Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
Economic Profit
DuPont de Nemours Inc., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= -572 – 24.37% × 62,770 = -15,867
The financial performance from 2015 to 2019 is characterized by a transition from modest economic value creation to substantial value destruction. While the period began with a positive economic profit, the subsequent four years were marked by a failure to generate operating returns that exceeded the cost of capital.
- Net Operating Profit After Taxes (NOPAT)
- A volatile and generally downward trajectory is observed in operating profitability. NOPAT declined from a high of US$ 8,206 million in 2015 to US$ 2,498 million in 2017. Despite a temporary recovery to US$ 4,932 million in 2018, the metric collapsed to a negative US$ 572 million by 2019, indicating a severe erosion of core operational earnings.
- Invested Capital and Cost of Capital
- The capital structure underwent significant expansion between 2016 and 2017, with invested capital rising from US$ 50,610 million to US$ 149,192 million. This elevated capital base persisted through 2018 before a sharp reduction to US$ 62,770 million in 2019. Concurrently, the cost of capital exhibited an upward trend, increasing from 16.92% in 2015 to a peak of 24.37% in 2019, which intensified the capital charge against earnings.
- Economic Profit Analysis
- Economic profit turned negative in 2016 and reached its nadir in 2017 at negative US$ 29,731 million. This peak in value destruction coincided with the massive increase in invested capital and a rising cost of capital. Although there was a gradual reduction in the magnitude of the economic loss toward 2019, the combination of negative NOPAT and the highest cost of capital in the period ensured that economic profit remained deeply negative at US$ -15,867 million.
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Net Operating Profit after Taxes (NOPAT)
DuPont de Nemours Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful receivables.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in deferred revenue.
5 Addition of increase (decrease) in restructuring reserve.
6 Addition of increase (decrease) in equity equivalents to net income attributable to DuPont.
7 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 554 × 4.07% = 23
8 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 691 × 21.00% = 145
9 Addition of after taxes interest expense to net income attributable to DuPont.
10 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 56 × 21.00% = 12
11 Elimination of after taxes investment income.
12 Elimination of discontinued operations.
The financial performance between 2015 and 2019 is characterized by significant volatility in both operational profitability and bottom-line earnings. A general downward trajectory is observed over the five-year period, interrupted by a temporary recovery in 2018.
- Net Operating Profit After Taxes (NOPAT) Trends
- A sharp contraction in operational profitability occurred between 2015 and 2017, with NOPAT declining from 8,206 million US$ to 2,498 million US$. Although a partial recovery was recorded in 2018, with NOPAT rising to 4,932 million US$, the trend reversed severely in 2019, resulting in a negative value of -572 million US$. This transition into negative territory indicates that the core operations failed to generate a positive return after taxes in the final year of the period.
- Net Income Attributable to DuPont
- Net income exhibited a pattern of volatility mirroring the operational trends. Earnings fell from a high of 7,685 million US$ in 2015 to 1,460 million US$ in 2017. A rebound to 3,844 million US$ was observed in 2018, followed by a steep decline to 498 million US$ by the end of 2019.
- Correlation and Operational Divergence
- While NOPAT and net income generally moved in tandem, a notable divergence appeared in 2019. During this year, net income remained positive (498 million US$) despite NOPAT falling into negative figures (-572 million US$). This discrepancy suggests that the positive net income was not derived from core operating activities, but rather supported by non-operating income, tax adjustments, or other non-operational financial gains.
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Cash Operating Taxes
DuPont de Nemours Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
The financial data reveals a significant divergence between the provision for income taxes on continuing operations and the actual cash operating taxes paid between 2015 and 2019. While the tax provision exhibited extreme volatility, including periods of tax benefits, the cash operating taxes remained substantially higher and more consistent throughout the majority of the period.
- Provision for Income Taxes Volatility
- The provision for income taxes demonstrated substantial fluctuations, dropping from US$ 2,147 million in 2015 to US$ 9 million in 2016, and shifting to a tax benefit of US$ -476 million in 2017. Following a recovery to US$ 1,489 million in 2018, the provision declined again to US$ 140 million in 2019. This pattern suggests significant non-cash tax adjustments or accounting entries that decoupled the reported tax expense from actual liquidity outflows.
- Cash Operating Tax Trends
- Cash operating taxes remained relatively elevated and more stable compared to the provision from 2015 through 2018. Payments peaked in 2018 at US$ 2,222 million, having maintained a range between US$ 1,544 million and US$ 2,222 million during the 2016-2018 interval. A sharp contraction occurred in 2019, with cash operating taxes falling to US$ 751 million.
- Analysis of Accrual versus Cash Divergence
- A notable discrepancy is observed specifically in 2016 and 2017. In 2016, despite a nominal provision of US$ 9 million, the company incurred cash tax outflows of US$ 1,544 million. Similarly, in 2017, a reported tax benefit of US$ -476 million coincided with a cash tax payment of US$ 2,017 million. This indicates the presence of significant deferred tax reversals or timing differences that required cash settlements despite the accounting tax position.
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Invested Capital
DuPont de Nemours Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of LIFO reserve. See details »
5 Addition of deferred revenue.
6 Addition of restructuring reserve.
7 Addition of equity equivalents to total DuPont stockholders’ equity.
8 Removal of accumulated other comprehensive income.
9 Subtraction of construction in progress.
10 Subtraction of marketable securities.
The trajectory of invested capital between 2015 and 2019 is characterized by a period of rapid expansion followed by a sharp contraction. Invested capital grew steadily from 2015 to 2016, experienced an exponential increase in 2017, peaked in 2018 at 153,164 million USD, and subsequently declined by approximately 59% in 2019.
- Total Reported Debt and Leases
- A consistent upward trend is observed from 2015 through 2018, with debt rising from 19,250 million USD to a peak of 43,241 million USD. This period of accumulation ended abruptly in 2019, when debt levels fell to 18,001 million USD, representing a return to levels slightly below those recorded in 2015.
- Total Stockholders' Equity
- Equity remained relatively stable between 2015 and 2016 before surging to 100,330 million USD in 2017. Following a slight decline in 2018, equity decreased significantly to 40,987 million USD by the end of 2019, indicating a substantial reduction in the equity base.
- Invested Capital Dynamics
- The dramatic expansion of invested capital in 2017 and 2018 was driven by simultaneous increases in both debt and equity. The sharp reduction in 2019 suggests a large-scale corporate restructuring or divestiture, as both primary funding sources decreased markedly, resulting in a consolidated invested capital figure of 62,770 million USD.
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Cost of Capital
DuPont de Nemours Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 39,262) | 39,262) | ÷ | 58,866) | = | 0.67 | 0.67 | × | 34.93% | = | 23.30% | ||
| Preferred stock, series A, $1.00 par (book value) | —) | —) | ÷ | 58,866) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Short-term borrowings and long-term debt3 | 19,050) | 19,050) | ÷ | 58,866) | = | 0.32 | 0.32 | × | 4.07% × (1 – 21.00%) | = | 1.04% | ||
| Operating lease liability4 | 554) | 554) | ÷ | 58,866) | = | 0.01 | 0.01 | × | 4.07% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 58,866) | 1.00 | 24.37% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 39,083) | 39,083) | ÷ | 83,391) | = | 0.47 | 0.47 | × | 34.93% | = | 16.37% | ||
| Preferred stock, series A, $1.00 par (book value) | —) | —) | ÷ | 83,391) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Short-term borrowings and long-term debt3 | 41,531) | 41,531) | ÷ | 83,391) | = | 0.50 | 0.50 | × | 4.34% × (1 – 21.00%) | = | 1.71% | ||
| Operating lease liability4 | 2,777) | 2,777) | ÷ | 83,391) | = | 0.03 | 0.03 | × | 4.34% × (1 – 21.00%) | = | 0.11% | ||
| Total: | 83,391) | 1.00 | 18.19% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 55,780) | 55,780) | ÷ | 94,739) | = | 0.59 | 0.59 | × | 34.93% | = | 20.57% | ||
| Preferred stock, series A, $1.00 par (book value) | —) | —) | ÷ | 94,739) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Short-term borrowings and long-term debt3 | 36,123) | 36,123) | ÷ | 94,739) | = | 0.38 | 0.38 | × | 3.88% × (1 – 35.00%) | = | 0.96% | ||
| Operating lease liability4 | 2,836) | 2,836) | ÷ | 94,739) | = | 0.03 | 0.03 | × | 3.88% × (1 – 35.00%) | = | 0.08% | ||
| Total: | 94,739) | 1.00 | 21.60% | ||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 24,371) | 24,371) | ÷ | 49,418) | = | 0.49 | 0.49 | × | 34.93% | = | 17.23% | ||
| Preferred stock, series A, $1.00 par (book value) | —) | —) | ÷ | 49,418) | = | 0.00 | 0.00 | × | 8.50% | = | 0.00% | ||
| Short-term borrowings and long-term debt3 | 23,079) | 23,079) | ÷ | 49,418) | = | 0.47 | 0.47 | × | 4.70% × (1 – 35.00%) | = | 1.43% | ||
| Operating lease liability4 | 1,967) | 1,967) | ÷ | 49,418) | = | 0.04 | 0.04 | × | 4.70% × (1 – 35.00%) | = | 0.12% | ||
| Total: | 49,418) | 1.00 | 18.77% | ||||||||||
Based on: 10-K (reporting date: 2016-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 17,133) | 17,133) | ÷ | 41,627) | = | 0.41 | 0.41 | × | 34.93% | = | 14.38% | ||
| Preferred stock, series A, $1.00 par (book value) | 4,000) | 4,000) | ÷ | 41,627) | = | 0.10 | 0.10 | × | 8.50% | = | 0.82% | ||
| Short-term borrowings and long-term debt3 | 18,454) | 18,454) | ÷ | 41,627) | = | 0.44 | 0.44 | × | 5.40% × (1 – 35.00%) | = | 1.56% | ||
| Operating lease liability4 | 2,040) | 2,040) | ÷ | 41,627) | = | 0.05 | 0.05 | × | 5.40% × (1 – 35.00%) | = | 0.17% | ||
| Total: | 41,627) | 1.00 | 16.92% | ||||||||||
Based on: 10-K (reporting date: 2015-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings and long-term debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
DuPont de Nemours Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (15,867) | (22,931) | (29,731) | (5,656) | 374) | |
| Invested capital2 | 62,770) | 153,164) | 149,192) | 50,610) | 46,288) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -25.28% | -14.97% | -19.93% | -11.18% | 0.81% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Linde plc | — | — | — | — | — | |
| Sherwin-Williams Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -15,867 ÷ 62,770 = -25.28%
4 Click competitor name to see calculations.
The financial performance from 2015 to 2019 indicates a significant shift from modest value creation to substantial economic value destruction. Following a positive economic profit in 2015, the entity entered a prolonged period of negative economic profit, suggesting that returns on invested capital failed to exceed the cost of capital for four consecutive years.
- Economic Profit Trends
- A transition from a positive economic profit of US$ 374 million in 2015 to a deficit of US$ 5,656 million in 2016 is observed. This downward trajectory accelerated sharply in 2017, reaching a peak deficit of US$ 29,731 million. While a gradual recovery occurred in 2018 and 2019, with the deficit narrowing to US$ 15,867 million by the end of the period, the entity remained unable to return to a state of positive economic profit.
- Invested Capital Volatility
- Invested capital remained relatively stable between 2015 and 2016, ranging from US$ 46,288 million to US$ 50,610 million. A massive expansion occurred in 2017, with capital increasing to US$ 149,192 million, and peaking at US$ 153,164 million in 2018. This was followed by a significant contraction in 2019, where invested capital dropped to US$ 62,770 million, indicating a substantial reduction in the capital base.
- Economic Spread Ratio Analysis
- The economic spread ratio, which measures the difference between the return on invested capital and the cost of capital, declined from a positive 0.81% in 2015 to negative territory starting in 2016. Despite a temporary improvement in 2018 (-14.97% compared to -19.93% in 2017), the ratio deteriorated to its lowest point of -25.28% in 2019. The widening of this negative spread in 2019, despite a lower absolute economic loss than in 2017, is primarily attributed to the sharp decrease in the denominator of invested capital.
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Economic Profit Margin
DuPont de Nemours Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (15,867) | (22,931) | (29,731) | (5,656) | 374) | |
| Net sales | 21,512) | 85,977) | 62,484) | 48,158) | 48,778) | |
| Add: Increase (decrease) in deferred revenue | —) | (41) | 2,332) | —) | —) | |
| Adjusted net sales | 21,512) | 85,936) | 64,816) | 48,158) | 48,778) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -73.76% | -26.68% | -45.87% | -11.74% | 0.77% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Linde plc | — | — | — | — | — | |
| Sherwin-Williams Co. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Economic profit. See details »
2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × -15,867 ÷ 21,512 = -73.76%
3 Click competitor name to see calculations.
The financial trajectory from 2015 to 2019 is characterized by a transition from positive economic value creation to significant economic losses, accompanied by extreme volatility in net sales and profit margins.
- Economic Profit Trends
- A shift from positive to negative economic profit occurred after 2015, where the company recorded a surplus of 374 million USD. This was followed by a sharp decline into negative territory, reaching a peak loss of 29.73 billion USD in 2017. While the losses narrowed in 2018 and 2019 to 22.93 billion USD and 15.87 billion USD respectively, the company failed to return to a positive economic profit state within the analyzed period.
- Adjusted Net Sales Performance
- Revenue patterns show a period of expansion followed by a severe contraction. Adjusted net sales grew from 48.78 billion USD in 2015 to a high of 85.94 billion USD in 2018. However, 2019 saw a drastic reduction in sales to 21.51 billion USD, indicating a substantial change in the scale of operations or a significant divestiture of assets.
- Economic Profit Margin Analysis
- The economic profit margin reflects the combined impact of falling profits and fluctuating sales. Starting at a positive 0.77% in 2015, the margin dropped to -11.74% in 2016 and hit a significant low of -45.87% in 2017. Although a recovery to -26.68% was observed in 2018, the margin plummeted to -73.76% in 2019. This final decline is primarily attributed to the collapse in adjusted net sales, which amplified the impact of the remaining economic losses on the margin percentage.
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