August 1, 2019 / 10:34 AM / 2 months ago

DuPont pins hopes on lower costs to counter trade war hit

(Reuters) - Industrial materials maker DuPont (DD.N) raised its full-year profit forecast on Thursday as it plans to cut costs to combat the impact of slowing demand in the electronic and automotive sectors due to the U.S.-China trade war.

The ongoing trade war between two of the world’s largest economies and weakening car and smartphone sales globally have hurt companies like DuPont that supply components to a range of industries and supply chains.

Shares of the company, which makes everything from adhesives and resins to probiotics, rose as much as 1.8% in early trading as investors shrugged off weaker-than expected revenue and a cut to full-year sales forecast.

DuPont, one part of conglomerate DowDupont until a split earlier this year, now expects 2019 proforma adjusted profit to range between $3.75 and $3.85 per share, compared with its prior expectation of $3.70-$3.85.

The company said it plans to cut about $80 million in costs, in addition to the $30 million in the second quarter that helped prop up operating core earnings margins.

It now expects full-year organic sales to be slightly down, compared with its earlier forecast of a 2% to 3% rise.

China, the world’s largest market for both cars and mobile phones, has seen sales in both areas fall in recent quarters, according to industry indicators.

For the second quarter, Dupont reported a 12% decline in volumes and a 10.4% drop in sales in its transportation and industrial (T&I) business.

“T&I is exposed to short cycle businesses, mostly autos and electronics where weak demand continues to be driven by the global macroeconomic condition and the U.S.-China trade tariff. This weaker demand also led to additional softness in Europe,” Chief Financial Officer Jeanmarie Desmond said on the call.

The auto industry is DuPont’s biggest end-market, accounting for about 15% of its total sales, while smart phones represent about 5%.

Revenue fell 6.6% to $5.47 billion, below analysts’ average estimate of $5.63 billion, according to Refinitiv IBES data.

Adjusted for charges, the company reported profit of $725 million, or 97 cents per share, in the second quarter ended June 30 from $695 million, or 89 cents per share, a year before.

Dupont shares were up 1% after dipping slightly before the bell.

Reporting by Nishara Karuvalli Pathikkal and Arathy S Nair in Bangalore; Editing by Anil D'Silva and Saumyadeb Chakrabarty

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