Chemical giant DuPont de Nemours Inc. (NYSE: DD) got a premarket boost Monday after the company released an update on current business conditions. DuPont said it expects “strong first quarter results” but is suspending its full-year 2020 net sales and adjusted EPS guidance.
The consensus analysts’ estimates for the quarter call for adjusted earnings per share of $0.68 and revenues of $5.02 billion. DuPont estimates adjusted EPS in a range of $0.82 to $0.84 and sales of $5.2 billion. The company also estimates operating EBITDA of approximately $1.3 billion in the quarter.
DuPont is delaying some capital investments and idling production at several manufacturing facilities, predominantly in the Transportation and Industrial segment. The company especially noted the “current global automotive environment” as a reason.
To shore up its finances to “meet the unprecedented challenges” of the COVID-19 pandemic, DuPont has replaced its $750 million revolving credit facility that was set to expire in June with a new $1 billion revolver. The company also established a $2 billion delayed-draw facility “ensuring its ability to meet November 2020 maturities.”
CEO Ed Breen commented:
Securing these two new facilities further strengthens our near-term liquidity position. Additionally, we now have committed financing in place to bridge our debt maturing in November 2020 to the receipt of the special cash payment in connection with the Nutrition & Biosciences and IFF transaction. Combined with our existing cash balances and available borrowings through our commercial paper program, these facilities provide the liquidity needed to navigate these uncertain times.
Breen is referring to a tax-advantaged transaction (a Reverse Morris Trust) in which International Flavors & Fragrances Inc. (NYSE: IFF) will pay $7.3 billion for DuPont’s Nutrition and Biosciences segment and DuPont shareholders will receive approximately one IFF share for every five DuPont shares. DuPont shareholders will wind up owning about 55% of the new company.
The cash payment is targeted for debt reduction. DuPont reported $13.62 billion in long-term debt and $3.82 billion in current debt at the end of 2019. DuPont stock has dropped about 40% of its value so far in 2020.
DuPont shares traded up about 2.3% shortly after the opening bell, at $39.24 in a 52-week range of $23.75 to $81.95. The stock’s 12-month consensus price target is $49.16, and the dividend yield on the stock is 3.31%.
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