DuPont de Nemours, Inc. (DD) Q4 2007 Earnings Report, Transcript and Summary

Good morning, my name is Jackie and I will be your conference operator today. At this time, I would like to welcome everyone to the DuPont Fourth-Quarter 2007 Investor Conference Call. [Operator Instructions]. To listen to the webcast, please go to www.dupont.com. Thank you. It is now my pleasure to turn the floor over to your host, Chad Holliday, Chairman and CEO. Sir you may begin your conference.

Thank you. Good morning everyone and thank you for joining today's webcast covering DuPont's financial results and outlook. Our CFO Jeff Kiefer is with me today and so is Carl Lukach, our Vice President of Investor Relations. He will be coming on in just a minute to take you through our results, but I wanted to introduce today's call. First, thank you for calling in today, recognizing all the dynamics in the financial markets. I believe you will be pleased with what we have to say about our company. If you remember, we announced actions to accelerate value creation in November 2005, which are now largely complete. As a result, our company is stronger, more productive and more profitable. We are announcing today the next phase of our acceleration plan. I posted a letter to our shareholders today on our website outlining the key focus points of our plan and I invite you to read it. The bottom line is, DuPont today is on a springboard for growth, from new science, new products and new markets. I'll discuss this later in today's call. But also I want you to attend our upcoming meeting on March 14 for investors. We will introduce in our press release today and we will explain our acceleration plans in more detail. Let me now turn the call over to Carl to kick things off.

Okay, thank you Chad. I need to first take care of some administrative items and then Jeff is going to walk you through our highlights on performance. I'll come back after Jeff with our customary platform preview and then we will go back to Chad. For those of you accessing this call through our website dupont.com, we will be using slides today. Please turn to slide two. During the course of this conference call, we will make forward-looking statements. All statements that address expectations or projections about the future are forward-looking statements. Although they reflect our current expectations, the statements are not guarantees of future performance and involve a number of risks and assumptions. We urge you to review DuPont's SEC filings for discussion of some of the factors that could cause actual results to differ materially. We've also posted on our website today supplemental information that we hope will be helpful to your understanding of our company's performance. With that, let me turn it over to our Chief Financial Officer, Jeff Keefer.

Thanks very much Carl and good morning everyone. It was a strong quarter and year. We executed our plans and delivered results that exceeded our targets. Underlying fourth-quarter earnings per share grew 27%, $0.57 per share. Underlying full-year 2000 [ph] earnings per share grew 14%, the fourth quarter and full-year growth was broad and deep across our businesses. In summary for the quarter, we drove strong topline growth of 11% globally and 20% in emerging markets. Our pricing gains were well ahead of increasing raw material and energy cost. Fixed cost as a percent of sales improved 210 basis points while we continue to invest in our higher margin businesses. In segment pretax operating income excluding items grew 30%, and our operating margin improved 210 basis points. Starting now with slide three. Fourth quarter reported earnings were $0.60 per share and includes a net benefit of $0.03 per significant item that include impairment charges, tax settlements, and a litigation reserve reversal. Excluding items from both periods earnings per share were up 27%. The results are higher than the outlook issued by the company on January 9, largely due to finalization of the company's tax rate and higher business performance. Aligned with the double-digit earnings growth segment pre-tax operating income increased 30% and margins expanded 210 basis points. All five segments grew earnings in the quarter and locked in full year of segment pre-tax operating income growth of 13%. While performance increased across all our segments, Performance Materials and Ag and Nutrition delivered over 20% earnings growth in 2007. Fourth-quarter consolidated net sales were $7 billion, up 11%. The topline results reflect our strong presence outside the US and the success of new products, particularly in Ag and Nutrition and strong performance in Kevlar and Nomex brand names. Looking at our global sales distribution on slide four, 67% of our sales in the quarter were generated outside the United States and sales in emerging markets grew 20%. While each business contributed for the topline growth, Ag and Nutrition sales grew 23% in the quarter and had double-digit sales growth in every region around the world. The results reflect strong performance of our products during the southern hemisphere season as well as a very solid start to the European selling season. As a company, we delivered strong volume growth in Asia, Latin America and emerging Europe and improved price in every region. We grew sales in China 14% versus prior year quarter performance material product lines increased sales greater than 25% in the quarter. Glass laminating products are doing particularly well in the architectural sector, Coatings and Ti02 also had solid volume and price improvements in China. Both businesses are working to increase their local presence and as an example, in December we opened a collision paint facility in Shanghai [ph] on time and on budget. We grew emerging Europe 25% and achieved a milestone by generating $2 billion in sales in 2007. Latin America sales were $941 million, up 16% with double-digit growth in all platforms and especially strong in Ag and Nutrition. Moving now to the EPS variance analysis on slide five. The local pricing improvements delivered in each region contributed $0.25 per share. This marks our fourth year of consecutive pricing gains. Total variable cost increased $0.19 in the quarter, excluding the impacts of royalties, commissions, and the impact of pass-through pricing inflation, our underlying raw material, energy and transportation cost were up 6%. As we look back at 2007, we estimate the full year cost escalation was about 5%. For the quarter, our price increases netted a $0.06 per share benefit over variable cost. On a full year basis, we introduced 1200 new products. Today we use pricing on these new products and our pricing discipline kept our local price gain somewhat ahead of raw material and energy cost increases. All other was a benefit of $0.05 per share and primarily reflects proceeds from the sale of non-core assets. Moving now to fixed cost. We delivered over $100 million of cost reduction programs in the quarter, which covered inflation and partially funded growth programs, primarily in Ag and Nutrition and Safety and Protection. Accelerating growth in these high margin businesses would certainly create future value for our shareholders, the fixed cost variance with a charge of $0.02 per share in the quarter. For the full year 2007, we delivered over $400 million in cost reduction program savings and an additional $130 million in restructured program savings. Fixed cost excluding currency and volume was up just 1.5% for the year. Moving to slide 6, fixed cost as a percentage of sales improved this quarter again and for 2007 was 41%, a 150 basis point improvement versus last year. From 2003 through 2007, we've reduced fixed cost as a percent of sales by a whole 7 percentage points. Turning to slide 7. 2007 full-year pretax operating income margin improved by 100 basis points and return on invested capital improved 90 basis points. The 2007 performance locked in the fifth consecutive year of improvements in both metrics. While higher earnings are certainly contributing to both metrics, our work on underperforming assets is also underpinning the results. Each quarter we show you our [inaudible], which is on slide 8. We're pleased to show another significant increase in the underperforming assets classification. Improving the metric is done business unit by business unit. Several of our target businesses adjusted their strategies and are now achieving attractive sustainable returns. As examples, from December 2005 to December 2007 the performance of elastomer's business improved 1300 basis points. Ethylene copolymers, 800 basis points. Fluoromonomer and polymer 750 basis points and Zytel resins moved 500 basis points. We also took key strategic actions such as shedding certain industrial chemical in Coatings businesses. We've momentum. As we move forward, we will continue to improve underperforming asset return and have faster asset growth in our high return businesses, all with the intent to grow ROIC. The internal decision support processes we are using to guide our actions, that’s cash flow, return on investment or CFROI. We believe this metric allows us to make the best asset growth decision as well as clearly target and measure improvements in underperforming assets. Externally, we will continue to provide ROIC data as they method to measure our progress. Finally, the full-year abbreviated cash waterfall is on chart nine. In summary, cash from operations was invested back into our asset and we returned $3.1 billion in value to shareholders via dividend and stock repurchases. Going into 2008 and in line with our growth strategies, our capital spending will be about $2 billion. The increased funds are primarily for focused investments in our previously announced expansion in Kevlar, Tyvek and TiO2, all high return businesses. Looking back at 2007 helps to frame our plan for 2008. The US slowdown has started in 2007. The US residential housing starts were down about 28%, North American auto builds were down about 2% and the Detroit three builds were down 6%. In total, we estimate a slowdown on construction and auto cost us about $0.20 per share in 2007. Heading into 2008, we expect the headwinds of 2007 to continue and this is in our planning assumptions. Notably, we expect the US slowdown to continue. US residential housing is still looking for the bottom and it is estimated we will again see another year-over-year reduction in housing starts. North American auto builds are estimated to be down again. In addition, raw material and energy and transportation costs are expected to continue to increase at a faster rate than we experienced in 2007. Let me assure you DuPont is well positioned to meet these challenges and in fact we see good opportunities. Our fourth quarter pricing actions put us in a solid position to deal with the rising raw material and energy costs. Our new product introduction, mix enrichment strategies and discipline pricing will support further pricing gains. In addition, we are improving operations at our plants and using our global purchasing power to reduce costs. All of these actions will address the upward pressures of raw materials. Global GDP growth is expected to be about 3.2% with solid growth in emerging markets. With a sizeable base of over 7 billion of sales in emerging markets, we will use our capabilities to capitalize on the growth and we will leverage our local presence across all our businesses. We also see opportunities in the end markets of agriculture and safety and security. Both markets have strong fundamentals in 2008. We expect to build on our global leadership positions in these markets and deliver growth in the coming months. Cost productivity is another opportunity. As Chad will cover later, we will build on our momentum from 2007 and continue to benefit from cost productivity actions in 2008. The savings from our November 2005 plan are running ahead and our goal remains to offset inflation and contribute to funding growth investments. With this as a backdrop on slide 10, we reaffirm our full year outlook for 2008 of $3.35 to $3.55 per share. We have the right plans in place and the ability to execute as we did in 2007 to achieve sustainable growth in 2008 and beyond. We have also provided first quarter guidance in a range of $1.12 to $1.17 per share. Now, I'll turn it to Carl for platform specific data, details which support the first quarter guidance. Carl.

Okay, thanks Jeff. Everyone will move to our platform review. Let’s begin with our Ag & Nutrition platform on slide 11. Sales grew 23% to $1.3 billion. Underlying earnings improved 40% from a loss of $148 million in the fourth quarter last year to a loss of $89 million this quarter. I'd like to point out that the fourth quarter this year includes a gain of $15 million related to a crop, chemical assets divestiture. Excluding this gain, our PTOI for the platform grew 30% quarter-over-quarter. The strong performance delivered by our Ag platform was driven by strong international sales across the platform and across all regions coupled with cost productivity improvements from the restructuring program we announced to you one year ago. I will give you the details beginning with crop protection product. Sales and earnings were up significantly driven by strong regional demand and buoyed by favorable pricing in Latin America. Insecticide demand was particularly strong in Latin America and Europe. Asia-Pacific volume was up significantly driven by demand for [inaudible] in Japan and broad market growth across the region. Margins expanded on favorable pricing and fixed cost productivity gains. Moving to seeds, fourth quarter sales at Pioneer increased 40%, led by substantial growth in Latin America and Asia and early season sales in Europe and North America. Last quarter we described the strong season under way in Latin America. That strong momentum carried through the fourth quarter as well. Corn market share was up four to five points in Brazil and Argentina on expanding acreage in both countries. In fact, 2007 was the fifth consecutive year of share gains for corn and soybeans in Brazil. For the full-year 2007, our seed business PTOI represented about two thirds of total platform PTOI and in 2007 earned an 18% pretax margin. This includes our incremental growth spending in 2007 of about $100 million. We are already seeing a return on our investments in our seeds sales team and in R&D. Overall we're pleased with the 23% platform growth in PTOI in 2007. Let's turn now to the outlook for the Ag and Nutrition platform for the first quarter. Our order books for the North American growing season are strong. Platforms sales and earnings will be up low double digits driven by strong seed sales in North America and chemical sales in Europe and Latin America, moderated by higher commodity costs and continued growth in investment spending. Okay, let's move now to slide 12, Coatings & Color Technologies segment. Sales increased 8% to $1.7 billion, earnings grew to $216 million, up 5%. Earnings grew substantially in our coatings business, reflecting the results of our restructuring efforts and increased sales, but were partially offset by modest declines in TiO2 earnings and the absence of gains from asset sales in last year's fourth quarter. TiO2 product sales increased slightly. US dollar price was up in Europe and Asia, volumes were up in Asia and Brazil, but volumes were lower in North America and Mexico reflecting lower demand from our paint customers selling into the North American residential housing market. Earnings for TiO2 declined modestly. The coatings businesses increased sales moderately, but earnings improved substantially as our teams continue to execute on two key strategies. Number one, restructuring the cost base and number two, reorienting our business towards faster growth markets. As proof point, fixed cost as a percentage of sales improved 195 basis points and sales outside the US grew 10% and as Jeff mentioned, the collision paint plants in Shanghai, China started up on time and on budget. For a little longer term perspective on the status of our coatings transformation, after two years of transformed work and despite the North American market conditions, our coatings business grew the topline on average 17% in Latin America and Asia and grew global earnings on average 22%. The key growth drivers in this platform are continued growth in emerging markets, penetration to new markets, pricing actions and productivity gains. As Jeff noted, we are not expecting improved conditions in North America housing or auto markets in 2008. Specifically our first quarter outlook for Coatings and Color Technologies reflect modest earnings growth, partially offset by the inclusion in the first quarter '07 of $60 million in insurance recovery. Moving now to slide 13 and our Electronics & Communication Technologies platform. Sales grew 13% to $1 billion; earnings increased substantially to $156 million and included a $28 million gain on our land sale. Excluding this gain, earnings grew 14%. Our fourth quarter performance reflects continuous improvement from the first half for several key product lines. Fourth-quarter sales growth was driven by volume growth in fluroproducts and electronic materials. Strong demand for photovoltaic materials continued while sales for electronic materials rebounded in the quarter, particularly for the semiconductor and plasma displays supply chains. Platforms earnings improvement reflected sales gains and cost control, partially offset by changing business mix. Earnings growth was particularly strong in our fluroproducts, electronic materials and packaging product lines. Turning to the outlook for the first quarter, we expect to generate modest sales growth. We anticipate benefiting from strong demand for photovoltaic, improved demand for electronic materials and continued cost control. Earnings however should grow significantly in the first quarter driven by an improved product mix versus the first quarter ‘06. I'll turn to slide 14 now and review our Performance Materials segment. Sales grew 12% to $1.7 billion, particularly on the high US dollar selling prices. Excluding significant items in both periods, earnings increased 54% to $186 million reflecting gains in all product lines. The segment’s profit improvement reflects higher US dollar selling prices and disciplined fixed cost management, which were partially offset by higher raw material cost and a charge to write down certain manufacturing assets. We experienced global sales gains in all three major product lines. From a regional perspective, revenues grew in Latin America, Asia, and Europe due to US dollar selling price gains and volume growth. In North America however, volume declined, but sales were up slightly. Looking forward to 2008, the segment will face difficult comparison to its strong '07 results. However, we expect continued growth reflecting growth in emerging markets, higher US dollar selling prices, fixed cost discipline and successful launches in new products applications. These gains are anticipated to be partially offset by higher raw material cost, continued softness in the North American auto and housing markets and costs related to shut down of a European production facility at our company's Louisville, Kentucky plant. Specifically for the first quarter, we expect modest sales gain and slight earnings growth compared with the strong comparable results in prior year's first quarter. US dollar pricing and cost management will be partially offset by higher raw material costs and plant shutdown costs. Turning to slide 15 and looking at our sales and our Safety and Protection segment, sales increased to $1.4 billion, up 5% excluding the impact of divested business. Earnings in the quarter were $277 million, up 13% versus previous year. The quarter and the year closed strong with diversity of the S&P products, markets and geographies continues to support growth in the phase of continuing slowing in the US residential housing market. Sales growth in all regions continued double-digit growth in emerging markets. Kevlar and Nomex demand remains strong across most market segments. Global sales by our building innovation business was about flat, even though US housing starts were down about 25%, as sales growth outside the US mostly offset lower US sales. The combination of topline growth, fixed cost productivity particularly in chemicals and favorable currency were the key elements for achieving a double-digit PTOI growth. For full year 2008, we see solid fundamentals for safety and security products globally. The key growth drivers are continued non-US penetration, new product introductions, Nomex capacity expansion and enriching the product offering. The growth would be tampered by continue weakness in US housing and cost increases of fund growth such as Kevlar capacity investments. Specifically for the first quarter, safety and protection expect modest earnings growth reflecting expansion related activities in the Nomex business. Lastly our Applied BioSciences technology platform, we have two milestones to report on since our investor meeting just 8 weeks ago. First, in our Biomedical business, we signed a strategic collaboration with BioSphere Medical under which the companies will evaluate potential peripheral vascular and embolotherapy research and new product development. We will also apply DuPont's know-how to the manufacturing of BioSphere, Embosphere and EmboGold product in an effort to accelerate the improvement of manufacturing yield by these products. Second in our BioSurfaces business, we signed a new co-development agreement with a major downstream partner to commercialize new products based on DuPont's innovative BioSurfaces technology. That concludes the review of our platforms. I'll now turn the call back to Chad.

Thank you Carl. As Jeff and Carl summarized, we grew earnings per share 27% in the fourth quarter and 14% for the full year. While weaker dollar at Cozaar certainly helped, they were not the primary reason we overcame the challenging environment in US housing, auto and raw material. We grew earnings because we are successful in growing revenue outside the US and because we were successful at reducing cost, while funding our growth investments. Our ability to exceed in these areas are two direct outcomes of the plan we recited to you November 2005, to accelerate value creation by our company. The actions we took as of November 2005 acceleration plan have made our company stronger and more profitable. Our pre-tax profit margin and return on invested capital are up significantly and continue to rise. Our R&D cost and capital productivity plans are either on or ahead of plan. In the third quarter last year, we completed our $5 billion share repurchase program and raised our dividend 11%. In short, we are not just talking, we are doing and I hope you can see that in our results. With November 2005 acceleration plan largely complete, we are not taking any victory laps. Instead we are focused on the next phase of our accelerations, our focus is a higher rate of earnings growth to significantly increase the value of our company. We want to prove to not just to be in our results as it is now, but also in our stock price. We must keep posting the candid performance that's impossible to ignore or discount. We are announcing today an extension of our November 2005 acceleration plan. Our extension will achieve an even higher level of profitable and sustainable growth. Please turn to slide 16. We will accelerate our topline growth by applying our science to create new products, new markets as only DuPont can. At the same time, we will extend our productivity improvements. We think about it in five steps that are all accelerating at the same time, emerging market growth, safety and protection expansion, increasing our competitiveness and propelling our agriculture related units to faster growth, winning in bio-based materials and bio-fuels, and extending our productivity gains. Let me expand on each of these five steps. First, emerging market growth. We've learned that more focused resources in emerging markets deliver profitable growth for us in 30 plus product families, where we've been targeting. I've challenged Dave Miller, Diane Gulyas, Terry Caloghiris to boost our rate of growth in these markets to an even higher rate over the next two years. As a baseline, current sales in emerging markets of these 30 plus product families are just over $4 billion and their aggregated topline growth rate has been 18% for the past six years. We can and will boost that rate higher. Ellen Kullman will be the Executive Vice President with direct accountability for this growth. Second, Safety and Protections; this is a $5.6 billion revenue platform for us today with the highest profit margins in DuPont. Our five-year average annual topline growth rate for this platform has been running about 13% through 2006. We slowed in 2007 with the US housing market, but we can and will make a marked increase in our sales growth by 2010. Mark Vergnano will lead this work with the support of Ellen Kullman. Third Agriculture and Nutrition, our third quarter results confirm the power of our seed and crop-protect products in the organization. This is a tremendous market for us with wide-open potential. We increased our R&D and margin expenditures by $100 million in 2007. We'll continue to expand these investments. Erik Fyrwald with the support of the Executive Vice President Tom Connelly will deliver these results. This could include acquisitions to strengthen our arsenal. Four, applied BioSciences technology platform, which includes biofuels and biobased materials. Last week we assigned Group VP, Nick Fanandakis to lead this platform reporting to Tom Connelly. Nick is charged with accelerating the value realization from these humongous opportunities. And fifth productivity, in November 2005 we shared with you our simplification and streamline plans they would drive down fixed cost as percent of sales. Our target was to capture $1 billion in fixed cost savings over the three years ending 2008. We've been running ahead of plan and expect savings to the end of 2008 to exceed our $1 billion target. But we will not stop there. Richard Goodmanson, our Chief Operating Officer has responsibility to take the DuPont Production System and deploy and grade business management tools and extend the productivity gains in 2008. We will also accelerate variable cost improvements from energy conservation and process yield programs. We'll be ready to share with you more details of the exact amount of the additional savings in our March 14 meeting. When you ask Americans what is acceleration, they respond generally with how many seconds it takes a car to go from 0 to 60. So acceleration is change in velocity, the data speaks for itself, DuPont has changed its velocity since November 2005. Jeff Keefer and I are today very firmly committed to the second phase of velocity improvement in DuPont. We see growth opportunities there even larger than we expected. We acknowledge short-term uncertainty in macro economic growth, but the fundamental drivers we see in emerging markets are Safety and Protection arena, Agriculture, Biomaterials, Biofuels are not going away, and DuPont is perfectly positioned to capitalize on them. Jeff, Ellen, Richard, Tom and I look forward to seeing you March 14. In this meeting, we'll discuss in more detail our actions for 2008 and 2009 that will increase our velocity. Carl, back to you.

Okay. Thank you Chad and Jeff. Jackie, we're ready to go to our callers' questions. Question and Answer

Thank you. [Operator Instructions]. Your first question is from Don Carson with Merrill Lynch.

Yes, thank you. Well, Diane did such a good job at Performance Materials, I won’t ask my usual question, [inaudible] sell the business. But on the agricultural side, Chad you talked about acquisitions. Would these be major acquisitions or technology and then just as a follow-up, can you update us on the achievability of your goal of stabilizing market share at Pioneer and US corn seed in 2008?

Don, thank you for the question you asked and the one you didn't ask too. On acquisitions, I've put that in particular, because we see tremendous international growth and international strength. And there could be some very focused acquisitions internationally that will add to our market reach. Secondly, from a technology standpoint, we are constantly scanning and we've got better systems than we've ever had before to scan where the leading edge technology is. So, picking up some of these companies that would really match what we need to do are the kinds of things that we're constantly focused on to make a difference. It's too early to talk about the second part of your question about the year, but I'm very pleased.

Okay, thank you.

Don, I could add to that. I think you may have heard some of this before, but certainly the factors that go towards holding share and even in North American core market is the availability of our triples; as you know it's way up. And so we mentioned on the call, our order book is strong for the season and on track in the direction that would indicate that. And we're expecting return on the growth investments that you've already made in our sales team. So, those would be the three factors I would point to at this early part of the season.

Okay. Thanks Carl.

Okay. Thanks Don.

Thank you. Your next question is from David Begleiter with Deutsche Bank.

Thank you. Good morning. Chad, give me your confidence [ph] from the outlook, we've stock crisis. Any further update on share buybacks with your cash position?

Well, of course, I pointed out that we completed ahead of schedule our $5 billion share buyback. It'll be inappropriate to speculate on future share back. I think if you look at our track record, we've been very good at returning money to share holders either through dividend increases or share buybacks. But we see some good growth in this company. And so we think now in this market, there is room to increase the topline, some of that the cash you go for that too.

And Jeff, you mentioned a $0.20 hit in '07 from auto and housing, what's the hit in your '08 forecast?

Yes, if you look at kind of the year-over-year numbers, we would expect probably about that same $0.20 in that range. I would call your attention to again, we've put in a lot of drivers to offset that. We offset it in '07, and clearly emerging country growth, repositioning even in that segment commercial, the new products are going to stand us in good stead.

Thank You. Your next question is from Frank Mitsch with BB&T Capital Markets.

Hi, good morning gentlemen. Nice results, a bit unfortunate today you... today you put it out.

Good morning Frank.

Looking longer term, Chad in your letter to shareholders, you talked about through 2010 a clear potential for average double-digit earnings growth and that implies, if we are looking at '08, your guidance is 335 to 355 average 345, 10% in '09 and 10% in 2010, gets you to a 420 number. Are we to read that sentence as suggesting that you are signing onto $4.20 earnings in 2010?

Well Frank, I wouldn't question your math, but I wouldn't confirm it without checking it. But what we are saying and we chose those words carefully. That if you take 2008 as the base year, we take all average for the next couple of years, we can get double-digit earnings growth. And that's because of the build up or specific plans we put in place both from the cost reductions side which will still be very important, very critical to us but also on the topline growth side. So, that's why I put that out, is that a clear answer to the question.

That is, the one caveat I guess or the elephant in the room is Cozaar Hyzaar starting in 2010 to dip down, and I understand what you're talking about the existing DuPont businesses, but the projection of average double-digit earnings growth, that is inclusive of the decline in Cozaar Hyzaar in 2010, is that correct?

Of course.

Thank you.

Thanks Frank.

Thank you. Your next question is from Bob Koort from Goldman Sachs.

Hi, good morning. Jeff, you gave some new data we haven't heard before about specific sub segment or a business unit return on asset improvement, and you highlighted some notables. I was wondering if you could tell us how auto OEM is doing on that metric and then secondly maybe Chad, if you could give us a little more commentary about what's going on in Europe. I sense from a lot investors anxiety that Europe is going to be lagging the US and head towards recession as well, and it looks like your volumes are a little bit weak there, maybe you can give us some comments. Thanks.

On auto OEM, I'm not going to quote specific numbers, but you saw I think the overall improvement, I think Carl quoted 22% across an earnings growth across our quoting segment. OEM has certainly benefited the restructuring savings at top and bottom line. So, when I look at our return on net asset metrics, that business has improved as well.

And Bob on your question about Europe, obviously in release to... you could see where the volume was, yet overall sales growth was 13%. We've taken a very close look throughout the quarter as to the drivers there, and it is uniqueness of the comparison with the fourth quarter of last year and some various specific inventory shifts that we are in control of because of phasing in new products and phasing out old products. We don't see negative growth in Europe, but we see slow growth in Europe certainly.

Thank you. Your next question is from Jeff Zekauskas with JP Morgan.

Hi, good morning. I guess my first question is for Jeff Keefer. What was cash flow from operations in the fourth quarter and what percentage of the $2 billion in CapEx you expect for 2008 goes to the agricultural operation?

On that second one Jeff, not much on the Ag in terms of the CapEx spending. I mean what you're seeing there is more about the previously announced expansion plan in Kevlar with the lead one there. Some of the Nomex expansion money and also some of the TiO2 expansion projects kicking in.

Jeff, in terms of cash flow for the fourth quarter, I only have the total year’s statistics available to be right now and that was about $4.3 billion, which was an increase over last year. We'll report... you can get fourth quarter after the call here.

Thank you. Your next question is from P.J Juvekar with Citi.

Yes. Hi, good morning. In Ag can you talk about what happened to seed and chemical prices in Brazil and what do you expect in the US? And the second question is, how many acres of triple-stack corn do you expect to have for this growing season?

Okay. Let's talk first P.J about Latin America. Okay, for '07 Latin American seed sales for Pioneer were up 54%. And I'm talking about the season now P.J, it’s about the third and fourth quarter primarily. And that was obviously driven by increased currency sales in Brazil and Argentina, strong product performance, higher grain prices and higher share. In Brazil, we've gained five points of share in corn and that includes all three tiers of the market including the one we don't sell into in third tier, and in beans we gained about a point in share. In Argentina, we've gained about four points in corn. So you've all of the drivers to growth coming on to the seed business there at once, you've got the acreage going up, shares gains going up, and a bit of price action too. In crop chemicals, we did have good pricing in Latin America, profitability was strong aided by the expanded acreage and demand. Your last question again P.J, could you repeat that?

How many acres of triple stack would you have in the US?

Triple... gee, I don't have in acres, I have it in percentage of sales, about one third of our corn offering. In this you could probably back calculate that.

Thank you. Your next question is from [inaudible] with HSBC.

Hello.

Yes, good morning.

Couple of questions, Chad. Congratulations on a good quarter. Can you talk about what your operational improvement initiatives are regarding manufacturing, TPM and Six Sigma and around the world with economy looking at a recession? What are some of the plans that you are concerned with around the world and what areas that you're concerned with DuPont in operational efficiency?

Hi, Dave, thanks for the question. So, we've put in Six Sigma in 1999. That is well baked into our company, which means every improvement program is measured and has a control plan and is audited at least once a year out, to make sure we've really got the results. What we've done now under Richard's leadership to take that to the next phase, what we call DuPont Production System, which more engages our employees and gets the creativity much higher and the enthusiasm much higher. And where we've been able to do that, we've seen just a step change, over 2X improvement in the kind of results we've from Six Sigma. We pioneered that on two of our largest sites last year, we're going to 17 more sites this year, and it will take it across the entire company. This DuPont integrated business management is a supply chain process, where we're rating and evaluating every product family, how effective their supply chain is, that is the fundamental that is going to help us take working capital down to the next step. Again, it is all statistically based just like Six Sigma, but it takes it beyond what we have been able to do so far. So, those are the two programs that are driving across the entire company and what we see is several years of more productivity improvements from these... just like we thought it would be, because it's fundamental change not just taking out cost. And we will describe that in great more detail on March 14. The second question around the plants being set up for this kind of economy. This current exchange rates is going to play into us a bit, where you might think we might have some trapped assets in the US, with the dollar value, we are good exporter right now. And we have been pulling down our asset base in Western Europe for some time. I think you have seen we announced last three or four years. I don't see any large assets in Western Europe that will not be successful in this period. Obviously our Asia and Latin American assets are going like gangbusters.

Thank you. Your next question is from Kevin McCarthy with Banc of America Securities.

Yes, good morning Chad. Given the level of anxiety in the financial markets, I was wondering if you could comment on two higher-level questions both macro in nature. First could you comment on the monthly pattern of your sales and earnings within the quarter? In other words, did the quarter end any differently than it began and second what are your underlying economic growth assumptions for the United States and China as well as the energy complex?

Kevin, thanks for your question. First, let me refer back to the letter that we put out this morning. I know it is a little bit unusual, normally we issue it a couple of months later, but we thought with all the anxiety with our plans being so clear, what we're doing in the balance of those, we thought it was important to put it out today. So, I think kind of reading the letter will give you the tenor of how we see things, not specifically the short-term economics for the next month or two, but what we see is the potential for low return growth. Let me give you a couple of data on your question about trends. Looking at Asia, which I know people are concerned about, will Asia hold up with the US where it is? We had the strongest quarter in the fourth quarter in Asia by order of magnitude of revenue growth. It was over 16% in the fourth quarter versus 8% for the entire year. So, we didn't see in that region certainly or the other regions any pattern coming in the fourth quarter that makes us concerned over and above what we had in our plans for next year. So, I don't think any pattern that’s a problem, but what I'd like to stress is our global strength and how the task force I described with my Group Vice Presidents is focusing on those opportunities. I think that puts us in a really good position, if we were to see a hiccup somewhere along the way.

And what would you be baking in for the US, China and energy?

On energy we are assuming it’s going to stay very high at least for the first half in the kind of order magnitudes we've been seeing. And that is why we have been putting in place very disciplined price improvement programs, and as I referred to in my talk, what we see is tremendous potential now in yield improvement, energy improvement all based on those systems I described a little bit earlier. So, we are dealing with those as they come up. We are not expecting any tailwinds to push us along here. We have to work for throughout 2008.

Thank you. Your next question is from Steve Schuman with New Vernon Associates.

Hi good morning guys.

Steve.

Sorry guys, sorry about that. On CapEx, you increased it quite significantly. Why such a large increase? Obviously you have got the TiO2 plant and the Kevlar situation, but I think we all performed a greater growth globally. It's probably going to slow in the next couple of years. Why not cut back on some of the other areas?

We spent... we've been spending about $1.5 billion to about $1.7 billion over the last several years. And the growth in our capital is really related to those focused investments in Kevlar and TiO2, those are very healthy businesses, growing businesses and we need to support that growth, that will support higher profits and returns in the company overall.

I guess you've mentioned TiO2 profitability was down slightly. Is this the time, right time to build? Is there a way you can push this back at all or are you sort of locked in at this point?

I think it’s absolutely still… I know that business very, very well. I think it’s absolutely the right time to continue to move forward. Again that's a very high return business for us, we know how to operate that business very, very well.

Jeff, it's Chad, I just want to add. We are going to build the lowest cost flat in the world and the fastest growing market in the world, give me that any day of the week.

Thank you. Your next question is from Mark Gulley with Soleil Securities.

Yes. I had some questions regarding portfolio restructuring. Chad you had this question a couple of different times, but given the softness in the economics outlook, are there anymore asset sales that you need to do to tighten up the portfolio?

Mark, as Jeff described, we've been focused on that period of time. I think what you can see is a [inaudible] that have really come up, we have made some focused divestitures, we're always out to create the most shareholder value. But right now, I like to mix the parts we have, but... just looking at what we've done in the last several years, we have made right sense for shareholders, we'll roll into make adjustments. But I'm not forecasting anything today.

Also want to follow-up on TiO2, one of your more important product lines. You've announced three rounds of price increases in about the last six to seven months. Are the realizations from that, from those three rounds of price increases sufficiently strong to encourage you to move head aggressively on expansion and seeing higher margins?

Well, again I'm not going to get into the specific in the pricing. You've seen that... you've mentioned Mark with the three price increases. We're encouraged in that market, and again that as a high return business, we've got a low-cost position in a very rapidly growing market and it's a right thing to do to invest in that business to grow shareholder value.

Thank you. Your next question is from Edward Yang with Oppenheimer.

Thank you. Good morning. My question is also on emerging markets growth. Chad, you spoke about the very strong trends you've seen recently. But over the past couple of days, emerging markets, stock markets are down double-digits and seem to be predicting some type of slow down. Could you elaborate a little bit in terms of, why you think that growth there would remain strong, and this theory on decoupling, how... how valid do you think that is?

Great question. I understand why you ask... it is hard to take into account… you know a few days movement in stock markets in our overall business case. So, let me kind of talk about what's unique about our company. We've got over 35% of our sales from [inaudible] less than five years old. And what we find is customers during downtimes want to be pushing out new products and that's what ours could do, it could allow them to have new products. Secondly, we are much more specialized in the normal commodities. We have a few commodities, TiO2 is one of them, but generally we're more specialized than we're more locked in and they don't move suddenly just based on short-term demand. And again remember we've got our agricultural business, we see the commodity prices trends there. We just think that's going to be good for a very long time to come. So, I don't think we're typical of what maybe others might experience. But I don't see any big alarm signs coming from our people on the field, [inaudible] six years, I stay really close to that market and I'm not saying that we are home free or that we can take a look at what's happening, but right now we're going to have a good year.

Thank you.

Thank you. Your next question is from John Roberts with Buckingham Research.

Morning. Shouldn’t the growth rate for the first quarter earnings be targeted higher than the growth rate for the whole year? You have a stronger lift from agriculture in the first quarter and I assume the fourth quarter is going to have difficult comps given the low tax rate this year. So, don’t you need to start the year off with a higher than average growth rate, so that you can cover for the back-end of the year?

John as we see it, you see that our first quarter is right in line with our overall guidance and so that is our best judgment right now, and it's the guidance we have given.

John, in the cost cut that you went through the... each platform you can see that the drivers and the headwinds platform by platform. That we add up as Jeff said to call it down the middle there.

I am just making the observation that back half of the year, unless you are assuming a low tax rate in the fourth quarter again, you got lower Ag participation in the back half of the year than you do in the first quarter that you ought to come out of it and start the year off a little bit above trend

John, I understand what you are saying and we have really analyzed that from the revenue, costs, margin standpoints quarter-by-quarter or actually month-by-month, and the first quarter that we've got out there... a kind of year that we look at overall. I understand your question fully. I don't see a pattern to be concerned about there at all.

Thank you. Your final question is from Mike Judd with Greenwich Consultants.

Actually my question has just been answered. Thank you.

Thank you. Okay, Jackie I guess that wraps up our call. Investors, thank you again as Chad said for signing on such a busy morning in the financial market. As every quarter the IR team is here to answer any follow-up questions, and I want to highlight one... some words in the press release, we are scheduling an Investor Event on March 14 in New York city, details would be available on our website soon and we hope that you'll join us there. Thank you again very much.

Thank you. This does conclude today's DuPont fourth quarter 2007 investor conference call. You may now disconnect.