Chemical maker DuPont
The U.S. chemical industry has been hard hit in recent months by the recession that has shrunk sales of its products from the autos, construction and electronics industries.
The outlook is definitely disappointing, Morningstar analyst Ben Johnson told Reuters, pointing to the company's expectation that customers will continue to draw down inventories.
The Wilmington, Delaware-based company, said it would seek $200 million in cost reductions, including cuts to contractor positions and work schedule reductions, and announced a 12.5 percent cut to its 2009 spending plans to $1.4 billion.
One analyst applauded DuPont's statement that it would maintain its second-quarter dividend at 41 cents a share.
We believe a consistent dividend payout provides a valuation support for (DuPont) in the current economic turbulence,' Goldman Sachs analyst Robert Koort wrote in a research note.
The company is planning further restructuring plans that will be finalized in the second quarter, but it did not say how many positions would be cut. In December, the company said it would lay off 2,500 employees and 4,000 contractors.
For the second quarter, DuPont expects revenue growth to be limited by continuing weak demand in nonagricultural markets and the negative impact of currency.
In a conference call with analysts, the company's Chief Executive Ellen Kullman said she expects overall second-quarter sales to be flat to up from the first quarter.
However, the company declined to give an earnings per share forecast for the second-quarter citing the uncertain economic environment.
First-quarter earnings were $488.0 million, or 54 cents a share. That was above the average analyst forecast of 52 cents a share, according to Reuters Estimates.
Sales fell 20 percent to $6.87 billion. Analysts had expected revenue to be $7.44 billion.
Most of DuPont's consolidated first-quarter earnings came from its Agriculture & Nutrition segment - which was the only segment to post earnings growth out of the five major businesses of the company.
Fortunately for DuPont, they are going to continue at least through the remainder of this year and on into next year to have both Ag and the pharmaceutical income to bolster the consolidated income, Morningstar's Johnson said.
Longer term the real driver of this business will be the Ag business and that is becoming more and more apparent,
For full-year 2009, the company expects earnings to be between $1.70 and $2.10 a share, down from its earlier forecast of earnings to be in the range of $2.00 to $2.50 a share.
However, the midpoint of the new range which is $1.90 a share, is above $1.88 a share that analysts, on average were forecasting.
This downward revision was not fully unexpected given current consensus is at $1.88, Goldman's Koort said
DuPont shares were trading up 4.1 percent to $27.83 in noon trading on the New York Stock Exchange. In the last 52 weeks, the stock has traded in the range of $16.06 to $52.34.
(Reporting by Hezron Selvi; Editing by Dave Zimmerman and Tim Dobbyn)