NEW YORK – DuPont Co. (DD), the No. 2 U.S. chemicals maker, on Tuesday posted better-than-expected quarterly results before items on stronger pricing and set a $5 billion share buyback.
Third-quarter sales improved across DuPont's five business, and prices rose 4-percent, offsetting record energy costs and the effect of Hurricanes Katrina (search) and Rita, which hobbled chemical output by closing plants in the Gulf Coast, a key producing region.
Before a tax charge and the hurricane impact, the company posted a third-quarter profit of 33 cents a share, beating analysts' average forecast of 29 cents.
Including items, the company posted a net loss of $82 million, or 9 cents a share, compared with a profit of $331 million, or 33 cents a share, a year earlier.
DuPont also warned the hurricanes' impact will continue to squeeze profits in the fourth quarter, forecasting earnings of 20 cents a share to 25 cents a share, below the average analysts' forecast of 36 cents, according to Reuters Estimates.
DuPont will also launch a $5 billion share repurchase program, including a $3 billion "Accelerated Share Repurchase" agreement with Goldman, Sachs & Co..
"I don't think it's a huge surprise. A lot of people have been calling for that," said Gene Pisasale, research analyst with Mercantile Investment and Wealth Management Group.
He also noted that the weak fourth-quarter outlook was expected, given DuPont's plant shutdowns during the storms.
Under the buyback deal, DuPont will purchase from Goldman Sachs about 75.7 million shares of DuPont common stock on October 27, 2005, at a price of $39.62 a share, Monday's closing price. Goldman Sachs will purchase an equivalent number of shares in the open market over the next nine months.
At the end of this period, DuPont may owe or be owed money by Goldman Sachs according to a volume weighted average price of DuPont shares during this period. For that calculation, DuPont will have 75.7 million fewer shares outstanding immediately following the October 27 purchase.
DuPont aims to repurchase the remaining $2 billion repurchase in the 12 months following the completion of the Accelerated Share Repurchase program in mid-2006.
In recent months, the U.S. chemicals industry has struggled with record energy costs, which spiked after the Gulf Coast storms. But even before the storms, industry experts were worried about weakening demand, rising interest rates, and high prices for natural gas, a key chemical ingredient.
Shares of DuPont, a component of the Dow Jones industrial average, fell 8.9 percent in the third quarter, compared with a 5.6 percent decline in the S&P Chemicals index (search).