Morningstar | Patented Specialty Chemicals Give DuPont Pricing Power and Will Lead to Long-Term Profit Growth
DuPont de Nemours is a world-renowned chemicals company with a history spanning over 200 years and an ever-evolving portfolio. In the current iteration, DuPont is the specialty chemicals company created in 2019 from the DowDuPont merger and subsequent separations. The company has four distinct business lines that each generate roughly one fourth of profits and sell products to different end markets. With 15% of sales to the auto industry and no other end-market making up over 5%, DuPont is fairly diversified and we forecast consolidated revenue to grow slightly above global GDP.DuPont has produced some noteworthy (and high-profit) products over the years. The safety and construction segment invented products such as Lycra and Kevlar, which have wide applications in textiles and safety equipment. Teflon, which is used in nonstick cookware, and Tyvek, broadly used in construction materials, also demonstrate DuPont's successful product development and innovation. The company has a solid record of innovation, and we think it will be able to replace earnings from older products as they fall out of favor or are leapfrogged by new technologies, and as patents expire.DuPont is well positioned to capture profit growth from secular trends in the coming years. In the transportation and advanced polymers segment, DuPont should benefit from automakers replacing small metal pieces with lighter plastics, a trend that should continue as automakers move toward more lightweight vehicles. In the electronics and imaging segment, DuPont should benefit from the continued growth in semiconductors and a rise in interconnectivity of devices, which will require more electronic components in smartphones, computers, automobiles, and consumer appliances. DuPont is also exposed to the electrification of vehicles as the company generates over 50% more revenue per vehicle for an electric vehicle versus an internal combustion engine vehicle.DuPont is also the second largest industrial enzyme producer with a 20% market share globally after Novozymes. Industrial enzymes and are used to produce laundry detergents, ethanol fuel, food and beverages, and animal feed.DuPont de Nemours provides technology-based materials, ingredients and solutions in key markets including electronics, transportation, building and construction, health and wellness, food and worker safety. The company has five segments: Electronics & Imaging, which is a supplier of materials and systems for a range of consumer electronics ; Nutrition & Biosciences, which provides solutions for the global food and beverage markets; Transportation & Industrial, which delivers polymer-based high-performance materials; Safety & Construction, which provides engineered products and integrated systems; and Non-Core, a supplier of key materials for the manufacturing of photovoltaic cells and panels.
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