Nov. 6, 2017
Dow Jones reports:
DowDuPont Inc. could take longer than expected to split into three new companies after the newly merged chemical giant revamped its separation strategy, Chief Executive Ed Breen said.
DowDuPont now projects the three-way split to take up to two years as some businesses are shifted among the planned spinoff companies, Mr. Breen said on Thursday. DowDuPont, formed in September from the merger of Dow Chemical Co.. and DuPont Co., had previously aimed to execute the breakup within 18 months.
The newly combined industrial conglomerate also plans to cut jobs and close or sell some facilities to save $3 billion in annual costs. DowDuPont aims to streamline operations before forming three new companies focused on agriculture, materials and specialty products, executives said Thursday after the company reported better-than-anticipated profits in its first quarterly report since the merger closed.
Two stalwarts of U.S. industry, Dow and DuPont in 2015 pitched their blockbuster combination as a way to unite respective strengths ranging from farm pesticides to silicone and bulletproof fibers.
Some activist investors contested the breakup strategy, arguing that the split of businesses as originally proposed wouldn't create the most competitive spinoffs. In September DowDuPont revised the plan.
The altered plan involves moving businesses with more than $8 billion in annual revenue from the materials spinoff, which is to house the legacy Dow operations and be named Dow, into the specialty products company. The "extra work" to harmonize technology systems and other preparations pushed the time frame from at most 18 months to between 18 and 24 months, Mr. Breen said.
DowDuPont is moving ahead with ongoing cost-cutting efforts, such as consolidating distribution centers, negotiating new supply contracts, shutting down some operations and eliminating some jobs. The company expects to hire more workers as the three new companies are set up, a spokesman said.
One venture DowDuPont aims to exit is its cellulosic ethanol plant in the city of Nevada, Iowa, which produces the fuel additive from corn stalks, leaves and cobs, versus typical ethanol production, which relies on corn kernels.
Some farmers and ethanol makers have heralded the technology as the next frontier for ethanol production. The DuPont-built plant was the world's largest in terms of capacity for such ethanol when it opened after delays in 2015. But Mr. Breen said Thursday that it is "just not going to be core to our future." DowDuPont will seek to sell the plant.
In its latest quarter, DowDuPont reported pro forma net income of $232 million, down 53% from a year ago. Excluding items including restructuring, pro forma net income rose 14% to $1.29 billion, or 55 cents a share.
Almost all segments reported sales increases except for agriculture, which was weighed down by high pesticide inventories and slow corn seed sales in South America. Net sales were generally flat for nutrition and biosciences, and rose for all regions except Latin America.