Every Day. to All Dupont Stakeholders: for Dupont and Its People, 2004 Was a Landmark Year
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DUPONT 2004 ANNUAL REVIEW Science.Every Day. To All DuPont Stakeholders: For DuPont and its people, 2004 was a landmark year. We completed the last major element in the transformation of DuPont into a 21st century global science company. We had our fastest annual growth in recent years. We put the building blocks in place to execute and deliver results in 2005. Among the highlights of the past year: Sale of INVISTA to Koch Industries. This was a complex commercial and financial transaction that required tremendous effort to accomplish. We succeeded, and it is now behind us. It marked the close to more than 70 years of innovation and leadership by DuPont in nylon, polyester, spandex and other textile fibers. DuPont Chairman’s DuPont senior research physicist Gillian Reynolds works on How much science will you use today? And, yes, that’s a Message. next-generation display serious question. technologies at DuPont’s Because if you ride in a car, eat a bowl of cereal, pull on a pair of Manufacture of Sorona™ polymer. Together with our Experimental Station in work gloves, read some printed material, or make a cell phone manufacturing partner Tate & Lyle, we will launch our first new Wilmington, Delaware. polymer platform in 20 years, Sorona™, to create polymer products call, you’re using science. And there’s a very good chance the from renewable resources such as corn. The company will construct science you are using came from DuPont. a commercial manufacturing plant in Loudon, Tennessee, with startup scheduled for 2006. From the laboratory to the factory floor, the people of DuPont are New products in putting science to work, every day. Making cars lighter, safer and Agriculture & Nutrition. Transforming For Our Third Century more fuel-efficient. Developing seeds for larger, more nutritious Pioneer benefitted from the crop yields. Shaping a new generation of innovative materials to largest introduction of new Maturity products in its history — 170 protect humans, animals and buildings from harm. Harnessing Maturity new seed varieties globally. digital technology to create breakthrough printing systems. And Growth Growth Our highly profitable sulfony- Maturity making cell phones ever smaller — and ever more powerful. lurea herbicides business was expanded by the launch of our Growth Birth Chemistry, Biology... So if you’re tempted to think of science as something remote or patented blends technology. Birth Knowledge-Intensive Solutions academic — something that happens just in the lab or on the This market-driven innovation Birth Chemistry, Energy blackboard — stop and take a look around. You’ll see that science resulted in eight new products Explosives in 2004. An additional 10 new is a crucial part of everyday life. Six Sigma products are expected in 2005. 1802 1830 1850 1900 1925 1945 1990 2000 2050 2090 A life made better every day by the people of DuPont. | 1 Productivity improvements. Over 50 percent of our volume ratio into the future. We expect to reach 33 percent in 2005, so came from businesses whose plants set volume records for the year. we are firmly on track. Hundreds of Six Sigma projects contributed to extending capacity. Everything we do scientifically is done with the goal of creating One example: a team at our Fayetteville, North Carolina, site new products customers need or finding new uses for existing completed Six Sigma projects that expanded the capacity of the products. Listening to the voice of the customer is critical, and our Nafion® polymers area by 15 percent, delayed the need for a $4.5 innovation is driven by concrete market opportunities. We have million expansion, and contributed $3 million pre-tax in 2004. hard-wired our scientists to our marketing teams to put them in Growth in security applications. Initiatives aimed at improving direct contact with customers and end-user needs. the security of buildings have increased demand for, and innovative The power of One DuPont — driving productivity and use of, DuPont branded products such as Kevlar®, Tyvek® and SentryGlas®. We also experienced rapid growth in the personal tapping market opportunities. protection market. Operationally, DuPont is five business platforms with numerous In the year ahead, we will be business units in each platform. But to execute and deliver, we are building on these and other leveraging our market access, capabilities and customers as one developments across our five entity — One DuPont in which collaboration creates wider growth platforms in a wide opportunities for the entire company and increases our productivity. variety of businesses around Our productivity initiatives include the R&D revitalization I’ve the world. We have a frame- already discussed, as well as pricing initiatives and a working work for growth, which we capital efficiency program. We are also mid-way through our sum up in three key phrases: two-year $900 million cost improvement program. Along with Put science to work these efforts we are re-tooling our sales force. We’re consolidating Harness the power of hundreds of purchase points around the world into 16 high powered One DuPont global centers. We’re leveraging best practices, centering our Go where the growth is e-business and marketing capabilities. In information technology, Let me give you a sense of we’re driving to a companywide SAP backbone to provide a how we are moving forward common systems platform. with each of these strategic We also are working to make sure that our organization presents thrusts. itself as One DuPont to customers who buy from different Put science to work — DuPont businesses. Our largest customers are served as “corporate more new products faster. accounts” with a point of contact who can manage all their interactions with DuPont to ensure the maximum benefit to the customer. DuPont is a science company. Science is at the heart of everything Chairman Chad Holliday, Chief Science and Six Sigma continues to play a major role in achieving all of our Technology Officer Tom Connelly, and Uma we do and helps form the capabilities, offerings and competitive business objectives, both productivity and growth. We are now Chowdhry, Vice President, Central Research advantages of all our businesses. & Development in a DuPont Experimental finishing our sixth year of Six Sigma at DuPont. At the outset, Station greenhouse with scientists Keith Wing, we focused on cost improvement, mainly at our manufacturing George Lahm, and Stephen McCann who While we are always primed for a blockbuster innovation, we won the DuPont Bolton/Carothers Innovative don’t depend on that. We realize that exceptional growth can come sites. We now have Black Belts leading projects in every function Science Award for inventing the compound from dozens of $20 million to $200 million new products. We and region, and over 25 percent of our projects are aimed at growing indoxacarb, the basis for DuPont’s highly successful Steward®/Avaunt® agricultural have an R&D pipeline rich in thousands of new product candidates. revenue. Six Sigma has become the way we work at DuPont and is insecticides. Because our approach to innovation is “market-back,” we now have a key approach to improving execution as we enter 2005. a higher success rate than ever before. And new products spend a Go where the growth is — emerging and expanding markets. shorter time in the pipeline, which means greater R&D productivity. In 2004 we had nearly 1,700 total patent filings compared to an When we emphasize “going where the growth is” we have two annual figure of around 950 as recently as 2001. destinations in mind — emerging markets and expanding addressable markets. The result is an increased percentage of sales from new products. We have set a goal for ourselves of 35 percent of revenues from Emerging markets are a rich source of growth for DuPont, not products less than five years old by 2007, and to maintain that just because they are growing rapidly, but because DuPont already has a strong presence in all the fastest-growing emerging markets. 2 | DUPONT 2004 | 3 We are not a newcomer to Greater China and Eastern Europe where 2004 sales grew 32 percent and 35 percent, respectively. In the most important emerging markets, we are an established and respected DuPont Corporate presence, already part of the economic life of the market and the society. We can leverage new growth naturally and efficiently. The other opportunity for growth is in what we call expanding addressable markets. For example, Tyvek® HomeWrap®, long the world leader in house wrap, is now used in roofing systems and window seals in the expanding building innovations market. Kevlar® and Nomex® are finding new and varied applications in Highlights. the personal protection market. Corian®, once limited to four DuPont™ Tyvek® wraps the walls of 550 million buildings in the US, 180 million colors and counter tops, is now available in many styles and a buildings in Japan, and 50 million palette of colors for the expanding surfaces market. We are focusing (dollars in millions, except per share) buildings in Europe. these and other businesses on the markets where our strengths and OPERATING RESULTS 2004 2003 potential match up to outstanding opportunities for growth — where our science, our brands and our reputation for performance Net Sales $27,340 $26,996 give us obvious advantages. Net Income $1,780 $973 By adjusting both our business focus and our geographic Depreciation and Amortization $1,347 $1,584 distribution of resources to meet fundamental shifts in global Capital Expenditures $1,298 $1,784* markets, DuPont will continue going where the growth is in Research and Development Expenses $1,333 $1,349 2005 and beyond. FINANCIAL POSITION, YEAR END Delivering value for our Total Assets $35,632 $37,039 stakeholders Net Debt** $2,949 $7,106 As I said at the beginning of Stockholders’ Equity $11,377 $9,781 this letter, our transformation DATA PER COMMON SHARE is complete.