E.I. du Pont de Nemours and Co.

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E.I. du Pont de Nemours and Co.

also known as: du pont founded: 1802

Contact Information:

headquarters: 1007 market st. wilmington, de 19898 phone: (302)774-1000 fax: (302)774-7321 toll free: (800)441-7515 email: info@dupont.com url: http://www.dupont.com

OVERVIEW

Du Pont is the largest chemical company in the world. The company manufactures and sells thousands of products to many markets through 80 business units. Products produced include textiles, agricultural products, specialty chemicals, fibers, automotive and engineering polymers, and pharmaceuticals. The petroleum industry contributed to nearly half of Du Pont's sales, yet the company announced in 1998 that it would sell its wholly-owned petroleum subsidiary, Conoco, Inc. Du Pont is choosing to focus on its Life Science industry.

Du Pont and its subsidiaries conduct business in some 70 countries worldwide. Du Pont has about 175 manufacturing and processing facilities, which include 140 chemical and specialty plants, 8 petroleum refineries, and 27 natural-gas processing plants. The company operates research and development labs in 18 states in the United States and more than 11 foreign countries.

COMPANY FINANCES

In 1997 Du Pont's worldwide sales were $45.1 billion, a gain of 2.9 percent over 1996 sales of $43.8 billion. The company's profits were down by $1.2 billion—$2.4 billion in 1997 as opposed to $3.6 billion in 1996—due mainly to nonrecurring charges in the amount of $1.7 billion taken in 1997. Excluding the nonrecur-ring charges, in 1997 Du Pont reported its fourth consecutive year of record earnings. The company also raised dividends 10.3 percent, from $1.12 per share in 1996 to $1.23 per share in 1997. During a 52-week period in 1997 Du Pont's stock ranged from a high of $69 to a low of $46.

All industry segments showed gains in sales from 1996 to 1997, except Life Sciences, which remained the same, and Diversified Businesses, which was down by 9.7 percent. In 1997 Petroleum contributed 46.6 percent of Du Pont's total sales, followed by Fibers with 17.1 percent, Polymers with 15.1 percent, Chemicals with 9.5 percent, Diversified Businesses with 6.2 percent, and Life Sciences with 5.5 percent.

Although lower petroleum prices, unfavorable currency rates, a rapid pace of acquisitions, and the Asian economic crisis could point to a downturn in 1998, Du Pont fully expects to continue with record sales and earnings. Although Asia is in turmoil, Europe and the United States, which account for 80 percent of the company's sales, are projected to have healthy economies. Like many other companies, in 1997 Du Pont was hard hit by the strong U.S. dollar, so the company has raised prices overseas to compensate for currency rates. Petroleum and natural gas prices have declined, which translates into lower raw-material costs for Du Pont's Chemicals industry.

HISTORY

E. I. Du Pont De Nemours and Company began as a family-owned gunpowder and explosives partnership in 1802. Eleuthere Irenee Du Pont de Nemours, the founder, was born to French nobility, emigrated to Delaware in 1800 after the French Revolution, and set up a gunpowder plant on Delaware's Brandywine Creek. The plant grew to be the largest of its kind, and within a couple of decades it was also producing dynamite, nitroglycerine, and guncotton. About a century after it was founded, the senior partner Eugene Du Pont died. The surviving partners decided to sell the company to the highest bidder, who turned out to be Alfred I. Du Pont, a distant cousin of the founder.

Alfred Du Pont and two cousins, Coleman Du Pont and Pierre Du Pont, expanded the company to command the entire explosives market by 1907. The company was so dominant that the U.S. government initiated antitrust proceedings against it. In 1912 Du Pont was deemed a gunpowder monopoly and was ordered to divest itself of a substantial portion of its business.

Modernization, diversification, good management, and a command of the market characterized Du Pont's industrial-era phase. The outbreak of World War I generated about $89 million in business, and the company diversified into paints, plastics, and dyes. Numerous fiber-related discoveries made Du Pont a strong contender in that market. Du Pont chemists' experiments with a product called guncotton led to the company's entry into the textile business. In the 1920s Du Pont acquired rights to produce cellophane. Du Pont made it moisture-proof, transforming cellophane from a decorative wrap to a packaging material for food and other products. Du Pont introduced the clothing fiber Rayon in the 1920s. The company's most important invention, Nylon, was created in 1938. A large number of plastics and synthetic fibers followed.

The demand for artificial fibers collapsed in the mid-1970s, bringing the company's bread-and-butter business to a halt. Increased cost of raw materials and declining demand continued to depress the market in 1979. The collapse compelled Du Pont to concentrate exclusively on repairing its older businesses, thereby reducing its commitment to research and development.

Continued reliance on fibers made Du Pont one of the worst-hit companies in the 1980 recession. However, the company's continued attention to the fibers business resulted in the discovery of a very important material called Kevlar in 1980. The revolutionary material was light yet strong, possessing a tensile strength five times that of steel. Du Pont made the largest financial gamble in history when it invested $250 million in a Kevlar plant expansion. However, Kevlar's true success ultimately depended on the price of its raw material, oil.

The largest merger in history occurred when Du Pont took over Conoco Oil Company, the second-largest oil company in the United States. The company enjoyed greater growth and financial security when it acquired Remington Arms, a manufacturer of sporting firearms and ammunition. By 1982 Du Pont had also acquired New England Nuclear Corporation and Solid State Dielectrics.

By the mid-1980s Du Pont had approximately 90 major businesses selling a wide range of products to different industries, including petroleum, textile, transportation, chemical construction, utility, health care, and agricultural. Du Pont had business operations in more than 50 nations, and was organized into 8 principle business segments—biomedical products, industrial and consumer products, fibers, polymer products, agricultural and industrial chemicals, petroleum exploration and production, coal, and petroleum refining, marketing, and transportation.

STRATEGY

Du Pont's growth strategy contains four elements: research and development (R&D), acquisitions and expansions, focus on core businesses, and concentration on Life Sciences.

Du Pont's philosophy is staying ahead of competition by investing in research and development. The purpose of R&D is to make existing products better, find new applications, and develop new products and technologies. In 1997 the company spent $1.1 billion on R&D, up 8.1 percent from 1996; this amounted to 2.4 percent of the company's 1997 sales. While most of the company's R&D facilities are located in the Wilmington, Delaware, area (Du Pont's headquarters), there are 75 R&D sites worldwide, including more than 40 sites in 18 states in the United States.

The company is expanding the divisions it believes fits into its core industries. Acquisitions, joint ventures, and partnerships are used to strengthen Du Pont's industries. In 1997, Chemical made an offer to purchase ICI's foreign titanium dioxide business, subject to governmental approval. The deal would allow Du Pont to manufacture titanium dioxide in Asia and Africa, something the company had been looking to do. Du Pont announced a total of $7 billion in acquisitions in 1997. At the same time, the company began expanding its current businesses by adding manufacturing plants and upgrading facilities around the world.

While Du Pont adds to and expands its core businesses, it also sells off companies and joint ventures in industries not related to the core focus. For example, the company sold printing, publishing, and graphic arts businesses, as well as some medical products companies. Reflecting Du Pont's belief that alternatives to petroleum will be found, in May 1998 the company decided to sell 20 percent of its wholly-owned subsidiary Conoco, Inc.

FAST FACTS: About E.I. du Pont de Nemours and Co.

Ownership: Du Pont is a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: DD

Officers: John A. Krol, Chmn., $2,169,668; Charles O. Holiday, Pres. & CEO, $1,576,400; Gary M. Pfeiffer, Sr. VP & CFO; Archie W. Dunham, Exec. VP, $2,117,500

Employees: 98,000 (1997)

Principal Subsidiary Companies: Du Pont is organized into six industry segments: Chemicals, Fibers, Polymers, Petroleum, Life Sciences, and Diversified Businesses.

Chief Competitors: Du Pont's diversity means it has worldwide competitors, both large and small. The company competes against chemical companies, oil and gas producers, and agribusiness companies. Some competitors are: BASF; Imperial Chemical Industries; Dow; Amoco Corp.; Exxon; Arco; Room and Haas; Courtaulds; and RPM.

Du Pont's newest focus is the Life Sciences industry. Du Pont Merck, the company's 50/50 joint venture with pharmaceutical maker Merck, had been developing drugs. In May 1998 Du Pont announced it would buy out Merck's portion of the venture, renaming the company DuPont Pharmaceuticals. The company is also pushing hard into the biotechnology market, developing alternatives for foods and petro-based fibers. Du Pont expects the Life Sciences industry to contribute 30 percent of the company's income by the year 2002.

INFLUENCES

With the inventions of Nylon, Rayon, and other fibers, Du Pont began focusing on the fiber industry, to the detriment of others. In the 1970s the company nearly collapsed after the cost of raw materials increased and demand plunged. The lesson learned was to diversify. Du Pont expanded its scope with many acquisitions. The company decided to risk becoming a leader in the Life Sciences by delving into development and production of biomedical products and agricultural chemicals.

Du Pont also became heavily involved in joint ventures worldwide. The company supported these businesses with large amounts of capital investment and research and development expenditures. Du Pont entered diverse fields, including genetic engineering, drugs, agricultural chemicals, electronics, fibers, and plastics. Du Pont also had the multinational marketing capability and the resources to become a major influence in the Life Sciences.

Although diversification put the company at less risk if one product failed, by 1985 Du Pont was bloated with its numerous businesses. The company undertook a massive restructuring, eliminating non-core businesses and investing heavily in the industries thought to bring future growth. Du Pont began to move away from commodity production, concentrating instead on oil, health care, electronics, and specialty chemicals.

CURRENT TRENDS

Lycra, a stretch polymer invented in 1959, became a big hit in the 1980s and 1990s after being adapted for biking clothes and other exercise outfits. Lycra clothing became fashionable, and big-name designers started incorporating Lycra (generic name spandex) in their fashions. Lycra profits topped $200 million per year. Even though Du Pont's patent on Lycra expired, Du Pont continued to improve the fabric and was its only major manufacturer. To maintain its dominant position, Du Pont announced that it would spend $500 million over the next three years to build or expand Lycra plants.

Even though the Gulf War temporarily drove up oil prices, leading to profits of more than $1 billion for Conoco, the worldwide recession was hurting most of the rest of the company. Du Pont reduced its focus on electronics and pharmaceuticals and refocused on its core businesses. As part of this initiative Du Pont acquired ICI's worldwide Nylon business in 1993. In January 1995 Du Pont and Dow Chemical announced their intention to form a joint venture for the discovery, development, production, and sale of thermoset and thermoplastic elastomer products. The venture was expected to have initial annual sales of about $1 billion.

In 1996 Du Pont streamlined its Nylon business by eliminating about 3,000 employees and launching a major restructuring program for its worldwide Nylon operations. The company continued to focus on its fiber division, developing new technologies that could cut polyester fiber production costs by up to 20 percent in the year 2000.

PRODUCTS

Some of Du Pont's most significant inventions include neoprene synthetic rubber (1931), Lucite (1937), and Nylon and Teflon (1938).

CHRONOLOGY: Key Dates for E.I. du Pont de Nemours and Co.

1802:: Eleuthere Irenee du Pont de Nemours founds the company
1811:: U.S. president Thomas Jefferson endorses du Pont
1902:: Three cousins of the founder buy the company and reorganize
1909:: The company begins investigating synthetic fibers
1912:: DuPont is deemed a gunpowder monopoly and forced to divest itself of portions of its business
1931:: Freon refrigerant is discovered
1938:: DuPont invents Nylon fiber and Teflon
1955:: DuPont starts expanding into Europe helping to rebuild the war-torn continent
1960:: The company invents Lycra spandex
1976:: DuPont makes a public commitment to stop CFC production
1981:: Acquires Conoco and Consolidation Coal
1990:: Merck and DuPont merge to form DuPont-Merck Pharmaceutical Company
1993:: The company forms alliance with Asahi of Japan to grow Nylon business in Japan
1998:: DuPont announces plans to buy Merck's portion of DuPont-Merck and rename the company DuPont Pharmaceuticals

In 1997 the Nonwoven's division of Fibers introduced Xavan, a polypropylene for industrial packaging, furniture, and bedding. Fibers also developed new applications for existing products; Kevlar will be used to make concrete stronger, and Teflon will be used to produce low-friction socks.

CORPORATE CITIZENSHIP

Du Pont was one of the country's biggest air polluters, and the company spent more than $1 billion on pollution control and clean-up in the early 1990s. The firm spent another $1 billion to replace its chlorofluoro-carbon business with chemicals less harmful to the ozone layer. Du Pont was also creating safer herbicides and expanding into the growing recycling market. Partly because of these changes, Du Pont's sales of agricultural chemicals tripled between 1985 and 1990 to $1.7 billion.

GLOBAL PRESENCE

Du Pont is one of the most diversified companies globally. With plans to increase its presence in high-growth areas of the globe, Du Pont has embarked on several undertakings in the Asia-Pacific region. Forming alliances and investing in product research and development was expected to enable Du Pont to double its market value in South America, Europe, and Asia. The company was expected to invest about $300 to $400 million on growth opportunities in Europe, which account for 25 percent of the company's earnings and sales. More than 35 percent of Du Pont's workforce is outside the United States.

SOURCES OF INFORMATION

Bibliography

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e. i. du pont de nemours and company 10k filing, 21 may 1998. available at http://www.sec.gov.

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