NEWS OF TH E WEEK
FOURTH-QUARTER EARNINGS SURGE FINANCES: Chemical makers report
an unusually strong finale to 2013
T
HE FOURTH QUARTER is the seasonable low
point for the chemical industry and is often glossed over by executives. But not in 2013. Both Dow Chemical and DuPont beat earnings expectations, and their CEOs were eager to discuss how they can continue to increase shareholder value. The two chemical giants have been targets of investor activism in recent months. The hedge fund of billionaire Daniel S. Loeb purchased a large stake in Dow and is advocating that it break into separate specialties and commodities firms. Instead, Dow will buy $4.5 billion of its own shares, $3.0 billion more than previously disclosed, and increase its dividend 15%. “You can expect a drumbeat of actions from Dow to liberate cash and reward shareholders,” CEO Andrew N. Liveris told analysts in a conference call. Meanwhile, DuPont CEO Ellen J. Kullman in a conference call highlighted a plan to buy back $2.0 billion in shares in 2014, part of an eventual $5.0 billion buyback program. DuPont is already on the path to spin off its performance chemicals unit, a move announced in October 2013. Activist investor Nelson Peltz and his Trian Fund Management reportedly lobbied for the change. But activist investors can’t take credit for increased demand for the industry’s products in the quarter. Dow’s earnings doubled to $793 million compared with last year’s fourth quarter, thanks to stronger sales of agricultural products, coatings, and performance plastics and higher earnings from petrochemical joint ventures in Kuwait and Thailand. The company’s earnings per share of 65 cents were 22 cents above analysts’ expectations.
DuPont saw a broad uptick in demand across businesses including agriculture, electronic chemicals, nutrition, and performance materials. Overall, sales increased 5.8% compared with the year-ago quarter. Earnings skyrocketed despite a $168 million charge to acknowledge overvalued assets in the struggling thinfilm photovoltaic market. At Ashland, earnings were up by more than 23% compared with the year-ago quarter, although sales were flat. The company’s personal care ingredients, coatings, and adhesives businesses all enjoyed strong demand. Ashland announced that it will follow the planned sale of its water technologies business with a reorganization into three units: specialty ingredients, performance materials, and Valvoline. To cut costs, the company will reduce its staff by 800–1,000 workers this year (see page 12).
FOURTH-QUARTER 2013 CHEMICAL RESULTS Stronger demand and cost controls helped firms overcome normal seasonal slowdown SALES EARNINGSa ($ MILLIONS)
Air Products Albemarle Ashland Celanese Dow Chemical DuPont PPG Industries Praxair
$2,546 692 1,868 1,616 14,386 7,747 3,702 3,010
$287 88 111 164 793 558 258 462
CHANGE FROM 2012 SALES EARNINGS
-0.6% 0.6 -0.1 7.7 3.4 5.8 14.2 7.5
-8.9% -16.2 23.3 51.9 103.9 189.1 33.0 11.6
PROFIT MARGINb 2013 2012
11.3% 12.7 5.9 10.1 5.5 7.2 7.0 15.3
12.3% 15.3 4.8 7.2 2.8 2.6 6.0 14.8
a After-tax earnings from continuing operations, excluding significant extraordinary and nonrecurring items. b After-tax earnings as a percentage of sales.
PPG Industries had 14.2% higher sales in the quarter, thanks in part to its acquisition of AkzoNobel’s architectural coatings business in April 2013. In addition, the firm reported a 10% rise in global demand for industrial coatings from auto manufacturers. Overall, PPG saw earnings rise by a third.—MELODY BOMGARDNER
LAB AUTOMATION Accelrys is acquired by French software firm Dassault Systèmes Accelrys, a leading supplier of laboratory information management systems, has agreed to be acquired by Dassault Systèmes, a French specialist in product lifecycle management software. The stock transaction is worth $750 million. The deal comes in a run of acquisitions in the scientific software market in which Accelrys has been an acquirer. Since 2010, the San Diego-based company has expanded its core Pipeline Pilot software, purchasing two electronic laboratory notebook companies, including market leader Symyx. Last year, Accelrys bought
QUMAS, a supplier of regulatory and quality management software; ChemSW, an environmental, health, and safety management software firm; and Vialis, an information technology integrator. By acquiring Accelrys, Dassault, part of the French conglomerate Groupe Dassault, will add chemistry and materials science software to its product life-cycle management line, which spans the life sciences, consumer packaged goods, hightech, and energy markets. “Accelrys is convinced that joining Dassault Systèmes will deliver trans-
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FEBRUARY 3, 2014
formational value to our customers by combining science-based innovation with product life-cycle management,” CEO Max Carnecchia says. Accelrys’s customers include BASF, Pfizer, DuPont, and GlaxoSmithKline. Michael Elliott, head of the scientific software consulting firm Atrium Research, says that while he’s not surprised a product life-cycle management player eventually grabbed Accelrys, he expected a deal to occur only after Accelrys had successfully digested its string of acquisitions.—RICK MULLIN
