“Heading into 2016, we targeted certain fundamental metrics that we believe are the right measures of our performance going forward,” Breen explained during a Jan. 24 conference call with analysts. “Thanks to a lot of hard work throughout DuPont, we improved on all of them.”
Breen said DuPont’s company wide gross margins improved by 60 basis points, while operating costs declined 11%, including a 41% decline in corporate costs. Meanwhile, operating earnings per share grew 21%, and segment operating margins improved by about 200 basis points, with increases in all reportable segments. Capital spending declined 27%, and free cash flow improved by $1.6 billion.
Ed Breen, chairman and chief executive officer of DuPont.
Photo courtesy of Dupont.
“These improvements were enabled by our leaner, more accountable organizational structure,” he said. “We also strengthened our business by improving our focus on the customer and better meeting their needs. For example, in our seeds business, we moved the Southern U.S. and parts of Brazil to an agency sales model. Timing of seed deliveries, primarily related to the Southern U.S. route-to-market change, pushed about $200 million in sales into 2017. That was clearly the right thing to do. The enhancements to our overall route-to-marketed ag have improved customer relationships and strengthened our competitive position.”
Breen said DuPont introduced nearly 1,600 new products into the marketplace during 2016, including the Leptra corn hybrid, which he said accounted for more than half of the company’s corn sales in Brazil.
During 2016, DuPont made progress against its strategic priorities, Breen said, including efforts that have made the company “stronger, more focused, more effective, and efficient.”
“The first strategic priority was delivering $730 million in year-over-year cost savings, and we surpassed our goal for 2016 by $20 million,” he said. “We did it without disrupting our businesses.
“The second priority was disciplined and productive capital spending. For the year, our CapEx totaled $1 billion, down $375 million, or 27%, excluding Chemours. Capital spending now is back in line with depreciation and amortization, and we intend to keep it that way. At the same time, we are fully funding compelling growth projects with solid returns. An example is the $100 million-plus we approved last year for probiotics production facility expansions in New York and Wisconsin.
“The third priority was working capital performance. We set a goal to improve our working capital by $1 billion over the medium term. Our free cash flow this year rose by $1.6 billion. Within that total, business working capital contributed nearly $500 million of the improvement, and we will continue to build on this success. We will continue to focus on productivity as well, including our production facilities. Plant efficiency and productivity can unlock significant shareholder value.”
Net income at DuPont in the year ended Dec. 31, 2016, totaled $2.513 billion, equal to $2.87 per share on the common stock, up 29% from $1.953 billion, or $2.17 per share, in fiscal 2015. Net sales eased 2% to $24.594 billion from $25.130 billion.
In the company’s Agriculture segment, operating earnings in fiscal 2016 totaled $1.758 billion, up 7% from $1.646 billion in fiscal 2015. Sales in the segment fell 3% to $9.516 billion from $9.798 billion.