DuPont An Investment Analysis


DuPont An Investment Analysis Essay, Research Paper

DuPont makes a variety of high-value products for industry today, including

polymers, chemicals, fibers, and petroleum products…products for agriculture,

electronics, transportation, apparel, food, aerospace, construction, and health care.

DuPont serves customers in these and other industries every day, offering "better things

for better living" as the company prepares to begin its third century of scientific,

technological, commercial, and social achievement. DuPont is a research and technology

based chemical and energy company with its annual revenue exceeding $39 billion.

Eleuth?re Ir?n?e du Pont de Nemours, a French immigrant, established DuPont

in 1802 in a small Delaware town. E.I. du Pont was a student of Antoine

Lavoisier, the father of modern chemistry, and when he came to America he brought some of

the new ideas about the manufacturing of consistently reliable gun powder. His

product ignited when it was supposed to, in a manner consistent with expectations. This was

greatly appreciated by the citizens of the growing nation, including Thomas

Jefferson, who wrote thanking du Pont for the quality of his powder, which was being used to clear the land at Monticello. Many other heroes of early America owed their success, and their

lives, to the dependable quality of DuPont’s first product. This represents a good,

strong start for a company.

DuPont, which is moving through the last decade of the twentieth century and

toward its third century, emphasizes several things; competing globally;

sharpening its business focus; increasing productivity; committing to safety, health, and

environmental excellence; and continuing to extend its significant science and

technological achievement.

One of DuPont’s major strategies is to focus on businesses in which DuPont

has core competencies, where DuPont can build competitive advantage. The most

notable example of this focus was the 1993 transaction in which DuPont acquired ICI’s

nylon business and ICI acquired DuPont’s acrylics business. This strengthened the

company’s position in the global nylon business while divesting a business that no

longer fit its portfolio.

Another major factor in the transformation of the company in the1990s was

the focus on reducing costs and improving productivity. This was necessary to

give the company the flexibility for competitive pricing and to grow market share and


DuPont had strong plants in several countries around the world for many

years, and their globalization trend continued in the 1990s. New plants opened in

Spain, Singapore, Korea, Taiwan, and China, and a major technical service center

opened in Japan. In 1994, a Conoco joint venture began producing oil from the Ardalin

Field in the Russian Arctic–the first major oil field brought into production by a

Russian/Western partnership since demise of the Soviet Union.

A further major development was the redemption of 156 million DuPont shares

from Seagram for $8.8 billion in cash and warrants — one of the largest

stock redemptions in history. This large block of shares was redeemed at a 13

percent discount to market price. While DuPont later sold some new shares, there are 18

percent fewer shares currently outstanding than just prior to the redemption. This resulted

in a significant opportunity for wealth creation for our stockholders. The share

redemption was made possible by four years of cost reduction, productivity improvement

and organizational change that have made DuPont strong financially and allowed

them to move decisively and quickly.

The DuPont that emerged from the company’s transformation in the 1990s has

often been described by people inside and outside the company as "the new

DuPont." This characterization is only partly appropriate, because while DuPont has

changed, there are many things that remain the same. The core competency in science and

technology, the commitment to safety, the concern for people, the feeling of community,

the emphasis on personal and corporate integrity, the future focus, and indeed

the willingness to change. DuPont is a company not only out for their own interest, but also

for the best interest of the world.

What has always set DuPont apart is the quality of the people, people

committed to making life easier and better for everybody, proud to be a part of an

enterprise making "better things for better living." That was true in 1802. And it is just as

true today.

In the second quarter of 1995 DuPont reported earnings per share of $1.70,

up 47 percent from the $1.16 earned in the second quarter 1994. Net income

totaled $938 million, compared to $792 million earned in 1994. Both earnings per share

and net income increased 27 percent."These outstanding results continue to reflect

strong revenue gains and ongoing productivity improvements," said DuPont Chairman

Edgar S.Woolard Jr. Sales for the second quarter were $11.1 billion, up 9 percent

from prior year.

The third quarter of the 1995 business year led DuPont to a $1.38 per share

earning. This number exceeded the $.95 earned in the third quarter of 1994

by more than 45%. Net income totaled $769 million compared to $647 million earned in

1994. Sales for the third quarter were $10.2 billion, up 4 percent from the prior year.

DuPont saw a drop in the earnings per share price for the fourth quarter of

1995. The $1.13 per share of the fourth quarter was $.25 lower than the third

quarters report. But the report was still $.18 higher than the fourth quarter report from


The average rise in earnings per share per quarter from 1994 to 1995 is

roughly $.40, which is not bad at all.

The full year’s earnings were $5.61 per share compared to $4.00 per share in

1994 (Graph 3). The average number of shares outstanding in 1995 declined 14

percent due to the redemption of stock from Seagram in 1995.

"This was our second consecutive year of record earnings and significant

year-over-year improvement," said John A. Krol, DuPont president and chief

executive officer. "These outstanding results are a tribute to the talent and

dedication of DuPont’s people worldwide. We are pleased with the progress we have made to increase profitability and expand our businesses globally."

In a day and age where any thing can happen, diversity in production is key.

No company comes close to the variance that DuPont expresses in their

production. Share earnings continue to rise throughout the past two years, as do the price per

share numbers (Graph1), and there is no reason for the pattern to change.

DuPont is obviously a company that is going places in the global community.

If something goes wrong with the clothing industry, they will still compete in

the construction industry. If something happens in transportation, electronics

will be there to hold strong for the company. With a company that is so diversified in its

production, DuPont is a smart investment, and I fully endorse it.

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