What Will DuPont Deliver in 2013?

Shareholders of chemical giant DuPont (NYSE: DD  ) are all too eager to get the new year started. 2012's promise through the year's first nine months dissolved in the third quarter, and shares haven't recovered. The stock's lost more than 3% year to date and underperformed the Dow Jones Industrial Average (DJINDICES: ^DJI  ) that it's a part of by more than 10 percentage points. With the fiscal cliff looking unavoidable, investors have to wonder whether or not DuPont will be able to get out of its slump.

The future's not set in stone, but let's look at the two things DuPont will need to get a handle on to secure a stronger 2013.

Doubling down in agriculture
Most of DuPont's various divisions haven't posted impressive numbers through the first nine months of 2012. However, the company's agriculture branch has fueled nearly the entirety of DuPont's sales growth this year – and it's agriculture that the company should focus its resources on in 2013.

Through the first nine months of the year, agricultural sales have picked up more than 13%. While that's a nice number on its own, the segment's revenues are DuPont's largest by a mile – the next-largest division by sales, performance chemicals, is more than $3 billion smaller and has posted a year-over-year sales decline this year so far. The agricultural sector has done quite well outside of DuPont, as well – rival Monsanto (NYSE: MON  ) has continued to surge through the end of 2012 despite a murky economic situation, as has manufacturer Deere (NYSE: DE  ) , which is affected by the industry's fluctuations.

With the fiscal cliff predicted to inflict a recession for the first few quarters of next year, it's important that DuPont focuses on what works. The company's third quarter gave a taste of what to avoid: Economic troubles weighed on DuPont's performance chemicals and electronics and communications divisions, and further woes next year would likely continue to sap these branches. It's been enough of a worry that the company sold off its performance coatings branch and committed to slash jobs in order to counteract the costs of a struggling global economy, but those are two moves that should help save on costs next year.

Sales around the world
That same global economy's woes have weighed heavily on DuPont's international sales in 2012. With Europe still in the throes of its fiscal crisis and China adapting to slower growth, expect more global frustration for DuPont's sales in 2013.

To succeed, DuPont will have to keep growing its American business while improving international performance. While sales in the European/Middle East/Africa region have grown over 2012's first nine months despite currency fluctuations, DuPont's Asia-Pacific sales have cratered in 2012 and could face continued pressure in 2013 with China's slowing growth on pace to remain sluggish.

Sales in the U.S. and Canada dwarf those in Europe and Africa by 80%, and despite the fiscal cliff's hit, the American economy still looks poised to post a stronger 2013 than Europe's debt-plagued nightmare. Getting rid of the Europe-exposed performance coatings division was a good first step, and the acquisition of Denmark-based Danisco should continue to help the company reorient its international exposure toward agriculture and bioproduct sales and away from lower margin divisions.

Cheap natural gas supplies should continue to benefit the agricultural business in the United States, too, as well as give DuPont an advantage on its international competitors in the industry.

The 2013 verdict
It's almost certain that DuPont's going to be affected negatively by the effects of the fiscal cliff in 2013. However, this company's push in the agricultural business should pay dividends next year, both in the United States and abroad. The Danisco purchase and DuPont's deal with South African seed company Pannar will keep this growing business churning despite economic woes. Continuing to grow its domestic business while cutting down on lagging divisions – already begun with the sale of the performance coatings branch – will give DuPont valuable growth and savings.

The economy will likely keep this company from any astronomical returns, but DuPont's positioned itself well to perform better than 2012's lackluster offerings. While no one can predict the future, you can be confident that DuPont's making the right moves to secure a brighter and stronger tomorrow.

DuPont's solid dividend is a strong selling point despite the company's murky 2012, and should continue to serve income investors in 2013. If you're looking for more long-term-investing ideas, let me invite you to read the Fool's brand-new special report: "The 3 Dow Stocks Dividend Investors Need." It's absolutely free, so just click here and get your copy today.


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  • Report this Comment On December 28, 2012, at 1:57 PM, mobbylar wrote:

    In the spring of 2011 DuPont introduced a new herbicide called Imprelis. Unknowing to lawn care experts this under tested product killed certain types of trees. I was unfortunate enough to own 2 of these tree types. It is now December of 2012 and I still have 1 completely dead tree and one very sick tree in my yard. DuPont has been dragging their feet on this issue since day one. A counter claim we made to a DuPont settlement was just refused. At every turn I feel I have been intimidated by DuPont to accept their offer on a settlement. If this is how DuPont has treated the thousands of victims from this product it is no wonder they are having a bad year. I know that I have used my last DuPont product.

  • Report this Comment On December 28, 2012, at 2:52 PM, funfundvierzig wrote:

    DuPont's evasive and unethical Management and their PR con artists have worked assiduously to spin and cover up the growing magnitude of what is the largest new product failure in American corporate history in the 21st century. Hundreds of thousands of mature landscaping tree have been damaged and killed countrywide by DuPont's "eco-SAFE"-touted Imprelis.

    Part of the unprincipled strategy of DuPont executives is to kick the Imprelis can down the road, stalling the enormous number of pay-outs to settle thousands of claims. The media is rife with reports confirming the deliberate stonewalling and sandbagging by DuPont of legitimate claims by Imprelis-victimised homeowners and property owners.

    Our own educated projection is the total cumulative charges to DuPont earnings will reach $2 billion or more.

    The CHEAT-to-COMPETE culture of DuPont Management continues to destroy shareholder value big-time.

    Merely the individual viewpoint of one retail investor and DD shareholder...funfun..

  • Report this Comment On December 28, 2012, at 3:04 PM, funfundvierzig wrote:

    DuPont Chieftess Ellen J. Kullman and her Senior Management TEAM love to brag that food and agriculture is the crown jewel of the 21st century DuPont. But the Company begins the year 2013 with two huge overhanging $billion dark clouds in the ag area:

    * The looming cost of settling thousands of claims in hundreds of Imprelis lawsuits across the land, and

    * The potential liability for a $1 billion U. S. DIstrict Court jury verdict, the jury having found DuPont deliberately stole and used superior patented seed know-how from Monsanto. Seems part of this willful patent infringement was propelled by the attempt by DuPont Management to cover up the embarrassing failure to develop and commercialise DuPont's own first-generation GM seed trait to compete with superior-managed Monsanto...DuPont OptimumGAT.

    ...funfun..

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