Industrial materials maker DuPont raised its full-year profit forecast on Thursday as it plans to cut costs to combat the impact of slowing demand in the electronic and automotive sectors due to the U.S.-China trade war.
The ongoing trade war between two of the world’s largest economies and weakening car and smartphone sales globally have hurt companies like DuPont that supply components to a range of industries and supply chains.
Shares of the company, which makes everything from adhesives and resins to probiotics, rose as much as 1.8 per cent in early trading as investors shrugged off weaker-than expected revenue and a cut to full-year sales forecast.
DuPont, one part of conglomerate DowDupont until a split earlier this year, now expects 2019 proforma adjusted profit to range between $3.75 and $3.85 per share, compared with its prior expectation of $3.70-$3.85.
The company said it plans to cut about $80 million in costs, in addition to the $30 million in the second quarter that helped prop up operating core earnings margins.
It now expects full-year organic sales to be slightly down, compared with its earlier forecast of a 2 per cent to 3 per cent rise.
China, the world’s largest market for both cars and mobile phones, has seen sales in both areas fall in recent quarters, according to industry indicators.
For the second quarter, Dupont reported a 12 per cent decline in volumes and a 10.4 per cent drop in sales in its transportation and industrial (T&I) business.
“T&I is exposed to short cycle businesses, mostly autos and electronics where weak demand continues to be driven by the global macroeconomic condition and the U.S.-China trade tariff. This weaker demand also led to additional softness in Europe,” Chief Financial Officer Jeanmarie Desmond said on the call.
The auto industry is DuPont’s biggest end-market, accounting for about 15 per cent of its total sales, while smart phones represent about 5 per cent.
Revenue fell 6.6 per cent to $5.47 billion, below analysts’ average estimate of $5.63 billion, according to Refinitiv IBES data.
Adjusted for charges, the company reported profit of $725 million, or 97 cents per share, in the second quarter ended June 30 from $695 million, or 89 cents per share, a year before.
Dupont shares were up 1 per cent after dipping slightly before the bell.
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