Chemicals megafirm DuPont is shaking up its corporate structure, splitting off its fibers unit after a year in which the firm's sales and profit each took major drops.
DuPont's market-leading nylon 6/6 resin business will be placed in its performance materials unit, along with its acetal, specialty polyester and copolyester businesses. The unit also will include the DuPont Dow Elastomers and DuPont Teijin Films U.S. LP joint ventures.
However, DuPont's fluoropolymers business will be placed in the electronics and communication technologies unit, to take better advantage of growth in the semiconductors industry, Charles Holliday Jr., chairman and chief executive officer, said in a Feb. 11 news conference call.
``Fluoropolymers could go in many different places,'' Holliday said. ``We wanted to put it in an area where it could show the most growth.''
Overall, Wilmington, Del.-based DuPont now will operate as six business units. The newly formed textiles and interiors unit - which includes polyester and nylon fibers - will be the largest of the six, with an estimated $6.5 billion in annual sales, representing about one-fourth of the company total. DuPont wants to separate the unit completely via an initial public offering or other means by the end of 2003.
DuPont's $24.7 billion 2001 sales total was a drop of about 13 percent from the previous year. Profit dropped 57 percent to less than $1.3 billion.
The firm's nylon business - including both resins and fibers - lost $75 million in 2001 as sales dropped more than 14 percent. DuPont has no plans to reduce the number of nylon resin sites it operates, Holliday said.
Wall Street brokerage Salomon Smith Barney praised the move. SSB had suggested in a January report that DuPont split off its fibers business.
``With fibers dragging DuPont down, 10 percent growth was a mathematical challenge,'' said SSB analyst P.J. Juvekar.
Engineering resins industry consultant Austin Peppin also approved, saying the move would allow for more independent management marketing of DuPont's nylon resins and other engineering polymers. But he added that the nylon resin business could face supply issues regarding adipic acid and hexamethylenediamine, the key raw materials needed to make nylon 6/6. DuPont's adipic acid and HMDA assets will be included in the textile spinoff, though the spinoff will continue to supply DuPont's remaining nylon resin business.
Unlike other nylon makers, such as Honeywell Inc. and Solutia Inc., DuPont produces its nylon resin and fiber at separate sites. Its major nylon resin plants are in Richmond, Va., and Parkersbrurg, W.Va.
``The split will allow DuPont to focus on a separate thermoplastics business, which will be less subject to the vagaries of the fibers market,'' said Peppin, president of Peppin & Associates of Chesterland, Mo.