Shares in E.I. du Pont de Nemours & Co., one of the world’s biggest chemicals makers, dropped almost 5 per cent after the company warned on profit. It cited weakening demand, particularly for products such as polymers, used in a range of goods, and consumer electronics.
The warning – which came a day after Texas Instruments cut its earnings forecast – could fuel fears that earnings growth will slow down next year after several years of strong profit increases for big companies following the recession.
The chemicals industry is often seen as an economic bellwether, since its products are used in a wide range of consumer goods, from soap and saucepans to computers and solar panels.
DuPont’s warning follows a similar cut in profit outlook by Wacker Chemie, the German chemicals company, and downbeat comments from BASF, another German chemicals group, as the industry tries to cope with shrinking inventories.
“We are seeing slower growth in certain segments during the fourth quarter, driven by global economic uncertainty,” said Ellen Kullman, DuPont’s chief executive officer. “This uncertainty is contributing to ongoing conservative cash management in some supply chains.”
The Delaware-based company said profit for the year would be within a range of $3.87 (U.S.) to $3.95 a share, down from its earlier forecast of $3.97 to $4.05. DuPont had raised the lower end of that estimate in October from $3.90. Analysts, on average, had expected DuPont’s full-year profit to be about $4.03 a share.
“The earnings revision reflects destocking across polymers and certain industrial supply chains that has accelerated during the fourth quarter,” Ms. Kullman said. “Consumer electronics demand has further softened, and housing and construction markets remain weak.”
Not all of DuPont’s businesses are suffering. The company said demand in its agriculture and food unit remains strong, in part owing to growth in Latin America.
The warning came as a surprise to the markets, as DuPont’s performance until now has been good. Ms. Kullman told the Financial Times last year that “the worst is behind us.” The company’s third-quarter earnings were better than expected as DuPont benefited from higher prices, sharp increases in revenue in all of its main business segments and strong sales in emerging markets. However, it also warned when it reported those results in October that its fourth quarter would be hit by slowing global growth.