E. I. du Pont de Nemours and (DD)

Q2 2011 Earnings Call

July 28, 2011 9:00 am ET


Nicholas Fanandakis - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Ellen Kullman - Chairman, Chief Executive Officer and Chairman of Strategic Direction Committee

Karen Fletcher - Vice President of Investor Relations


David Begleiter - Deutsche Bank AG

Brian Maguire - Goldman Sachs Group Inc.

Abhiram Rajendran - Crédit Suisse AG

Donald Carson - Susquehanna Financial Group, LLLP

Jeffrey Zekauskas - JP Morgan Chase & Co

John Roberts - Buckingham Research Group, Inc.

Mark Gulley - Ticonderoga Securities LLC

Nils-Bertil Wallin

Laurence Alexander - Jefferies & Company, Inc.

Kevin McCarthy

P.J. Juvekar - Citigroup Inc



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Welcome to the DuPont Second Quarter 2011 Earnings Call. My name is John, and I'll be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Ms. Karen Fletcher. Ms. Fletcher, you may begin.

Karen Fletcher

Thanks, John. Good morning, and welcome. With me today are Ellen Kullman, Chair and CEO; and Nick Fanandakis, Executive Vice President and CFO. The slides for today's call can be found on our website at dupont.com, along with the news release that was issued earlier today.

During the course of the conference call, we will make forward-looking statements. And I direct you to Slide 2 for our disclaimers. All statements that address expectations or projections about the future are forward-looking statements. Although they reflect our current expectations, these statements are not guarantees of future performance but involve a number of risks and assumptions.

We urge you to review DuPont's SEC filings for a discussion of some of the factors that could cause actual results to differ materially.

We will also refer to non-GAAP measures and request that you refer to the reconciliations to GAAP statements provided with our earnings news release and on our website. And finally, we have posted supplemental information on our website that we hope is helpful to your understanding of our company's performance. It's now my pleasure to turn the call over to Ellen.

Ellen Kullman

Great. Thank you, Karen, and good morning, everyone. I'm pleased with the continued strong momentum from our second quarter results. Sales were up 19% with double-digit increases in every reporting segment and major region. Sales of developing markets grew 29%. Overall, we had excellent pricing performance driven by innovative new products and disciplined pricing actions across all businesses. Volume was up 2% for the quarter compared to 9% in the first quarter.

For the full year, our expectation is for 5% organic volume growth. Factors affecting volume growth specific to the quarter, included the timing of a very strong start to the Ag season weighted towards the first quarter at the expense of the second, as well as the impact from the Japanese earthquake and flooding in the United States, which we will recover in the second half. In spite of these items that were very unique to the second quarter, our volume growth year-to-date is about 5% and we expect that trend line to continue through the second half.

Now I'd like to take a few minutes to walk through what we're seeing in the major markets we serve. Let's start with Agriculture, where we're wrapping up a very successful selling season in the northern hemisphere. In line with our right product, right acre-feet strategy, our sales team deliver a constant stream of new products that optimize performance and profitability field by field. Broad customer acceptance leads us to expect share gains in North American corn and soybeans is one measure to grow our validation this season, and we'll announce those share gains later this summer. Healthy farm economics and high-value product innovations are the backbone of success for both our Seed and our Crop Protection businesses.

Moving to Electronics. Photovoltaics is an important growth market for us. We expect module builds to be up nearly 15% this year, and as we always state, the road is a bit bumpy. In the first quarter, we saw Module inventory build as production outpaced demand. Now this situation continued into the second quarter and with the further increases in inventories, coupled with significant price and margin pressures on the supply chain. While the market has begun to adjust, we expect the correction to continue into the second half. Positive news came from Germany signaling that they will keep their existing subsidy level of tax and not make the anticipated cut in July as was once thought.

We expect PV installations to be up significantly in the third quarter as compared to the second, helping to work off inventories and allow cell and module production to pick up again. PV installations in the second half should reach levels of about 11 to 12 gigawatts nearly double the rate from the first half on stronger demand in Germany, Italy, USA and China.

Given silver price escalation and extreme volatility, we've launched a new generation of Solamet metallization paste called Solamet PV17x. Now this flat side silver paste is quickly establishing a new global standard for high efficiency and crystalline silicon solar cells, while also reducing silver paste consumption by about 10% on average, a significant achievement given the strong drive to higher efficiency and lower cost in the photovoltaic industry.

Looking at consumer electronics, we see continued strength in smartphones and tablet PCs since both applications use a number of advanced DuPont materials. Demand for plasma displays has been stable. For our automotive market, light vehicle builds were down 1%, about as expected as the world worked through supply chain issues related to the tragic earthquake in Japan. We believe most of the issues are behind the industry now and expect production to catch up in the third and fourth quarters with full year vehicle build, up about 5%.

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