DowDuPont to Cut Jobs, Shut Plants in Bid to Save $3 BillionBy
Chemical giant begins post-merger effort to bolster earnings
Company’s board authorizes $4 billion in share repurchases
DowDuPont Inc. will begin cutting workers and closing offices and factories in its drive to eliminate $3 billion of annual costs at the newly created chemical giant.
Most of the target will be achieved through global workforce reductions, consolidating plants, shutting assets and saving on purchases, DowDuPont said in a statement Thursday. The company also approved the repurchase of $4 billion in shares.
The moves highlight the speed with which Chief Executive Officer Ed Breen is acting on his pledge to boost earnings at the world’s largest chemical maker, created Aug. 31 from the combination of Dow Chemical and DuPont. The company plans to split in three by early 2019.
Many analysts had expected DowDuPont would initiate a stock buyback as it wraps up construction of major projects, freeing up funds. New petrochemical facilities in Texas and Saudi Arabia that are nearly finished had accounted for $1.7 billion in annual capital spending, said Jonas Oxgaard, an analyst at Sanford C. Bernstein & Co. Those investments are starting to bolster profit.
“They are going to generate a boatload of cash,” Oxgaard said before Thursday’s announcement. He had expected a repurchase program of $8 billion to $10 billion, while Alembic Global Advisors analyst Hassan Ahmed had predicted $5 billion to $10 billion.
The stock buyback represents about 2 percent of the company’s market value at the end of trading Wednesday.
DowDuPont also declared a fourth-quarter dividend of 38 cents a share, payable to shareholders of record on Nov. 15.
Third-quarter adjusted revenue increased 7.6 percent to $18.3 billion, compared with the $18 billion average of analyst estimates compiled by Bloomberg. Sales volume rose 4 percent, and average prices climbed 3 percent, on an adjusted basis, the company said. DowDuPont reiterated its plan to boost revenue by $1 billion by finding new sales opportunities from its wider product offerings
Earnings excluding certain items rose to 55 cents a share, matching the preliminary results that DowDuPont reported last week. The restructuring program is generating charges of $2 billion, including $180 million in the third quarter and $1 billion in the fourth quarter, the company said.
Under pressure from activist investors Nelson Peltz and Dan Loeb, DowDuPont in September announced changes to its plan for splitting up. The move honed the material science unit’s focus on commodity products such as polyethylene plastic.
It shifted businesses such as silicones, auto adhesives and pharmaceutical ingredients to the specialty-products operation. The agriculture business was unchanged.
DowDuPont rose less than 1 percent to $73.80 in New York premarket trading.