How Are DuPont’s Expenses Expected To Change Post Restructuring?

Post restructuring DuPont‘s (NYSE:DD) total expenses are expected to form a higher % of Total Revenue in 2019 and thus reducing Net Income margin to around 1.6% in 2019. DuPont has its expenses largely clubbed under its Cost of Sales expense. Cost of Sales expense is expected to account for about 77% of the company’s total expenses in 2019. This would be a reduction from about 91% of total expenses that it accounted for in 2015. Over the years, along with an increase in Revenue, DuPont’s Research & Development, SG&A, and Depreciation expenses have increased. Due to this the Net Income margin fell from 15.1% in 2015 to 4.5% in 2018. Trefis expects the margin to fall post the restructuring to 1.6% in 2019.

You can view the Trefis interactive dashboard – DuPont: Breakdown Of Total Expenses – to better understand how the company’s total expenses have moved over the years and what is causing this change. In addition, here is more chemical companies data.

Total Expenses:

• DuPont’s total expenses have increased from $41.4 billion in 2015 to $82.1 billion in 2018, which is an increase of 98.3% over the years. Most of this increase was driven by cost of sales expense.
• In 2019 the Total expenses are expected to be around just $34.8 billion primarily due to the restructuring which led to multiple business being shifted to different companies.

Following is how each expense head has moved over the years. For more details of each expense please visit our interactive Dashboard on DuPont’s Total Expenses:

• As the company has been more efficient operationally in 2018 Cost of Sales as % of Revenue has declined from 77.4% of Total revenue in 2015 to 76% in 2018. Trefis estimates in 2019 the metric to be around 75.7% of Total revenue.
• Research and Development expenses have increased over the last few years both in absolute terms and as % of Revenue. The metric has increased over the years from 3.3% of Total revenue in 2015 to 3.6% of Total revenue in 2018. Trefis estimates the metric to go up further to 3.7% of Total revenue in 2019 though we expect the absolute number to fall due to restructuring.
• Selling, General and Administrative expenses have increased over the last few years both in absolute terms and as % of Revenue. The metric has increased over the years from 6% of Total revenue in 2015 to 7.8% of Total revenue in 2018. Trefis estimates the metric to go up further to 7.9% of Total revenue in 2019 though we expect the absolute number to fall due to restructuring.
• Depreciation and Amortization expenses have increased over the last few years both in absolute terms and as % of Revenue but saw a decrease in both cases in 2018. The metric has increased over the years from 2% of Total revenue in 2015 to 6.9% of Total revenue in 2017 but fell to around 3.5% in 2018. Trefis estimates the metric to go up to 5.5% of Total revenue in 2019 though we expect the absolute number to fall due to restructuring.
• Interest expenses have increased over the last few years in absolute terms but decreased as % of Revenue. The metric has decreased over the years from 1.9% of Total revenue in 2015 to 1.7% of Total revenue in 2018. Trefis estimates the expense to remain nearly flat and thus the metric to go up to 4.2% of Total revenue in 2019 due to restructuring.
• Other Expenses (net) includes other non-operating expense (net of income). The metric is just 1.2% of Total Revenue in 2018 and Trefis estimates it to be around 1.2% of Total Revenue in 2019.
• There was a minimal Income Tax expense in 2016 and a benefit in 2017 due to high Deferred Tax benefit available in those years. In 2018 the effective tax rate increased and overall income tax was 1.7% of Total Revenue. In 2019 we expect the statutory rate to be constant, but due to restructuring and higher expenses we expect Income Tax to be around 0.3% of Total Revenue.

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