DuPont de Nemours Inc. (NYSE:DD)

The period under review demonstrates significant fluctuations in financial performance as measured by economic profit. Net operating profit after taxes (NOPAT) experienced considerable volatility, beginning at US$8,206 million in 2015, declining to US$3,846 million in 2016, and continuing downward to US$2,498 million in 2017. A partial recovery was observed in 2018 with NOPAT reaching US$4,932 million, before a substantial loss of US$-572 million was recorded in 2019.

Concurrently, the cost of capital exhibited an increasing trend from 17.50% in 2015 to 25.31% in 2019, with peaks at 19.47% in 2016 and 22.44% in 2017. This suggests a growing risk profile or increasing market expectations regarding returns during this timeframe.

Invested capital also showed substantial variation. It increased from US$46,288 million in 2015 to US$50,610 million in 2016, then experienced a dramatic rise to US$149,192 million in 2017. While remaining high at US$153,164 million in 2018, it decreased significantly to US$62,770 million in 2019.

Economic Profit Trend

Economic profit began at US$104 million in 2015, indicating a modest creation of value. However, it quickly transitioned to substantial economic losses, reaching US$-6,009 million in 2016. These losses intensified in subsequent years, peaking at US$-30,974 million in 2017 and remaining negative at US$-23,947 million in 2018 and US$-16,459 million in 2019. The consistent negative economic profit throughout the majority of the period suggests that the company’s returns were insufficient to cover its cost of capital.

Relationship between NOPAT and Economic Profit

The decline in NOPAT from 2015 to 2019 directly contributed to the deterioration of economic profit. Even with a temporary increase in NOPAT in 2018, the rising cost of capital and the high level of invested capital prevented a return to positive economic profit.

Impact of Invested Capital

The significant increase in invested capital in 2017, coupled with a relatively stable NOPAT compared to the capital increase, likely exacerbated the negative economic profit in that year. The subsequent decrease in invested capital in 2019 did not fully offset the impact of the negative NOPAT and high cost of capital.

Overall, the analysis reveals a period of declining economic performance. The company struggled to generate returns exceeding its cost of capital, resulting in substantial economic losses, particularly from 2016 onwards. The interplay between NOPAT, cost of capital, and invested capital was critical in driving these results.

The financial data reveals significant fluctuations in profitability metrics over the five-year period. Both net income attributable to DuPont and net operating profit after taxes (NOPAT) demonstrate notable volatility and an overall downward trend from 2015 to 2019.

Net Income Attributable to DuPont

The net income experienced a steep decline from a peak of 7,685 million US dollars in 2015 to 1,460 million US dollars in 2017. Although there was a partial recovery in 2018 where net income increased to 3,844 million US dollars, the figure sharply contracted again to only 498 million US dollars in 2019. This pattern highlights increasing challenges in maintaining consistent profitability.

Net Operating Profit After Taxes (NOPAT)

The NOPAT metric follows a similar variable trend but shows even greater volatility throughout the period. It begins at 8,206 million US dollars in 2015 and falls sharply to 2,498 million US dollars by 2017. Despite a rebound in 2018 to 4,932 million US dollars, the NOPAT turns negative in 2019, indicating an operational loss of 572 million US dollars. This negative result in 2019 suggests operational difficulties or increased costs impacting the company's core profitability that year.

Overall, the data suggests a period of significant financial distress and operational challenges, especially towards the end of the timeline. Both net income and NOPAT show a loss of momentum post-2015 with a critical downturn in 2019. The negative NOPAT position in 2019 might call for a closer examination of the company’s operational efficiency and expense management during this period.

Provision for (benefit from) income taxes on continuing operations

The provision for income taxes on continuing operations demonstrates significant volatility over the analyzed period. In 2015, the provision was high at 2147 million US dollars, but it drastically decreased to 9 million US dollars in 2016, indicating a sharp reduction in tax expenses or changes in tax benefits. The following year, 2017, reported a negative value of -476 million US dollars, suggesting a tax benefit or credit rather than an expense. However, the provision increased again in 2018 to 1489 million US dollars before declining sharply to 140 million US dollars in 2019. Overall, the data reveals a highly fluctuating trend without a clear upward or downward consistency.

Cash operating taxes

Cash operating taxes exhibit a generally increasing trend from 2015 to 2018, starting at 2158 million US dollars in 2015 and peaking at 2222 million US dollars in 2018. This upward movement suggests rising actual cash outflows related to tax payments during the initial years. However, in 2019, a marked decrease to 751 million US dollars occurs, indicating a substantial drop in cash taxes paid. This shift may be reflective of tax strategy changes, timing differences, or altered profitability affecting cash tax obligations.

The financial data indicates significant fluctuations in the company's capital structure and invested capital over the five-year period.

Total reported debt & leases

This metric exhibits a rising trend from 2015 to 2018, increasing from 19,250 million US dollars to a peak of 43,241 million US dollars in 2018. However, this upward trajectory reverses sharply in 2019, with total debt decreasing to 18,001 million US dollars, indicating a substantial reduction in leverage or paydown of debt obligations during that year.

Total DuPont stockholders’ equity

Stockholders’ equity remains relatively stable between 2015 and 2016 but undergoes a dramatic increase in 2017, reaching 100,330 million US dollars, which is nearly quadruple the 2016 figure. This elevated level slightly declines in 2018 to 94,571 million but experiences a steep decrease in 2019 down to 40,987 million US dollars. The pronounced spikes and drops suggest significant equity transactions, asset revaluations, or changes in retained earnings during these years.

Invested capital

Invested capital follows a similar pattern to equity, growing moderately from 46,288 million US dollars in 2015 to 50,610 million in 2016, then experiencing a sharp increase to 149,192 million in 2017 and remaining close in 2018 at 153,164 million. In 2019, invested capital declines significantly to 62,770 million. This trajectory aligns with the movements seen in both equity and reported debt, indicating substantial changes in the company’s total capital invested in operating assets.

Overall, the data reflects periods of major capital structure changes, including a notable increase in both equity and debt leading up to 2017 and 2018, followed by a significant reduction in debt and equity in 2019. These shifts may be attributable to corporate restructuring, acquisitions, divestitures, or refinancing activities during these years. The volatility in invested capital further corroborates these possibilities, suggesting the company underwent important strategic financial decisions impacting its balance sheet composition and capital deployment.

The period under review demonstrates a significant decline in economic performance, as indicated by the economic profit and economic spread ratio. Initial profitability, as measured by economic profit, transitioned to substantial losses over the observed timeframe. This deterioration is mirrored in the economic spread ratio, which exhibits a consistently worsening trend.

Economic Profit

Economic profit began at US$104 million in 2015. However, it experienced a dramatic shift to a loss of US$6,009 million in 2016. Subsequent years show continued losses, reaching a peak loss of US$30,974 million in 2017, before decreasing to US$23,947 million in 2018 and US$16,459 million in 2019. The magnitude of the losses increased substantially before showing a modest reduction in the final year of the period.

Invested Capital

Invested capital increased from US$46,288 million in 2015 to US$50,610 million in 2016. A substantial increase occurred in 2017, reaching US$149,192 million, followed by a further increase to US$153,164 million in 2018. In 2019, invested capital decreased significantly to US$62,770 million. This suggests considerable capital deployment followed by a substantial reduction, potentially through divestitures or asset write-downs.

Economic Spread Ratio

The economic spread ratio started at 0.23% in 2015. It then moved into negative territory, declining to -11.87% in 2016. The ratio continued to worsen, reaching -20.76% in 2017 and -15.63% in 2018. The most negative value was observed in 2019, at -26.22%. This consistent decline indicates a widening gap between the return generated on invested capital and the cost of that capital, signifying diminishing value creation.

The concurrent movements in invested capital and the economic spread ratio suggest that while capital was initially deployed, it did not generate sufficient returns to cover its cost, and later, a significant portion of that capital was reduced. The negative and worsening economic spread ratio consistently demonstrates that the company’s investments were not generating economic value during this period.

The period under review demonstrates a significant decline in economic profit and a corresponding deterioration in the economic profit margin. Initial profitability quickly transitioned into substantial economic losses, culminating in a markedly negative margin by the end of the observed timeframe.

Economic Profit

Economic profit began at US$104 million in 2015. However, it experienced a dramatic shift to a loss of US$6,009 million in 2016. This loss intensified considerably in subsequent years, reaching a peak loss of US$30,974 million in 2017, before decreasing to a loss of US$23,947 million in 2018 and US$16,459 million in 2019. The consistent negative values indicate the company’s returns are failing to cover the cost of capital employed.

Adjusted Net Sales

Adjusted net sales exhibited volatility throughout the period. While showing an initial decrease from US$48,778 million in 2015 to US$48,158 million in 2016, sales increased substantially to US$64,816 million in 2017 and further to US$85,936 million in 2018. A significant reduction in sales occurred in 2019, falling to US$21,512 million. This fluctuation in sales does not appear to correlate directly with the trend in economic profit, suggesting factors beyond revenue generation are heavily influencing profitability.

Economic Profit Margin

The economic profit margin reflects the declining economic profit. Starting at a positive 0.21% in 2015, the margin swiftly became negative, reaching -12.48% in 2016. The margin continued to worsen, hitting -47.79% in 2017 and -27.87% in 2018. The most substantial decline occurred in 2019, with the margin plummeting to -76.51%. This indicates a substantial and increasing inability to generate returns exceeding the cost of capital, even considering the fluctuations in adjusted net sales.

The divergence between sales and economic profit suggests that increased revenue, when present, did not translate into improved economic returns. The consistently negative and worsening economic profit margin highlights a fundamental issue with profitability relative to capital employed, requiring further investigation into cost structures, capital allocation, and the cost of capital itself.