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EI DuPont de Nemours & Co. (DD)

Q4 2010 Earnings Call

January 25, 2011 9:00 am ET


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

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

Karen Fletcher - Vice President of Investor Relations


Mark Gulley - Soleil Securities Group, Inc.

David Begleiter - Deutsche Bank AG

Jeffrey Zekauskas - JP Morgan Chase & Co

Donald Carson - Susquehanna Financial Group, LLLP

Mark Connelly - Credit Agricole Securities (USA) Inc.

Lucy Watson - Jefferies & Co.

Frank Mitsch - BB&T Capital Markets

Kevin McCarthy

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Paul Mann - Morgan Stanley

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Welcome to the DuPont 2010 Fourth Quarter Earnings Call. My name is John and I will be your operator for today's call. [Operator Instructions] I will now turn the call over to your host, Karen Fletcher. You may begin, Karen.

Karen Fletcher

Thanks, John. Good morning and welcome, everyone, to our fourth quarter earnings call. With me this morning are Ellen Kullman, Chair and Chief Executive Officer; and Nick Fanandakis, Chief Financial Officer. The slides for today's call can be found on our website at, along with the news release that was issued earlier today.

During the course of this conference call, we will make forward-looking statements. And I direct you to Slide 1 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 ask that you refer to the reconciliations to GAAP statements that are provided with our earnings news release and can be found on our website. And finally, we've 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. The DuPont delivered a strong finish to a great year. And during the fourth quarter and throughout the year, we've been steadfastly focused on our 2010 directives with disciplined execution across the board. Our consistent focus on market-driven innovation, cost and capital productivity and differential allocation of resources delivered very strong results for the year. And we will look back on 2010 as the year we benefited from recovery, created our own momentum and emerged as a stronger, well-positioned company.

We did it by building on the aggressive actions we took in response to the global financial crisis and I'm not just talking about the restructuring and cost-cutting, I'm referring to the thoughtful, strategic choices that we made, specifically to prepare for global economic recovery and truly emerge a more agile and disciplined company.

To site up a few examples, we accelerated the implementation of the DuPont production systems at our plant site. We redeployed employees on megaprojects to structurally reduce working capital, and we made tough choices on our underperforming assets and we had afforded not to cut our R&D spend.

Our 2010 results are summarized on Slide 2. So with that winded in a way that is consistent with our internal set of directives. We delivered sales growth of 21% with a wide variance by business reflecting how different markets were affected by the global financial crisis and how our business has responded.

We delivered strong topline growth in areas that were minimally affected by the global crisis such as production agriculture and photovoltaics. These businesses executed well with new product launches, share gains, improved margins and strong momentum as we head into 2011. We also delivered outstanding growth at certain businesses benefited from early recovery and restocking such as TiO2, electronics, parts of our chemical businesses and polymers. As an example, we were prepared when auto builds recovered more than twice as fast as expected last year.

Certain industrial markets were slower to recover as expected mid-cycle businesses such as Nomex and Kevlar started to rebound midyear. And while their recovery has been a bit more muted, we expect more to come in 2011. In the meantime, we continue to develop new applications for fine denier Kevlar in anticipation of the Cooper River plant startup, which will occur later this year.

Finally, construction markets remained weak throughout the year. While total company sales were up 21% for the year, sales in developing markets grew 27%. We delivered exceptionally strong performance in China and India. Sales in greater China, including Taiwan, were over $3.3 billion, increasing more than 50%. All of our segment contributed to this growth with especially strong results in electronics and communications and performance materials. Sales in India were up over 40% to $678 million with the biggest gains coming from our performance chemicals and Ag & Nutrition segments.

The backbone of our topline growth this year remains market-driven innovation. Our steadfast investment in R&D-driven recession allowed us to intensify our efforts in new product introductions. So we did it by staying close to our customers, and I mean that literally as well as figuratively. We partnered with customers to run product tests and commercial prove outs in their facilities. New product introductions were up 23% in 2010 on the hills of a 60% increase in 2009.

Moving on to cost, we delivered more than $650 million in fixed cost productivity and benefits from restructuring. We exceeded our original goal of $600 million. We're poised to deliver an additional $300 million of fixed cost productivity in 2011. Raw materials were up 6% last year and our price increase more than covered higher cost with an impressive full year spread of $0.44, something we could only deliver because our customers recognize the value and competitive advantage that our products provide.

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