Several financial news media outlets have reported that DuPont is considering a sale of its performance coatings division, which includes auto paint and powder coatings.
The reports speculated that PPG Industries, BASF and Akzo Nobel all may be interested in buying the 90-year-old division. DuPont sells its coatings to auto producers like Ford and General Motors, as well as auto paint refinishers like Maaco. It’s powder coatings are sold throughout the U.S. and overseas.
Reports say that DuPont is exploring a sale of the division for as much as $4 billion. Bloomberg newspapers said that DuPont has hired Credit Suisse to look for potential buyers, and that it has hired Greenhill & Co. to separately handle a sale of a powder-coatings unit within the division.
“As always, we don’t comment on rumors or speculation,” DuPont spokesman Mike Hanretta said in a statement.
According to financial reports, DuPont’s performance coatings business accounted for 12 percent of DuPont’s $31.5 billion in revenue last year. The performance coatings division brought in $3.8 billion in 2010, but third quarter sales for 2011 were at $1.1 billion, which is up about 17 percent from the year before. However, analysts attributed much of that improvement to overall price increases over the past few months.
DuPont’s annual reports say that coatings for refinishing vehicles accounted for nearly $1.7 billion of sales last year, while new-car coatings totaled $1.2 billion and powder and liquid coatings were roughly $950 million.
DuPont CEO Ellen Kullman may have hinted at the coatings division sale while speaking about the company’s third-quarter results.
“DuPont is a far different company than it was just a few years ago,” Kullman told analysts, noting that agriculture, food and nutrition products now account for a third of the business, up from 20 percent a few years ago.
The paint and powder coating division has been a drain on DuPont in the past few years because of rising material costs. The pretax operating-profit margin was about 7 percent last year, the lowest of DuPont’s six divisions. Worse yet, it was almost half the margin of the safety-and-protection division, which was the second-lowest performing unit. DuPont executives said in December that they planned to boost operating profit in performance coatings to at least 10 percent of sales by 2012. “Performance coatings is a turnaround story, with less emphasis on revenue growth and more on productivity and cash generation,” Chief Financial Officer Nicholas Fanandakis told investors at the Dec. 9 meeting.