Chemical manufacturer DuPont said Thursday that it will cut 2,500 jobs and will not turn a profit in the fourth quarter as a severe slowdown in the automotive and construction markets eats away at chemical sales.
DuPont also said it will release 4,000 contractors by the end of this year, with additional contractor reductions expected in 2009, and will implement work schedule reductions and redeploy more than 400 employees on projects to reduce working capital and operating costs.
Shares in the Wilmington-based company were up 17 cents to $23.78 in midday trading.
DuPont president and CEO-designate Ellen Kullman said the company is stopping all discretionary spending, slowing or halting noncritical projects, and temporarily idling more than 100 manufacturing units.
"Right now, we are focused on the next 16 weeks, and clearly cash is our priority," she told analysts in a conference call.
Kullman said the restructuring, which should be completed in about 12 months, will affect about 4,200 employees, or roughly 7 percent of DuPont's work force. In addition to the 2,500 employees who will lose their jobs and 400 being redeployed to "mega-projects" focused on cost savings, 1,300 staffers will be shifted to work being done by some of the 4,000 contractors being released.
Chairman and CEO Charles Holliday Jr. said DuPont will continue to act in a timely and aggressive manner in response to the business environment.
"We are extremely well-positioned for the eventual recovery," he said.
Meanwhile, with revenue declines affecting most of its businesses and spread across all regions, the company is relying heavily in the short term on its agriculture and nutrition unit, which will deliver about 30 percent of total earnings this year.
Jim Borel, group vice president and head of DuPont's production agriculture businesses, said the company has been gaining market share and sees opportunities in both crop protection and seeds.
"We expect 2009 to be a very challenging year," said DuPont chief financial officer Jeff Keefer.
DuPont is not the only chemical company responding to the global economic downturn.
Last month, the Dow Chemical Co. said it will look at all options to reduce costs and eliminate or defer capital spending, but that no final decisions had been made.
"We are going to take necessary, bold and proactive measures to manage our transformation through these extremely challenging times," Dow chairman and CEO Andrew Liveris said at the time.
DuPont expects to take a fourth-quarter, pretax charge of about $500 million, or 40 cents per share, for its restructuring plan, resulting in a pretax earnings increase of about $130 million for 2009.
The company is forecasting a 2008 fourth-quarter loss of 20 cents to 30 cents per share, excluding restructuring charges of about 40 cents per share, down from its October guidance of a 20 to 25 cents per share profit.
DuPont expects 2009 earnings to range between $2.25 and $2.75 per share, anticipating the current global recession will continue well into 2009.
Analysts surveyed by Thomson Reuters expected a quarterly profit of 23 cents per share and fiscal 2009 earnings of $2.80, on average.
"We are providing 2009 earnings guidance and underlying assumptions in our effort to be as transparent as possible with respect to the current and expected impact of the global recession," Holliday said. "We are, however, realistic about the potential for further change and we will adjust actions as conditions warrant."
Fourth quarter sales are expected to be at least 15 percent lower than fourth quarter 2007, principally reflecting a decline in worldwide volumes.
DuPont said 2008 free cash flow of about $1.3 billion should increase to about $2.5 billion in 2009, reflecting a planned $1 billion net working capital reduction and a 10 to 20 percent reduction in capital spending.
The company has targeted $600 million in fixed cost productivity improvements next year, in addition to about $130 million in cost reductions from its restructuring plan, supplanting an original 2009 cost productivity plan of $200 million.
