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DuPont Reports 2Q Earnings, $213 Million Loss, Will Cut More Jobs

Press release from the issuing company

WILMINGTON, Del., July 25 Summary * Second quarter 2001 earnings excluding one-time items were $.41 per share, 54 percent below second quarter 2000 earnings of $.90 per share. * Net income was principally reduced by $270 million from lower volume, $190 million from higher raw material costs, and a $35 million impact from the stronger U.S. dollar. * One-time items in the quarter total a net charge of $.62 per share, principally for previously announced employee terminations, facilities shutdowns, and asset write-downs. * Segment sales in second quarter 2001 of $7.8 billion decreased 12 percent versus second quarter 2000, principally reflecting significantly lower volume. * Worldwide local currency selling prices were up 1 percent. Adverse currency effects, principally from the weaker euro and Japanese yen, reduced second quarter worldwide segment sales by 2 percent. * On June 7, 2001, the company announced an agreement to sell DuPont Pharmaceuticals to Bristol-Myers Squibb Company for $7.8 billion. On July 12, 2001, the company completed the previously announced sale of selected U.S. polyester businesses to Alpek S.A. de C.V. Earnings Comparisons ($ per share diluted) 2Q'01 2Q'00 Underlying .41 .90 One-Time Items (.62) (.25) Reported (.21) .65 "Industries important to many of our customers -- electronics, automotive, textiles and chemicals -- have been particularly affected by the economic downturn. This has temporarily reduced fundamental demand for our products,'' said Charles O. Holliday, Jr., DuPont chairman and chief executive officer. "In response to lower levels of business activity, we have taken actions to reduce costs and enrich product mix, and as a result, we expect significant earnings leverage when demand improves.'' Global Sales and Income For the quarter, consolidated sales totaled $7.0 billion compared to $7.9 billion in 2000. Segment sales, including transfers and a pro rata share of sales by equity affiliates, were $7.8 billion, down 12 percent from $8.8 billion in 2000. Net income before one-time items was $432 million versus $949 million in 2000. The earnings decline reflects significantly lower results across all the company's segments principally due to lower U.S. sales volumes, higher raw material costs, and a stronger U.S. dollar. Net income including one-time items was a loss of $213 million, compared to earnings of $688 million in the second quarter of 2000. One-Time Items One-time items are described in the notes to the accompanying financial statements and are summarized in the table below: $MM Pretax $MM After-Tax ($ Per Share) 2001 2000 2001 2000 2001 2000 Pioneer - Purchase Accounting (220) (138) (.13) Sale of Affiliate Stock 52 34 .03 Benlate(R) Accrual (100) (62) (.06) Employee Separations/Facility Shutdowns (743) (98) (491) (61) (.47) (.06) Asset Impairments (Principally Polyester) (303) (188) (.18) 2nd Quarter - Total (994) (418) (645) (261) (.62) (.25) Restructuring actions announced on April 2 will eliminate 5,500 employee positions and reduce the contractor work force by 1,300. Projected annualized cost savings are expected to exceed $400 million by the end of 2002. The company anticipates that about one-third of these savings would be realized by year-end 2001. Segment Sales Regional segment sales and related variances for the second quarter 2001 compared with the second quarter 2000 are summarized below: Segment Sales % Change Due To Q2'01 % Change Local Currency Pharmaceuticals/ $B vs. Q2 '00 Price Effect Volume Other* Worldwide 7.8 (12) 1 (2) (9) (2) U.S. 3.9 (16) 1 0 (14) (3) Europe 1.9 (4) 3 (5) (2) 0 Asia Pacific 1.1 (7) 1 (5) (3) 0 Canada, Mexico, S. America 0.8 (12) (4) (2) (4) (2) * Includes impact from reduced ownership in DuPont Photomasks. In addition, the Pharmaceuticals segment has been isolated for purposes of this analysis. -- Worldwide volumes declined 9 percent, excluding the lower sales attributable to pharmaceuticals and portfolio changes. -- U.S. second quarter sales volume (excluding Pharmaceuticals/Other) declined 14 percent principally reflecting lower volumes in the Specialty Polymers, Nylon, Specialty Fibers and Performance Coatings & Polymers segments. -- European volume declined 2 percent with local currency prices up 3 percent. However, the stronger dollar reduced European sales by 5 percent. -- Asia Pacific sales continue to weaken, down 7 percent, reflecting lower volume and the negative impact of weaker currencies, particularly the Japanese yen. Business Segment Performance The following compares second quarter 2001 results before one-time items for each segment with those for the second quarter 2000, reflecting the segment realignments described in note (a) to the Consolidated Segment Information accompanying this news release. -- Performance Coatings & Polymers - Sales were 12 percent lower than 2000 reflecting lower worldwide vehicle builds and lower refinish sales, as well as the weak euro. Increased raw material costs were a significant factor in lower results in Engineering Polymers and Elastomers, in addition to lower volumes. Segment ATOI declined 59 percent. -- Specialty Fibers - Sales and ATOI were 11 percent and 46 percent lower, respectively. Continued earnings growth from Advanced Fiber Systems was more than offset by lower earnings from Apparel and Textile Sciences which declined 85 percent, adversely affected by the weak euro, higher raw material costs, and very weak U.S. apparel and textile markets. Earnings for Nonwovens were essentially flat on modestly higher sales. -- Specialty Polymers - Sales were down 12 percent. Segment ATOI declined 54 percent with lower earnings in all strategic business units. Electronic Technologies and Fluoropolymers were adversely affected by the significant slowdown in electronics and related high- technology markets. The decline in Packaging & Industrial Polymers earnings resulted from lower volumes and higher raw materials costs. DuPont Surfaces and Imaging Technologies results also reflect the economic downturn. -- Pigments & Chemicals - ATOI declined 34 percent on 8 percent lower sales with lower earnings in all strategic business units reflecting 7 percent lower worldwide volume. Segment earnings were also negatively affected by higher raw material and energy costs in White Pigment & Mineral Products and DuPont Chemical Solutions Enterprise. -- Polyester - Sales were 11 percent lower, reflecting depressed conditions in worldwide markets. Margins continue to be reduced by higher raw material and energy costs. The second quarter loss was $17 million. -- Nylon - Sales decreased 12 percent with ATOI down 97 percent, principally reflecting the impact of 23 percent lower U.S. volumes and higher raw material costs. Sales declines were principally due to lower flooring volumes, particularly in the United States. -- Agriculture & Nutrition - ATOI declined 26 percent on 8 percent lower sales. Pioneer sales were $771 million, down 4 percent, while remaining sales in the segment were down 12 percent. Crop Protection earnings were principally affected by lower U.S. volumes and by currency in Europe and Asia. -- Pharmaceuticals - ATOI was $10 million versus $51 million last year, primarily due to 23 percent lower sales. The DuPont share of Cozaar(R)/Hyzaar(R) U.S. operating profits increased this quarter versus last year. Major product sales are shown below: ($ in millions) 2Q 2001 1Q 2001 2Q 2000 Coumadin(R) 52 26 69 Sustiva(TM) 87 55 141 Cardiolite(R)/Miraluma(TM) 53 18 62 Outlook The company maintains a cautious view of the broader business environment in the second half of 2001, characterized by the following key elements: -- It does not appear that the second quarter marked the bottom of the current economic downturn, and we expect conditions to continue to deteriorate into the third quarter. -- We expect the U.S. economy to stabilize, but not to materially improve, by the fourth quarter this year. We believe that any modest upturn in the U.S. is likely to be offset by further declines in Europe, Asia, and South America. We also expect the electronics markets to continue to decline through the fourth quarter of 2001. -- Although we are hopeful that the burgeoning financial crisis in Argentina and Brazil will not spread, we do expect it to affect fourth quarter southern hemisphere agricultural sales and our other businesses in the region. -- For the second half of 2001, the company expects the purchased costs for raw materials to remain at approximately current levels and the U.S. dollar to stay in roughly its current exchange range versus trade weighted average currencies. Based on this view, the company anticipates that the third quarter 2001 will be substantially more challenging than the second quarter, as judged by year-over-year earnings per share (EPS) comparisons. Accordingly, the company expects earnings comparisons in the third quarter to show a sequential decline at least as great as that seen in the second quarter. The company does expect some mitigation of these downward trends in the fourth quarter of 2001, due to savings from its restructuring activities and assuming stabilization in the U.S. manufacturing sector. "We cannot control the economy, but we can control how we operate,'' said Holliday. "In today's economy that means accelerating cost savings from restructuring, strictly limiting discretionary spending, reducing capital expenditures and intensely focusing on stimulating sales into global markets.''

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