products to help combat the foreign-exchange challenges, and
hastening already-planned cost cuts. DuPont estimated Tuesday that
expense reductions would improve its 2015 results by 40 cents a
share, versus 35 cents projected in January.
"We look at every knob we have" to turn on expenses, she
said.
Ms. Kullman and other senior DuPont officials have been
canvassing shareholders in recent weeks ahead of the company's
annual meeting, when shareholders will vote on the slate of 12
DuPont directors, including Ms. Kullman as chairman, along with
four director candidates nominated by Trian, which include the
firm's CEO, Mr. Peltz.
"To me, this is an opportunity," Ms. Kullman said. "I've been an
underdog all my life, and I will continue to get out and represent
the future of our company to shareholders."
Dave Benoit contributed to this article.
Write to Jacob Bunge at jacob.bunge@wsj.com and Chelsey Dulaney
at Chelsey.Dulaney@wsj.com
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