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 – 24.70% × 62,770 = -16,078
The financial performance between 2015 and 2019 is characterized by a transition from marginal value creation to substantial value destruction, driven by a decline in operational profitability and significant volatility in the capital base.
- Net Operating Profit After Taxes (NOPAT)
- A volatile downward trajectory is observed in operational earnings. From a high of 8,206 million USD in 2015, NOPAT experienced a sharp decline, reaching a low of 2,498 million USD in 2017. Despite a partial recovery to 4,932 million USD in 2018, the trend reversed sharply in 2019, resulting in a negative NOPAT of 572 million USD, indicating a failure to generate positive operating income after taxes.
- Invested Capital
- The capital base underwent dramatic fluctuations. A significant expansion occurred between 2016 and 2017, with invested capital rising from 50,610 million USD to 149,192 million USD, peaking at 153,164 million USD in 2018. This was followed by a steep contraction to 62,770 million USD in 2019, suggesting a period of aggressive asset acquisition followed by substantial divestitures or restructuring.
- Cost of Capital
- The cost of capital exhibited a general upward trend, increasing from 17.13% in 2015 to 24.70% in 2019. This rising hurdle rate intensified the pressure on the organization to generate higher operational returns to avoid value destruction, particularly during the years of peak capital investment.
- Economic Profit
- Economic profit transitioned from a positive value of 278 million USD in 2015 to deep negative territory for the subsequent four years. Value destruction peaked in 2017 at 30,173 million USD, coinciding with the massive increase in invested capital and a high cost of capital. Although the economic loss narrowed to 16,078 million USD by 2019, the persistent negative figures confirm that the returns on invested capital remained consistently below the cost of capital throughout the period.
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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 | × | 35.43% | = | 23.63% | ||
| Preferred stock, series A, $1.00 par (book value) | —) | —) | ÷ | 58,866) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Short-term borrowings and long-term debt3 | 19,050) | 19,050) | ÷ | 58,866) | = | 0.32 | 0.32 | × | 4.07% × (1 – 21.00%) | = | 1.04% | ||
| Operating lease liability4 | 554) | 554) | ÷ | 58,866) | = | 0.01 | 0.01 | × | 4.07% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 58,866) | 1.00 | 24.70% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ 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 | × | 35.43% | = | 16.61% | ||
| Preferred stock, series A, $1.00 par (book value) | —) | —) | ÷ | 83,391) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Short-term borrowings and long-term debt3 | 41,531) | 41,531) | ÷ | 83,391) | = | 0.50 | 0.50 | × | 4.34% × (1 – 21.00%) | = | 1.71% | ||
| Operating lease liability4 | 2,777) | 2,777) | ÷ | 83,391) | = | 0.03 | 0.03 | × | 4.34% × (1 – 21.00%) | = | 0.11% | ||
| Total: | 83,391) | 1.00 | 18.43% | ||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ 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 | × | 35.43% | = | 20.86% | ||
| Preferred stock, series A, $1.00 par (book value) | —) | —) | ÷ | 94,739) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Short-term borrowings and long-term debt3 | 36,123) | 36,123) | ÷ | 94,739) | = | 0.38 | 0.38 | × | 3.88% × (1 – 35.00%) | = | 0.96% | ||
| Operating lease liability4 | 2,836) | 2,836) | ÷ | 94,739) | = | 0.03 | 0.03 | × | 3.88% × (1 – 35.00%) | = | 0.08% | ||
| Total: | 94,739) | 1.00 | 21.90% | ||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ 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 | × | 35.43% | = | 17.47% | ||
| Preferred stock, series A, $1.00 par (book value) | —) | —) | ÷ | 49,418) | = | 0.00 | 0.00 | × | 8.50% | = | 0.00% | ||
| Short-term borrowings and long-term debt3 | 23,079) | 23,079) | ÷ | 49,418) | = | 0.47 | 0.47 | × | 4.70% × (1 – 35.00%) | = | 1.43% | ||
| Operating lease liability4 | 1,967) | 1,967) | ÷ | 49,418) | = | 0.04 | 0.04 | × | 4.70% × (1 – 35.00%) | = | 0.12% | ||
| Total: | 49,418) | 1.00 | 19.02% | ||||||||||
Based on: 10-K (reporting date: 2016-12-31).
1 US$ 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 | × | 35.43% | = | 14.58% | ||
| Preferred stock, series A, $1.00 par (book value) | 4,000) | 4,000) | ÷ | 41,627) | = | 0.10 | 0.10 | × | 8.50% | = | 0.82% | ||
| Short-term borrowings and long-term debt3 | 18,454) | 18,454) | ÷ | 41,627) | = | 0.44 | 0.44 | × | 5.40% × (1 – 35.00%) | = | 1.56% | ||
| Operating lease liability4 | 2,040) | 2,040) | ÷ | 41,627) | = | 0.05 | 0.05 | × | 5.40% × (1 – 35.00%) | = | 0.17% | ||
| Total: | 41,627) | 1.00 | 17.13% | ||||||||||
Based on: 10-K (reporting date: 2015-12-31).
1 US$ 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 | (16,078) | (23,293) | (30,173) | (5,781) | 278) | |
| Invested capital2 | 62,770) | 153,164) | 149,192) | 50,610) | 46,288) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -25.61% | -15.21% | -20.22% | -11.42% | 0.60% | |
| 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 × -16,078 ÷ 62,770 = -25.61%
4 Click competitor name to see calculations.
The financial performance between 2015 and 2019 reflects a transition from marginal economic value creation to a sustained period of value destruction. A sharp decline in economic profit coincides with significant fluctuations in the invested capital base, indicating substantial structural changes in capital allocation and operational efficiency.
- Economic Profit Trends
- A transition from a positive economic profit of 278 million USD in 2015 to significant deficits is observed. This deficit intensified sharply in 2017, reaching a peak loss of 30,173 million USD. Although losses narrowed to 16,078 million USD by 2019, the organization failed to return to positive economic profit throughout the remainder of the analyzed period.
- Invested Capital Volatility
- The invested capital exhibited extreme volatility, increasing from 46,288 million USD in 2015 to a peak of 153,164 million USD in 2018. This expansion was followed by a substantial reduction to 62,770 million USD in 2019, suggesting a major restructuring of the asset base or significant divestitures.
- Economic Spread Ratio Analysis
- The economic spread ratio shifted from a positive 0.60% in 2015 to negative territory for the remainder of the period. Despite a temporary improvement in 2018, the ratio reached its lowest point in 2019 at -25.61%. The fact that the spread ratio deteriorated in 2019, even as nominal economic losses decreased, indicates that the reduction in the invested capital base magnified the negative impact of the economic deficit, reflecting a widening gap between the return on capital and the cost of 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 | (16,078) | (23,293) | (30,173) | (5,781) | 278) | |
| 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 | -74.74% | -27.10% | -46.55% | -12.00% | 0.57% | |
| 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 × -16,078 ÷ 21,512 = -74.74%
3 Click competitor name to see calculations.
The analysis of economic value added reveals a significant transition from positive value creation in 2015 to a period of sustained economic loss between 2016 and 2019. While absolute losses showed signs of narrowing in the final two years of the period, the overall economic performance remained deeply negative.
- Economic Profit Trends
- A positive economic profit of 278 million US dollars in 2015 shifted to a deficit of 5,781 million US dollars in 2016, deepening to a peak loss of 30,173 million US dollars in 2017. Following this trough, absolute losses began to contract, improving to 23,293 million US dollars in 2018 and 16,078 million US dollars in 2019, although the company remained unable to return to positive economic profit.
- Adjusted Net Sales Dynamics
- Revenue exhibited a growth trend from 2016 through 2018, rising from 48,158 million US dollars to a peak of 85,936 million US dollars. However, a precipitous decline occurred in 2019, where adjusted net sales dropped to 21,512 million US dollars, representing a significant contraction in the scale of operations.
- Economic Profit Margin Volatility
- The economic profit margin deteriorated sharply from 0.57% in 2015 to -46.55% in 2017. A temporary recovery to -27.10% was observed in 2018, coinciding with peak sales. However, the margin reached its lowest point in 2019 at -74.74%. This deterioration indicates that the reduction in the revenue base in 2019 far outpaced the reduction in absolute economic losses, thereby intensifying the negative margin.
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