DuPont reports drop in earnings

DOVER, Delaware The chemicals giant DuPont (DD) reported a nearly 12 percent decline in second-quarter earnings partly because of lower pricing for titanium dioxide, a widely used whitening pigment, and said Tuesday that it is exploring a possible sale or spinoff of its performance chemicals unit.

DuPont, a global leader in production of titanium dioxide, or TiO2, has wrestled for more than a year with sluggish demand for the whitening pigment, which is used in wide range of products, from automotive and house paints to toothpaste.

The Wilmington, Delaware-based company reported net income of $1.03 billion, or $1.11 per share, for the quarter ending June 30, compared to $1.17 billion, or $1.23 per share, for the same period last year.

Revenue fell 1 percent to $9.8 billion as lower selling prices and currency effects offset an overall 1 percent volume gain.

Wall Street analysts surveyed by FactSet were expecting higher earnings of $1.27 per share and revenue of $10.04 billion.

Last summer, DuPont CEO Ellen Kullman shrugged off short-term weakness in demand for TiO2, telling analysts that the overall fundamentals in the market were "robust." Chief financial officer Nick Fanandakis said DuPont was still "very bullish" on the mid- and long-term prospects for titanium dioxide, which has been key profit producer for the performance chemicals unit, which generated total sales of $7.2 billion in 2012.

But company officials said Tuesday that they are reconsidering the future of the business segment.

"We have been carefully weighing the strong cash generation of our performance chemicals businesses against their cyclicality and lower growth profile, as well as where the power of DuPont's integrated science can be differentiated," Kullman said. "We are evaluating options for our performance chemicals businesses as part of our ongoing plan to deliver higher growth and greater value creation for our shareholders."

Its shares rose $1.63, or 2.9 percent, to $58.80 in premarket trading.

In the second quarter, the performance chemicals unit saw sales fall 9 percent as a 15 percent pricing decline offset a 6 percent volume gain.

DuPont said operating earnings for the performance chemicals segment declined by $330 million from peak levels last year, largely because of lower prices for titanium dioxide. TiO2 volumes increased 12 percent compared to last year's second quarter, however, the company said.

DuPont's agriculture unit continued to lead the company's overall performance, posting a 7 percent gain in sales on higher prices and a slight increase in volume. The company said agriculture segment sales grew 11 percent in the first six months of the year, driven by seed prices and volume growth in corn seeds, insecticides and fungicides. First half operating earnings are up 8 percent despite higher seed input costs, DuPont said.

"Agriculture sales remained strong in the second quarter and titanium dioxide volume improved," Kullman noted. "As expected, this was largely offset by a substantial decline in performance chemicals earnings from last year's peak levels."

The company's electronics and communications unit saw sales drop 18 percent on both lower prices and volume declines amid weak demand in photovoltaics markets.

DuPont said overall sales volumes fell 1 percent in North America for the quarter but increased 12 percent in Latin America and 5 percent in Europe, the Middle East and Africa.