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DuPont Is Company Of The Year

Wilmington, Del., firm’s bold transformation makes it this year’s choice

by Alexander H. Tullo
January 13, 2014 | A version of this story appeared in Volume 92, Issue 2

DuPont’s makeup has undergone major changes in the past decade.
A set of two pie charts. The top chart depicts DuPont’s divisions by percentage of sales in 2002. The bottom chart depicts the same variables for 2012. The performance chemicals business shown in the 2012 chart will be spun off from the company.
DuPont’s makeup has undergone major changes in the past decade.

Nearly every major chemical company has at one time or another ditched a commodity business in favor of value-added materials. Right now, Dow Chemical and Ashland have such programs under way. But it is the boldness of DuPont’s decision to spin off its performance chemicals division into a new company that makes it C&EN’s choice for the 2013 Company of the Year.

It is difficult to imagine DuPont without Teflon, or Teflon without DuPont. But we’ll need to make that adjustment after DuPont, sometime in 2015, consummates the spin-off.

In doing so, DuPont will midwife one of the largest chemical companies in the U.S. By itself, the performance chemicals division racked up $7.2 billion in sales in 2012, more than firms such as Albemarle and Celanese did that year.

The largest performance chemicals business is titanium dioxide, which generated nearly half of the division’s 2012 sales. The business is the world’s largest producer of the white pigment, commanding a 20% market share, according to the research group TZMI.

DuPont’s fluorochemicals and fluoropolymers businesses, including Suva refrigerants and the Teflon brand of polytetrafluoroethylene, represent another 33% of sales. Many other businesses in the segment—such Nafion ion-exchange membranes and sodium and lithium metals—have strong positions in niche markets.

Most of the performance chemicals businesses have been with the company for generations. DuPont got into the TiO2 business in 1931. Teflon was one of the chemical industry’s great serendipitous discoveries: DuPont scientist Roy J. Plunkett found it as a residue in a metal cylinder after reacting tetrafluoroethylene under pressure.

But longevity does not make a business too sacred to dispose of, especially at DuPont, where the culture of reinvention has been around longer than Teflon. DuPont, after all, was founded as an explosives company in 1802. Explosives were DuPont’s bread and butter for more than a century, until professional R&D conducted by chemists like Plunkett, Wallace H. Carothers, and Julian W. Hill ushered the world into the polymer age.

In fact, the spin-off is tame compared with some of the other twists and turns of DuPont’s history. For instance, DuPont was a major General Motor investor for decades. And DuPont owned the oil firm Conoco from 1981 until 1999.

Charles O. (Chad) Holliday Jr., DuPont’s chief executive officer when it divested Conoco, led the company into life sciences. His most conspicuous purchase was the seeds and plant genetics firm Pioneer Hi-Bred, a cornerstone of DuPont today. The period also saw the company’s exit from the nylon fibers business.

Holliday’s successor, Ellen J. Kullman, is furthering the strategy. She spearheaded the $6.6 billion purchase of Danisco in 2011, which plunged DuPont into food ingredients. If you want to make “industrial bread” with an “artisan look,” DuPont is now the name you flip the Rolodex to. Probiotics are also a big thrust of DuPont’s food ingredients business. Kullman sees a future in mass-produced foods that are healthy for consumers.

DuPont has conducted other sales under Kullman. Early last year, the company sold off its automotive coatings business to the Carlyle Group for $4.9 billion.

However, unlike the coatings business, the performance chemicals division generates a lot of cash. It has been DuPont’s most profitable business for the past three years. The spin-off will come at a cost.

But the company isn’t leaving the business for financial reasons. The division’s results are volatile, which distracts DuPont’s management and pigeonholes the firm to the investing public as a cyclical chemicals maker.

To pursue science, Kullman says, DuPont needs to shed chemicals. Last fall, she told C&EN that when DuPont managers evaluate businesses they ask themselves, “How can science make the difference?” And although chemists such as Plunkett made a world of difference a half-century ago, in Kullman’s estimation there is little that science can still do to improve the performance chemicals division. The part of DuPont that Kullman wants to keep is building a plant in Iowa that turns corncobs into ethanol. That’s science solving today’s problems.

Many analysts approve of the spin-off. “The parallel that comes to mind is the separation of Solutia from Monsanto in the late 1990s, which turned out to be highly rewarding for Monsanto shareholders,” Citi Research stock analyst P. J. Juvekar wrote to clients after the spin-off announcement. If Kullman can manage to achieve similar results without the profits from the performance chemicals division, the move will go down in DuPont’s future history as yet another successful reinvention.

Views expressed on this page are those of the author and not necessarily those of ACS.


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