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DuPont continues 'strong momentum' into Q3

DuPont increases full-year 2016 operating earnings guidance by 17%.

DuPont, a global science company offering innovative products, materials and services, announced third-quarter 2016 U.S. generally accepted accounting principles (GAAP) earnings of 1 cent per share and operating earnings of 34 cents per share. Prior-year GAAP and operating earnings were 14 cents and 13 cents per share, respectively.

Third-quarter 2016 sales totaled $4.9 billion, up 1% from the prior year as 3% volume growth more than offset 2% lower local prices.

Year-to-date free cash flow improvement of $1.3 billion reflected improvements in working capital, lower tax payments, lower capital expenditures and the absence of Chemours cash outflows.

DuPont chairman and chief executive officer Ed Breen said, "This quarter, we continued the strong momentum from the first half of the year. We increased segment operating earnings 40%, expanded operating margins in each reportable segment, reduced costs, grew volumes and improved free cash flow. As a result of our continued performance and progress against strategic initiatives, we are raising our operating earnings guidance for the year.

"We also are making progress preparing for the merger with Dow," Breen added. "We developed an organizational design that fosters innovation and takes advantage of our market connections to drive growth. In addition, we have finalized plans to realize our cost synergies. We continue to work constructively with regulators in key jurisdictions to close the merger as soon as possible. In the event that regulators in those jurisdictions use their full allotted time, closing would be expected to occur in the first quarter of 2017. We expect the intended (spin-offs) to occur about 18 months after closing."

Results by segment

The following is a summary of business results for each of DuPont's reportable segments comparing the third quarter with the prior year.

Agriculture. A seasonal operating loss of $189 million improved $21 million, or 10%, as cost savings, higher volumes and a $28 million benefit from currency were partially offset by lower local prices and higher product costs.

Increased seed volumes were partially offset by lower fungicide and insecticide volumes. Increased seed prices were more than offset by lower crop protection prices. Prior-year operating earnings included a $27 million gain from asset sales and a $21 million benefit related to prior periods. Operating margins expanded by 230 basis points.

Nutrition & Health. Operating earnings of $135 million increased $33 million, or 32%, on continued broad-based volume growth that was led by probiotics, cultures and ingredient systems; cost savings, and lower product costs. Operating margins expanded by 380 basis points.

Performance Materials. Operating earnings of $371 million increased $54 million, or 17%. Cost savings, increased demand in automotive markets (primarily in China) and lower product costs more than offset a $14 million negative impact from currency, as well as the absence of a $16 million net benefit from a joint venture in the prior year. Operating margins expanded by about 350 basis points.

Industrial Biosciences. Operating earnings of $78 million increased $17 million, or 28%, as increased demand in bioactives and biomaterials and cost savings more than offset lower volume in CleanTech. Demand in bioactives increased due to growth in home and personal care, while strength in biomaterials reflected growth in the apparel market. Operating margins expanded by 360 basis points.

Electronics & Communications. Operating earnings of $108 million increased $4 million, or 4%, as cost savings more than offset lower demand, driven by declines in Tedlar film and continued weakness in consumer electronics. Operating margins expanded by about 240 basis points.

Protection Solutions. Operating earnings of $162 million increased $16 million, or 11%, driven by cost savings and increased volumes. Volume growth was driven by increased demand in Tyvek protective materials and surfaces, primarily in North America. Operating margins expanded by 225 basis points.

2016 Outlook

DuPont reported that it now expects full-year 2016 GAAP earnings to be about $2.71 per share, an increase of 30% from the prior year. Full-year 2016 operating earnings are now expected to increase 17% versus the prior year to $3.25 per share, up from the previously communicated range of $3.15-3.20 per share.

The estimated headwind from a higher base tax rate is now expected to be about 7 cents per share. The company continues to expect a benefit of 64 cents per share from the 2016 global cost savings and restructuring plan and a headwind from currency of about 15 cents per share. DuPont's full-year 2016 GAAP earnings include an expected charge of about 37 cents per share for transaction costs associated with the planned merger with Dow.

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