analysis and balance scorecard - dupont

Analysis and Balance Scorecard – DuPont

Analysis and Balance Scorecard

DuPont

Written byCates, JasonChoudhury, FatimaPatel, RaviPatel, Roshan

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© Jason Cates, Fatima Choudhury Ravi Patel and Roshan Patel, 2013

Reproduction for the following uses is authorised provided the source is acknowledged in line with the Copyright, Designs and Patents Act 1988;

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This publication may be made available online at SlideShare.net/AdrJasonCates for public use no earlier than 09:00hrs (GMT) on 21 April 2013 as deemed appropriate by the acknowledged sources.

This paper has referenced appropriate sources in line with Harvard Referencing.

Any queries regarding this publication should be sent to: [email protected]/in/AdrJasonCates

To be delivered to the University of Hertfordshire on or by

11 March 2012

Ordered to be printed

11 March 2012

Printed in the United Kingdom

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Table of ContentsType of Business...........................................................................................................................................3

Size of Business............................................................................................................................................4

Major Product/Service Areas.......................................................................................................................6

Agriculture................................................................................................................................................6

Performance Chemicals............................................................................................................................6

Performance Materials.............................................................................................................................7

Geographical Structure.................................................................................................................................8

Financial Performance................................................................................................................................10

Major Strategic Challenges.........................................................................................................................12

Balance Scorecard......................................................................................................................................13

Financial................................................................................................................................................13

Customer...............................................................................................................................................13

Internal Business Processes.................................................................................................................14

Learning and Growth............................................................................................................................14

Learning and Growth............................................................................................................................15

Notes to the Balance Scorecard.................................................................................................................16

Signatories..................................................................................................................................................17

Word count: 1471/1500

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Type of Business

DuPont is a chemical and performance material based company and considers itself a “world leader in

market-driven innovation and science”. Founded in 1802, DuPont has been involved in a number of

major material breakthroughs throughout history. Along with Wallace Carothers, DuPont helped discover

the first synthetic rubber Neoprene. During the Second World War, DuPont was the largest manufacturer

of gunpowder and explosives in the United States and went on to supply materials necessary for the US

Apollo Project. (DuPont, 2013bcd)

DuPont currently consists of seven differentiated segments ranging from “Electronics and

Communication” to agriculture and pharmaceuticals. Half of company sales currently come from

DuPont’s agriculture and performance chemical divisions currently contributing $17bn to corporate

revenue. In recent years, DuPont has focused on creating sustainable growth through targeting market

needs brought about by increasing global challenges. These include the need for a reduced dependence

on fossil fuels and the need for greater food productivity. (DuPont, 2013a)

DuPont (2013a) Annual Report 2012. [Online] Available at: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDkzNzU2fENoaWxkSUQ9NTMxODQ3fFR5cGU9MQ==&t=1 [Accessed 1 March 2013]DuPont (2013) Global Challenges. Available at: http://www2.dupont.com/inclusive-innovations/en-us/gss/global-challenges.html [Accessed 5 March 2013].DuPont (2013) Innovation starts here. Available at: http://www2.dupont.com/Phoenix_Heritage/en_US/landing_era4.html [Accessed 5 March 2013]

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http://www2.dupont.com/Phoenix_Heritage/en_US/landing_era4.html

http://www2.dupont.com/inclusive-innovations/en-us/gss/global-challenges.html

http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDkzNzU2fENoaWxkSUQ9NTMxODQ3fFR5cGU9MQ==&t=1



DuPont (2013) Our company. Available at: http://www2.dupont.com/corp/en-us/our-company/index.html [Accessed 5 March 2013]

Size of Business

DuPont is among the largest chemical performance material manufacturers in the world,

operating in more than 70 countries with 58,000 employees. According to their annual report, DuPont is

the global leader of selling and manufacturing nylon, titanium dioxide, elastane and fluropolymers. They

are also the largest supplier of automotive coating and the market leader in supplying resins and films,

advanced electronic material and holographic optical components and holograms. (DuPont, 2013a)

(Corporate Watch, 2013)(Forbes, 2013)

DuPont own over twenty thousand worldwide patents and over fourteen thousand patent

applications. Additionally, the company also has over twenty-one thousand unique trademarks for its

products/services and over twenty-three thousand worldwide registrations and applications for these

trademarks. This market stronghold makes it difficult for competitors to compete. However, due to the

continuous evolution of technology and new innovations, DuPont must continually invest in research and

development in order to maintain its competitive position. (DuPont, 2013a)(Reed, 2013)

Dow BASF Bayer DuPont0

102030405060708090

Net Sales

Net

Sal

es $

bn

Graph 2a

Dow BASF Bayer DuPont0

1

2

3

4

5

6

Net Income

Net

Inco

me

$bn

Graph 2b

(Dow, 2012)(BASF, 2013)(Bayer, 2013)(DuPont, 2013a)

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http://www2.dupont.com/corp/en-us/our-company/index.html


As shown in graph 2a, DuPont’s net sales have been significantly lower than those of its main

competitive rivals and half those of BASF. However, in regards to net income, DuPont outperforms two

of its rival at $2.79bn, but still behind BASF with net income of $4.88bn. This shows that even though

DuPont has significantly lower sales than many of its main rivals, it can still compete on the world stage.

(DuPont. 2013a)

Bayer (2013a) Annual Report 2012. [Online] Available at: http://www.annualreport2012.bayer.com/en/bayer-annual-report-2012.pdfx [Accessed 1 March 2013]BASF (2012) Annual Report 2012. [Online] Available at: http://www.basf.com/group/corporate/en/function/conversions:/publishdownload/content/about-basf/facts-reports/reports/2012/BASF_Report_2012.pdf [Accessed 1 March 2013]Dow (2011) Annual Report 2011. [Online] Available at: http://www.dow.com/investors/pdfs/161-00769_2011_Annual_Report_Final.pdf [Accessed 1 March 2013]DuPont (2013a) Annual Report 2012. [Online] Available at: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDkzNzU2fENoaWxkSUQ9NTMxODQ3fFR5cGU9MQ==&t=1 [Accessed 1 March 2013]Corporate Watch (2013) DuPont. Available at:: http://www.corporatewatch.org/?lid=170 [Accessed 5 March 2013]

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http://www.corporatewatch.org/?lid=170



http://www.dow.com/investors/pdfs/161-00769_2011_Annual_Report_Final.pdf

http://www.dow.com/investors/pdfs/161-00769_2011_Annual_Report_Final.pdf

http://www.basf.com/group/corporate/en/function/conversions:/publishdownload/content/about-basf/facts-reports/reports/2012/BASF_Report_2012.pdf

http://www.basf.com/group/corporate/en/function/conversions:/publishdownload/content/about-basf/facts-reports/reports/2012/BASF_Report_2012.pdf

http://www.annualreport2012.bayer.com/en/bayer-annual-report-2012.pdfx


Forbes (2013) Forbes earnings preview: DuPont. Available at: http://www.forbes.com/sites/narrativescience/2012/04/17/forbes-earnings-preview-dupont-2/2/ [Accessed: 1 March 2013]Reed Business Information Ltd, 2013. DuPont: Company structure information from ICIS. [Online] Available at:http://www.icis.com/v2/companies/9145202/dupont/structure.html [Accessed 5 March 2013]

Major Product/Service Areas

30%

20%18%

11%

10%

8%

3%

Segment Sales

Agriculture

Performance Chemicals

Performance Materials

Safety and Protection

Nutrition and Health

Electronics and Communications

Industrial Biosciences

Graph 3a

(DuPont, 2013a)

Graph 3a shows the contribution each of DuPont’s main segment makes to corporate sales. The

company consists of seven “reportable segments”, of which, those described below make up 68.4% of

total net sales. The remaining 31.6% of net sales come from safety and protection, nutrition and health,

electronics and communications and industrial bioscience segments. (DuPont, 2013a)

Agriculture “DuPont Pioneer” has a portfolio of products/services targeted to improve crop yields and

productivity. Products include fungicides and herbicides, fungicides, insecticides and seed products.

“DuPont Crop Protection” principle products include weed, disease and insect control offerings. This

segment makes up 29.6% of net sales and is equivalent to $10.4bn. (DuPont, 2013a)

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http://www.icis.com/v2/companies/9145202/dupont/structure.html

http://www.forbes.com/sites/narrativescience/2012/04/17/forbes-earnings-preview-dupont-2/2/


Performance Chemicals“DuPont Titanium Technologies” main products are its range of DuPont “Ti-Pure” titanium

dioxide products used for plastics, papers and coatings. “DuPont Chemicals and Fluoroproducts”

chemical products are seen in refrigerants, lubricants, propellants, solvents and fire extinguishers. This

segment makes up 20.4% of net sales and is equivalent to $7.2bn. (DuPont, 2013a)

Performance Materials“Performance Polymers” product portfolio includes a range of engineering polymers used in a

variety of chemical, electrical and mechanical systems. “Packaging & Industrial Polymers” produces

resins and films used in an array of packaging and industrial polymer applications. This segment makes

up 18.3% of net sales and is equivalent to $6.5bn. (DuPont, 2013a)

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DuPont (2013a) Annual Report 2012. [Online] Available at: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDkzNzU2fENoaWxkSUQ9NTMxODQ3fFR5cGU9MQ==&t=1 [Accessed: 1 March 2013]

Geographical Structure

2010 2011 20120%

10%20%30%40%50%60%70%80%90%

100%

38.0% 36.3% 38.1%

2.9% 2.6% 2.6%

23.3% 24.1% 23.1%

24.6% 24.8% 23.1%

11.2% 12.2% 13.1%

Geography - Net Sales

Latin AmericaAsia PacificEMEACanadaUnited States

Graph 4a

United States

Canada EMEA Asia Pacific

Latin America

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

Change in Net Sales(2010 - 2012)

Graph 4b

(DuPont, 2011-2013a)

Graph 4a shows that Du Pont’s main single market remains the United States, followed by the

EMEA (Europe, Middle East and Africa) and the Asia Pacific regions. However, growth in regards to net

sales since 2010 has largely come from Latin America. This includes growth in Latin America being almost

double that seen in any other region, including that in the US. (DuPont, 2013a)

Although growth was seen Du Pont’s Latin American operations, its starting point was relatively

low as compared to its US operations. As such, the US market will likely remain Du Pont’s topmost source

of income in the short-to-medium term. However, if this growth in Du Pont’s Latin American market

continues at the rate seen between 2010 and 2012, Latin America will become an increasingly important

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market for Du Pont’s products. As such, future strategic targets and measures should reflect such

importance. (DuPont, 2013a)

2010 2011 20120%

10%20%30%40%50%60%70%80%90%

100%

69.1% 64.6% 66.8%

1.5%1.3% 1.2%

15.3% 19.4% 18.1%

8.7% 9.2% 8.2%5.4% 5.5% 5.7%

Geography - Property

Latin AmericaAsia PacificEMEACanadaUnited States

Graph 4c

(DuPont, 2011-2013a)

In regards to Du Pont’s property portfolio, Du Pont has a disproportionate degree of property

weighted towards the US. This hinders Du Pont’s ability to grow in markets such as Latin America by

increasing the timing and costs involved in product distribution.

Overall, Du Pont has a diverse geographical market base with footholds in both mature markets

and in key growth markets including China and Brazil. This diverse geographical portfolio will help ensure

Du Pont’s long-term growth prospects.

DuPont (2011) Annual Report 2010. [Online] Available at: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDEzMDc1fENoaWxkSUQ9NDI0MTU3fFR5cGU9MQ==&t=1 [Accessed: 1 March 2013]DuPont (2012) Annual Report 2011. [Online] Available at: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDU1NjkyfENoaWxkSUQ9NDgyMTk5fFR5cGU9MQ==&t=1 [Accessed: 1 March 2013]

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http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDU1NjkyfENoaWxkSUQ9NDgyMTk5fFR5cGU9MQ==&t=1


http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDEzMDc1fENoaWxkSUQ9NDI0MTU3fFR5cGU9MQ==&t=1




Financial Performance

2008 2009 2010 2011 201205

10152025303540

Revenue vs. Net Income

Revenue Net Income

Valu

e $B

n

Graph 5a

2008 2009 2010 2011 201202468

10121416

Cash vs. Short-term Liabilities

Short-Term LiabilitiesCash

Valu

e $B

n

Graph 5b

(DuPont, 2009-2013a)

Graph 5a shows that Du Pont’s revenues declined in the year ended 2009. This was due to

subdued economic conditions which included “declining consumer and business confidence”. This, in Du

Pont’s view, caused customers to delay or cancel their orders. This also led to delays in customer

payments for goods, thus impeding Du Pont’s cash flow performance. However, graph 4b shows cash

flow remaining stable throughout this period. Furthermore, revenue performance improved from 2010

onwards and reached $34.8bn by 2012. This shows that, although Du Pont’s financial performance

declined in 2009, the long-term prospects for the company remain stable. (DuPont, 2011-2013a)

Regarding short-term liabilities, although these have increased since 2010, they have remained

in proportion to the company’s overall size in relation to total assets. As such, this increase should not be

an issue of concern at the present time.

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2008 2009 2010 2011 20120.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

Profit Margin(Revenue - Cost of Sales)

Graph 5c

2008 2009 2010 2011 20120.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

Net Income/Revenue(Revenue - Cost of Sales - Expenses)

Graph 5d

(DuPont, 2009-2013a)

Du Pont saw an increase in its profit margin in both 2009 and 2010 after which it levelled out at

slightly above 26%. As shown in graph 5c, when factoring in general expenses such as administration, the

net income margin for 2012 stood at 8%, a fall from 10.3% the previous year. This shows an increase in

company expenses is disproportionate to its increase in revenue, thus reducing Du Pont’s financial

performance. However, this margin remains higher than in 2009 when it stood at 6.7%. As such, this

lower margin of 8% is likely to remain sustainable in the long-term on the condition it doesn’t decline

significantly in future years. (DuPont, 2009-2013a)

DuPont (2009) Annual Report 2008. [Online] Available at: http://media.corporate-ir.net/media_files/irol/73/73320/BOP72619BOP005_BITS_N_1519.pdf [Accessed: 1 March 2013]DuPont (2010) Annual Report 2009. [Online] Available at: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MzY5MjM3fENoaWxkSUQ9MzY1ODgyfFR5cGU9MQ==&t=1 [Accessed: 1 March 2013]DuPont (2011) Annual Report 2010. [Online] Available at: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDEzMDc1fENoaWxkSUQ9NDI0MTU3fFR5cGU9MQ==&t=1 [Accessed: 1 March 2013]DuPont (2012) Annual Report 2011. [Online] Available at: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDU1NjkyfENoaWxkSUQ9NDgyMTk5fFR5cGU9MQ==&t=1 [Accessed: 1 March 2013]

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http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MzY5MjM3fENoaWxkSUQ9MzY1ODgyfFR5cGU9MQ==&t=1

http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MzY5MjM3fENoaWxkSUQ9MzY1ODgyfFR5cGU9MQ==&t=1

http://media.corporate-ir.net/media_files/irol/73/73320/BOP72619BOP005_BITS_N_1519.pdf



Major Strategic ChallengesChallenge Description

“Price increases for

energy and raw

materials could have a

significant impact on the

company's ability to

sustain and grow

earnings”

Although DuPont improved its profit margin during the period 2008 to 2010, the

volatility in the costs of energy and raw materials remain key factors to DuPont’s

long-term viability and success. This volatility has a significant impact on the

company’s net profit figure year-on-year and contributes to long-term instability

and risk. Therefore, systems should be put in place to mitigate exposure to such

volatility. Such systems will require years to implement and perfect and thus,

require long-term management commitment. Such systems should result in a

reduction in waste material and reducing reliance on key raw and energy materials.

Efficient procurement and logistics will also be required to further reduce waste

and improve profitability.

“Failure to develop and

market new products

and manage product life

cycles could impact the

company's competitive

position and have an

adverse effect on the

company's financial

results.”

Research and development will remain crucial to DuPont’s long-term viability as a

chemical company. As product lifecycles come to an end, DuPont must ensure it

has sufficient new products to replace and grow upon these declining products. As

such, DuPont’s investment in research and development increased by 48.8% during

the period 2008 to 2012 and has focused on growing customer needs including

“food productivity” and “decreasing dependency on fossil fuels”. This investment, if

maintained, will help maintain DuPont’s competitive advantage and further ensure

the company’s long-term viability and success.

“The company's results

of operations could be

adversely affected by

litigation and other

commitments and

contingencies.”

By the nature of being a chemicals based company, Du Pont faces significant

liabilities relating to litigation and related contingencies. A significant challenge

over the medium term will be implementing systems that prevent such litigation

from taking place at all, successful or not. As such, DuPont must ensure it meets

the highest ethical and environmental standards with investment in such being

returned in the form of lower litigation liabilities. In the short-term, DuPont must

ensure it meets all legal requirements regarding its environmental impact. This will

better allow DuPont to successfully defend against such litigation and reduce its

liabilities as appropriate.

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Balance ScorecardPerspective Objectives Measures Targets Initiatives

13




Financial

Customer

14

12.5%, 28%, 11% and $4.5bn

respectively by year end 2015

Reduce to $50mn by year

end 2018

Reduce Energy usage by 10% per $ of Revenue by year end 2020

Sum of all the objectives and initiatives that

follow.

“Bold Energy Plan” and the “Global

Climate and Energy Project”



ROCEGross Profit

Net Profit MarginNet Pre-Tax Profit

Improve Reputation

Increase Market Share

Reduce Delivery Times

Improve Profitability

Reduce Environmental

Costs

Reduce Energy Costs

Reduce Delivery Costs

Stability and Growth of Revenue

Improve Satisfaction

with Products

Improve Customer

Service

Annual Environmental Remediation

Total Energy Costs per $ of Revenue

Average Delivery Cost per Unit

Revenue

Number of New

Customers

Market Share

Orders per Customer

Average Delivery Times

Customer Retention Rate

Reduce by 15% by year end 2018

$41bn by year end 2015

15% More Customers by year

end 2015

24.5% in Corn, Soybean & Other Seeds by year end

2019

15% Increase in orders per

customer by year end 2016

Reduce by 25% by year end

2018

15% Increase by year end

2015

“US Resilience Project”

Indirectly“Central Research and Development

Team”

Indirectly“Bold Energy Plan”

and the “US Resilience Project”

Indirectly “Central Research and Development

Team”

“Central Research and Development

Team”


Indirectly


Objectives Measures Targets Initiatives

Internal Business

Processes

Learning and Growth

Develop 1000 new products

by 2015

Reduce to $300mn by end 2016

GP of 28% and Reduce Energy

usage by 10% by year end 2020

Reduce by 15% by Year End

2018

Investment in Research and Development

Develop New Products

Reduce Environmental

Impact

Reduce Material and Energy Waste

Shorten Supply Chains

Geographical Diversification

Improve Environmental Sustainability

Number of Total Products

CO2 Emissions and Annual

Environmental Remediation

Gross Profit Margin and Total

Energy Costs

Average Delivery Time

Break Down of Sales by

Geographic Location

Latin America 20% and Asia Pacific 30% by year end

2018

Revenues from Sustainable

Products



$8bn from Non-Depletable Resources

$2bn from Low Emission products

Greenhouse Gas Emissions

& Fuel Efficiency

Reduce greenhouse gas

emissions by 15% and Reduce water consumption by 30% by year end

2015

$2bn Annual Investment

Invest $640mn and develop 1000 new products by

2015

Total Investment in R&D

Investment in R&D for Sustainable

Products




Indirectly“Demand Planning Systems” and US

Resilience Project”

“Global Climate and Energy

Project” and the “Central Research and Development

Team”

“Bold Energy Plan” and the

“Global Climate and

Energy Project”


Team”


Team”


Perspective Objectives Measures Targets Initiatives

Learning and Growth

15

Investment in International

Logistics

Investment in Non US/EMEA

Facilities

Average Delivery Times

Value of Non US/EMEA

Warehouses and R&D Facilities

Reduce by 15% by Year End

2018

$2bn in Latin America & $1.5bn in Asia Pacific by year end 2018

Develop workforce Capability

Investment in Training and Development

“Modern Apprenticeship

Program”

Increase No. of Apprenticeships by 25% by 2018

“Demand Planning Systems” and US Resilience

Project”



Notes to the Balance Scorecard1. Colours

a. Red – Delivery, Supply Chain and Logisticsb. Blue – Research, Corporate Development and Training.c. Purple – Applicable to both of the above.

2. US Resilience Projecta. This initiative sets out to “standardise” the business processes within DuPont’s supply chain.

i. This standardisation will reduce delivery times and associated costs and will facilitate “Investment in Non US/EMEA Facilities”. These simpler supply chains will also contribute to “enhancing customer satisfaction” and “improved customer service”.

3. Demand Planning Systemsa. This system will use factors such as work-in-progress, inventory levels, plant capacities and

production plans to further enhance DuPont’s ability to meet “customer demand”. b. This will help “reduce deliver times” and contribute to the “Investment in International Logistics”.

4. Central Research and Development Teama. This central R&D team is aimed at producing breakthroughs in science and technology that will

lead to the coordinated development of new products. This initiative will also increase the productivity of corporate development through the streamlining of the R&D process.

b. This initiative aims at contributing to the “stability and growth of revenue” by enhancing growth in DuPont’s product portfolio and contributing to an “increase in market share”.

c. The initiative will work with the “Global Climate and Energy Project” on the development of environmentally friendly products, reducing energy costs and aiding corporate sustainability.

5. Modern Apprenticeship Programa. This training program will aid the workforce in gaining required skills and qualifications. This will

bring in new and different perspectives necessary for the “development of new products” and improve corporate productivity.

b. This will contribute to “improving company reputation” as DuPont will be seen as providing new opportunities in the job market.

6. Bold Energy Plana. The “Bold Energy Plan” aims to improve corporate sustainability and energy efficiency within

DuPont’s current supply chain, thus contributing to DuPonts “2020 Energy Plan”. This, by default, will also reduce DuPont’s total energy costs by $179 million by 2020.

7. Stanford University’s Global Climate and Energy Projecta. This project supports the “Bold Energy Plan” by encouraging innovative research into sustainable

energy technologies. The project will address Du Pont’s technology based needs in fields such as solar energy, second-generation biofuels and energy storage, therefore contributing to achieving its energy and environmental targets.

b. Collaborators in this project include Toyota, General Electric and ExxonMobil who, since the projects launch in 2002, have together invested over $113Mn in ninety-three research programs.

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SignatoriesWe commend this paper to the University of Hertfordshire to be delivered on or by 11 March 2012.

Signed on behalf of authors as stated on front page.

Jason Cates

___________

17

analysis and balance scorecard - dupont

Business

financial performance

performance chemicals

performance materials

performance chemical

fromduponts agriculture

size of business

sustainable growth

internal business processes