DuPont (DD) is the United States’ leading chemical company, primarily in the agriculture, biobased industrial, and nutrition chemicals segments. The company is well known for its research and development (or R&D) capabilities.
DuPont has strong R&D base. It had an average R&D expense of over 7% in 2014. DD employs around 10,000 scientists and engineers who work at more than 150 R&D centers and 13 innovation centers across the world. The company has launched 1,551 products across the world and generated 32% of its total revenue from these new products from 2011–2014.
DuPont has a presence in more than 90 countries and generates around 62% of its net sales from the international market.
DuPont has six broad product segments:
- Electronics & Communications
- Industrial Biosciences
- Nutrition & Health
- Performance Materials
- Safety & Protection
The company has the leading market position in the agriculture segment. Agriculture is the largest contributor to its total sales. It also has higher margins.
DD has increased its focus on its agriculture, nutrition, advanced materials, and biobased industrial businesses. The company wants to maintain its leadership position in the high-margin agriculture and nutrition industry. It also wants to strengthen its position in the advanced material and industrial bioscience segments through an intensive use of technology and R&D.
Key end-user industries
DuPont’s chemical products and solutions are primarily used by the agriculture, food and beverage, mining, automotive, packaging, building and construction, healthcare, plastics, electronics, safety, and energy sectors.
However, the agriculture industry is DuPont’s biggest contributor, accounting for 40% of the company’s total sales in 2014. Food and nutrition is the second-biggest sales contributor for DD, with a contribution of 13%.
DuPont’s ~6% average R&D expenditure as a percentage of sales from 2011–2014 is the second-highest amount among its closest peers. Monsanto Company (MON) has the highest average R&D expenditure at 11.3% as a percentage of sales for 2011–2014.
Other major chemical players Dow Chemical Company (DOW), LyondellBasell (LYB), Eastman Chemical Company (EMN), and Air Products & Chemicals (APD) have lower average R&D expenditures as a percentage of sales, at 2.9%, 0.4%, 2.4%, and 1.3%, respectively.
In this series, we’ll discuss DuPont’s business model and its segments, along with its R&D activities, geographical exposure, capacity expansion, financial liquidity, financial leverage, asset sales, shareholder rewards, and share performance.
The Materials Select Sector SPDR ETF (XLB) largely tracks the performances of the major chemical players. DD forms 11% of XLB’s total holdings.
Another ETF, the iShares US Basic Materials ETF (IYM), tracks the performance of US-based basic material companies, including chemical companies.