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Re:Dupont Spins-off its TiO2 Business (impact CPC Petcoke) – Downward Spiral?

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Charles Randall

Here is update on Dupont Proceeding with IPO on its TiO2 Unit. CEO Kullman  (ran TiO2 Business Unit 1980’s) fought the good fight & even championed TiO2 capacity expansion against analyst pressures.
But the purchase of $1.1 Billion of Dupont stock (total mkt cap was $54 B) by Activist Investor Nelson  Peltz / Trian Mgmt. who began pushing from inside and  IPO of Huntsman’s TiO2 Unit in Sept 2013 which was touted as  Option for Dupont …… eventually painted a Dupont, trying to Reinvent itself, into a corner and doomed the Company to yield to this stupidity. Unfortunately it is also happening as TiO2 prices & Industry is recovering from bottoming out in 2009-10 recession lows and due Europe & China import demands / production problems is spiking up (which is also typical of investor analysts timing).
 I say this because Wallstreet & Investment analysts have one mantra – put everything into Dividends, cut workforce till it bleeds and sell off anything not making growth rate return of +15%. Since mature companies and industries cannot do this except short term if stop R&D and funnel it to dividends, sacrifice Safety & Quality for manpower and stop expansion/maintenance investments for earnings. But leads carving up the company and selling off parts which is their real goals.  These guys do to companies what their nature counterparts (Jackals, Hyenas & Vultures) do to herds – single individuals at their weakest point. 
Before we delve into the “deja vue” nature of this Dupont move and continued death spiral – we should hook the impact of this to Petcoke industry. The TiO2 product (~5.36 MM mtpy in 2012) is made by Sulfate (~2.46 MM mtpy) and Chloride (~3.2 MM mpty) Process but only Chloride uses Petcoke as raw material.
It takes about 1 metric ton calcined petcoke to make 1 metric ton TiO2 Product.  So this means about 1.5-1.8 MM mtpy of Calcined Petcoke demand for Global Calciners or 1/12th their total production.
Now back to Duponts downward Spiral – Dupont had the Huntsman IPO model (which was never good leader to follow) long before when it spun off its Fibers Unit to IPO back in 2002. The new Dupont IPO (a $6 Billion/yr sales or 24% total Dupont sales but was 50% Duponts assets & 18,000 employees) business unit with  was called DTI (Dupont Textiles & Interiors) which later became INVISTA Fibers that was bought by Koch Ind. in 2004 for $4.4 Billion. Duponts Fibers unit was big gain for Koch’s KoSa global fibers segment and was big cash-flow loss for Dupont which dropped to 66 place on Fortune 500 list. Dupont lost most of the money from the Spin-off to failed attempt in Pharmacy Industry (no cash flow for drug takes  7-10 yrs before get drug to mkt). I remember emailing news and suggesting TiO2 sector would be next one and that Koch Ind. would be best fit assuming they could recover from swallowing both Dupont’s Fiber group and Global Pacific’s Paper Industry (paper is good TiO2 consumer and Koch already has place Petcoke mkt but would not be same purchase problems as Dupont other TiO2 competitors ).  
 Dupont was already in cash-flow lean position from spinning off previous other units like Consol Coal and Conoco Oil – both mature industries with high operation cost and low growth and low returns but very high cash flow generation. When Dupont merged with Conoco both were #8 place on Fortune 500 (both before and after their merger) and then Dupont spun off Conoco’s Consol Business Unit and later Conoco & then Fibers unit. Dupont has dropped from largest Chemical Company to #2 and from being #8 to #72 on Fortune 500 – given size TiO2 unit and similar set up to Fibers earnings of $6B look for Dupont to become #100-140 on next Fortune list.

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