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Specialty Chemicals

DuPont execs outline strategy for independence next year

The company will pursue smaller research and capital projects

by Alexander H. Tullo
November 13, 2018

A photo of a DuPont researcher in a lab in Sunnyvale, Calif.
Credit: DuPont
DuPont opened its Silicon Valley Technology Center in Sunnyvale, Calif., earlier this year.

The top managers of the new DuPont laid out their vision for the company at an investor day in New York City on Nov. 8. A major difference between the future DuPont—which is set to separate from DowDuPont on June 1 of next year—and the one that merged with Dow last year, is a more conservative approach to R&D and capital spending.

“This company is being run very, very differently than it was being run three or four years ago,” Ed Breen, CEO of DowDuPont and future chairman of the new DuPont, told the stock analysts.

The new DuPont will have four main lines of business: electronic materials, nutrition and biosciences, transportation and advanced polymers, and safety and construction. These businesses together had$21 billion in sales and $5.3 billion in earnings before taxes last year.

Two-thirds of its portfolio comes from the old DuPont, but it picked up some of its electronic and transportation materials from Dow and some of its nutrition products from FMC. The old DuPont’s plastics-packaging business is going to the new Dow, set to separate on April 1, and its agricultural business will be part of Corteva Agriscience, also launching on June 1.

Marc Doyle, DuPont’s CEO elect, said that in his 23 years with DuPont he’s “never seen the level of enthusiasm, both inside and outside the company, that exists today.”

Discussing their research strategy, the executives said they will opt for smaller projects—costing between $10 million and $20 million—targeted at market needs. DuPont will no longer undertake speculative “moonshot projects,” as Breen called them.

And the four main businesses will set the agenda for R&D. “We no longer have corporate R&D,” Doyle said. “This is a change from how DuPont has been organized.”

The company says it will set R&D spending at 4 to 5% of sales, putting annual spending at roughly $900 million. Its medium-term goal is to derive 30% of its sales from new products, up from about 25% today.

DuPont will also set capital spending at 4 to 5% of sales, a level that favors smaller projects. The firm’s only large projects are a $400 million Tyvek expansion and a multi-site probiotic expansion that is wrapping up now.

Additionally, the company is in the process of divesting 10% of its portfolio—less profitable, lower growth businesses such as its European Styrofoam insulation unit.

Vincent Andrews, a stock analyst with Morgan Stanley, was pleased with what he heard. “In our view, New DuPont is clearly going to be a much more focused and optimized company than Old DuPont, and this should drive superior earnings growth and returns,” he wrote to clients after the presentation.


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