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The Wilmington, Delaware based company, gearing itself to face current market challenges and strengthen the company's competitiveness in 2009, announced progressive actions which include continued focus on maximizing cash flow. As part of its restructuring plan, approximately 2,500 employee positions will be eliminated, principally in businesses that support the motor vehicle and construction markets in Western Europe and the United States. Additionally, the company plans to rationalize certain assets to improve future competitiveness.
To aid the restructuring plan, the company will take a pre-tax charge totaling approximately $500 million or $0.40 per share in the fourth quarter 2008. These actions are expected to result in a pre-tax earnings increase of about $130 million for 2009 and about $250 million in annual run rate.
DuPont is also accelerating productivity programs started earlier this year to deliver $600 million fixed cost pre-tax earnings benefit and $1 billion in net working capital reduction in 2009.
Under the program, DuPont targets a reduction of 4,000 contractors by the end of 2008. Additional contractor reductions are aimed for 2009. The company also plans to implement work schedule reductions at select locations and adjust production to market conditions while redeploying more than 400 employees to productivity projects aimed at accelerating reductions of working capital and operating costs.
Commenting on the plans, DuPont Chairman and CEO Charles Holliday said, "We have taken immediate and aggressive actions to maximize cash flow by reducing cost, working capital and capital expenditures in response to current market challenges. We will build on our strong financial and market positions and continue prudent financial discipline in navigating through this challenging economic environment."
The fourth quarter prospects of the car paint supplier diminished due to a steep global decline in construction, motor vehicle sales and consumer spending resulting in slowing industrial production, as well intensified by inventory reductions across most supply chains.
DuPont now expects a fourth quarter loss in the range of $0.20 to $0.30 per share, excluding an estimated $0.40 per share significant item charge for the company's restructuring plan. On October 22, the company provided fourth-quarter earnings guidance of $.20 to $.25 per share. Sharply lower sales volumes and resulting lower plant operating rates also contributed to the reduced outlook.
On average, fifteen analysts polled by First Call/Thomson Financial currently estimate earnings of $0.23 per share. Analysts' estimates typically exclude special items such as one-time gain or expense.
Fourth quarter sales are expected to be at least 15% lower than fourth quarter 2007, principally reflecting a significant decline in worldwide sales volumes. Analysts currently estimate revenues of $7.14 billion for the quarter.
The company continues to expect year-end free cash flow of about $1.3 billion.
DuPont, anticipating the current global recession will continue well into 2009, expects 2009 earnings in the range of $2.25 to $2.75 per share. Earnings estimate of analysts currently stand at $2.80 for 2009.
The company also expects to generate about $2.5 billion in free cash flow in 2009. Capital expenditures are expected to be in the range of $1.6 to $1.8 billion. DuPont said it would continue its investments in high-growth, high-margin businesses including seed products and photovoltaics. Pre-tax cost savings from the restructuring plan and productivity projects are expected to be about $730 million in 2009.
The chemical producer also anticipates $0.40 to $0.50 per share increase in pension expense. While favorable conditions in global agriculture markets are expected in 2009, the company expects revenue growth in 2009 to be limited by anticipated lower demand for non-agriculture related products and the impact of currency exchange rates.
Holliday said, "DuPont has market-leading global businesses, solid financial fundamentals, and strong growth opportunities. We are aggressively managing every facet within our control to maximize cash and assure we are positioned in the long term to take advantage of above-trend growth opportunities in key markets, especially where our science-based products position us among the market leaders."
DuPont is currently trading at $24.30, up $0.69 or 2.92% on the NYSE.
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