DuPont’s Performance Materials segment in 1Q17
DuPont’s (DD) Performance Materials segment, its second-largest revenue contributor, accounted for 17.7% of its revenue in 1Q17. The segment reported revenue of $1.4 billion in 1Q17, representing a 9.5% increase from the $1.3 billion seen in 1Q16.
Continued demand for polymers in the automotive space and copolymers in the packaging industry drove volume growth, thereby increasing the segment’s revenue growth. Also, polymers and elastomers witnessed volume growth of over 10%. However, foreign exchange hedging strategies impacted the segment’s revenue in 1Q17.
Operating earnings and margin
The performance materials segment reported a net income of $355 million in 1Q17, compared with $273 million in 1Q16, an increase of 30% YoY (year-over-year). The segment’s margin improved from 21.9% in 1Q16 to 26% in 1Q17, an increase of 410 basis points YoY. The segments’ income and margin improvements were primarily due to higher sales volumes and cost savings.
The segment is expected to continue its upward trend, driven by expected demand growth in automotive markets, particularly in China. However, foreign exchange translation could adversely affect the segment going forward.
Investors can indirectly hold DuPont by investing in the iShares Global Materials ETF (MXI), which has a 3.9% exposure to DuPont. Other top holdings of the fund include The Dow Chemical Company (DOW), Monsanto (MON), and LyondellBasell (LYB), which had weights of 4.0%, 2.8%, and 1.6%, respectively, as of April 25, 2017. In the next part, we’ll look at the Protection Solutions segment’s performance in 1Q17.