DuPont, Trian disagree on meaning of earnings report
DuPont and Trian Fund Management each said that the chemical company's first-quarter earnings – which exceeded analysts' expectations but produced lower revenues – proved their point.
Company officials said that surpassing analyst expectations demonstrates that DuPont's plan to manage costs and focus on innovation is working. Trian, which has launched a bitter proxy battle to gain seats on DuPont's board, contended the reduced revenue is a sign the company needs new leadership.
Trian has nominated four candidates to DuPont's 12-member board. DuPont has opposed the Trian nominees and encouraged shareholders to support its director slate.
DuPont posted first-quarter adjusted earnings of $1.34 per share, just above analyst forecasts of $1.31 per share. Last year, DuPont recorded first-quarter earnings of $1.58 per share. Revenue dropped to $9.2 billion in the quarter, down from $10.13 billion during the same period last year.
The 9 percent decrease is because costs of DuPont's products are rising for overseas buyers, the company said. International markets account for 58 percent of the company's sales.
In a statement within the earnings release, DuPont Chief Executive Officer Ellen Kullman said the report is proof the company's strategy is sound.
"DuPont delivered volume and margin improvements in the majority of our post-spin segments through intense focus on innovation, disciplined execution and ongoing efficiency improvements and cost reduction, even in the midst of challenging currency and market environments."
But Trian CEO Nelson Peltz disagreed. At a New York investor presentation, he called the earnings "very disappointing." Peltz also pointed out that DuPont's stock dropped more than $10 this quarter.
At the end of Tuesday trading on the New York Stock Exchange, DuPont's stock had fallen by $2.15.
Also at the investor presentation, Peltz addressed reports that he tried to recruit DuPont's newest board members – former Tyco Inc. CEO Ed Breen and ex-LyondellBasell Industries N.V. CEO James L. Gallogly – about becoming Trian nominees for the board.
While he denied having conversations with Breen, Peltz did say he had talks with Gallogly. The activist investor said Gallogly would agree to be a board candidate only if he was nominated as the CEO candidate to replace Kullman. Peltz said he balked at that idea because Trian's method is to work with the leaders of companies it has a stake in, not replace them.
Peltz said he replaced only one CEO as a board member and that change occurred three years after he joined the board.
Gallogly denied Peltz's claim in a statement released to The News Journal.
"This claim is simply untrue," Gallogly said. "I have chosen to work with Ellen Kullman and the rest of the DuPont board to build value for shareholders, and I am looking forward to a long and productive relationship."
'Simply unacceptable'
Overall, DuPont estimated that the negative currency impact for 2015 has increased to roughly 80 cents a share, up from 60 cents per share the company previously forecast. DuPont now expects to be at the low end of its predicted annual earnings per share range of $4 to $4.20.
Trian Chief Investment Officer Ed Garden claimed DuPont would have to improve its revenue by 30 percent if it planned to hit the $4 earnings per share goal. Garden said DuPont's earnings were "simply unacceptable."
Kullman told shareholders that she expects DuPont's performance to improve throughout the year on the strength of new product sales and the spinoff of its performance chemicals unit, Chemours, later this year. Kullman did not mention the proxy war.
The stronger dollar had the greatest impact on DuPont's agriculture unit. The unit generated $1.139 billion in earnings in the first quarter, down $303 million, or 21 percent, from the 2014 first quarter.
The company said that lower insecticide demand in Latin America, timing of seed shipments and reduction in corn planting also influenced the agriculture unit's earnings.
DuPont's performance materials unit outperformed other sectors, generating $327 million in revenue for the quarter, a $34 million, or 12 percent, increase from the previous year. The increase was driven by demand for its gas, ethylene and an improved product mix.
Contact Jeff Mordock at (302) 324-2786, on Twitter @JeffMordockTNJ orjmordock@delawareonline.com.