Summary
- DuPont reported a large net loss in H1 due to a multi-billion impairment charge.
- Despite negative EPS, the company remained free cash flow positive.
- With an anticipated FCF yield of less than 5% and a forward EV/EBITDA of around 12 for FY 2021, I think I should sell and look for opportunities elsewhere.
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Introduction
I like companies in the chemical sector, as they tend to be an excellent proxy for the world economy given their performances tend to be in line with the level of industrial activities worldwide. There are some very acceptably priced chemical companies out there, and I wanted to see if DuPont de Nemours (DD) is still cheap, as I have a tiny position which I picked up in April because I wanted to increase my exposure to the specialty products division, as the company had previously spun off the agricultural and material sciences divisions into separate entities.
Data by YChartsI’m not impressed with the company’s H1 performance
After keeping the revenue relatively stable in Q1, total revenue fell by just over 10% in the second quarter of this year. Looking at H1 performance, the $10 billion revenue came in approximately 8% lower compared to H1 2019.
(Source: SEC filings)
Fortunately, DD also saw its COGS decrease, while the company was also able to cut other expenses like SG&A and R&D expenses. Despite this, the loss from continuing operations was approximately $3.07 billion.
