Economic Value Added (EVA)
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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
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DuPont de Nemours Inc. pages available for free this week:
- Statement of Comprehensive Income
- Balance Sheet: Assets
- Common-Size Balance Sheet: Assets
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Geographic Areas
- Present Value of Free Cash Flow to Equity (FCFE)
- Selected Financial Data since 2005
- Return on Equity (ROE) since 2005
- Debt to Equity since 2005
- Price to Earnings (P/E) since 2005
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Economic Profit
DuPont de Nemours Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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
= – × =
The financial performance from 2015 to 2019 reflects a transition from marginal value creation to substantial economic value destruction. While 2015 showed a positive economic profit, subsequent years were characterized by negative returns relative to the cost of capital, indicating that the company failed to generate sufficient operating returns to cover its financing costs.
- Net Operating Profit After Taxes (NOPAT)
- A highly volatile and overall downward trend is observed in NOPAT. From a peak of 8,206 million US$ in 2015, profitability declined sharply, reaching a deficit of 572 million US$ by 2019. Although a partial recovery was noted in 2018 with a rise to 4,932 million US$, the subsequent collapse into negative territory in 2019 underscores a significant deterioration in operational efficiency.
- Invested Capital and Cost of Capital
- Invested capital underwent dramatic fluctuations, expanding from 50,610 million US$ in 2016 to 149,192 million US$ in 2017, before contracting sharply to 62,770 million US$ by 2019. Concurrently, the cost of capital exhibited a general upward trajectory, rising from 17.45% in 2015 to 25.22% in 2019. The combination of a massive increase in the capital base during 2017 and 2018, alongside a rising cost of capital, significantly heightened the financial burden on the organization.
- Economic Profit Analysis
- Economic profit transitioned from a positive 130 million US$ in 2015 to severe negative values, peaking at a loss of 30,855 million US$ in 2017. While there was a gradual reduction in the economic loss during 2018 and 2019, ending at -16,403 million US$, the figures remained deeply negative. This trend indicates a persistent inability to generate a return on invested capital that exceeded the weighted average cost of capital for the majority of the five-year period.
Net Operating Profit after Taxes (NOPAT)
DuPont de Nemours Inc., NOPAT calculation
US$ 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
= × =
8 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
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
= × 21.00% =
11 Elimination of after taxes investment income.
12 Elimination of discontinued operations.
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.
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).
- 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.
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 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.
Cost of Capital
DuPont de Nemours Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Preferred stock, series A, $1.00 par (book value) | ÷ | = | × | = | |||||||||
| Short-term borrowings and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ 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 | ÷ | = | × | = | |||||||||
| Preferred stock, series A, $1.00 par (book value) | ÷ | = | × | = | |||||||||
| Short-term borrowings and long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ 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 | ÷ | = | × | = | |||||||||
| Preferred stock, series A, $1.00 par (book value) | ÷ | = | × | = | |||||||||
| Short-term borrowings and long-term debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ 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 | ÷ | = | × | = | |||||||||
| Preferred stock, series A, $1.00 par (book value) | ÷ | = | × | = | |||||||||
| Short-term borrowings and long-term debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2016-12-31).
1 US$ 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 | ÷ | = | × | = | |||||||||
| Preferred stock, series A, $1.00 par (book value) | ÷ | = | × | = | |||||||||
| Short-term borrowings and long-term debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2015-12-31).
1 US$ 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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| 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 × ÷ =
4 Click competitor name to see calculations.
Between 2015 and 2019, a significant deterioration in economic performance is evident, characterized by a transition from marginal value creation to substantial value destruction. The period is marked by extreme volatility in the capital base and a persistent inability to generate returns exceeding the cost of capital.
- Economic Profit Trends
- A shift from a positive economic profit of US$ 130 million in 2015 to severe deficits is observed. The most acute loss occurred in 2017, reaching US$ -30,855 million. While a recovery trend emerged between 2017 and 2019, reducing the deficit to US$ -16,403 million, the company remained unable to return to a positive economic profit state.
- Invested Capital Volatility
- Invested capital remained relatively stable from 2015 to 2016 before undergoing a massive expansion in 2017, increasing from US$ 50,610 million to US$ 149,192 million. This elevated capital level persisted through 2018. However, a sharp contraction occurred in 2019, with invested capital falling to US$ 62,770 million, suggesting a significant divestiture or capital restructuring event.
- Economic Spread Ratio Analysis
- The economic spread ratio, which measures the difference between the return on invested capital and the cost of capital, moved from a marginal positive of 0.28% in 2015 to consistently negative territory. A brief improvement was noted in 2018, but the ratio declined to its lowest point of -26.13% in 2019. The fact that the spread reached its minimum in 2019, despite a reduction in total invested capital and a smaller absolute economic loss than in 2017, indicates a decline in the efficiency of the remaining capital employed.
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 | ||||||
| Net sales | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| 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 × ÷ =
3 Click competitor name to see calculations.
The financial trajectory from 2015 to 2019 is characterized by a transition from marginal value creation to significant economic value destruction. While the period began with a positive economic profit, subsequent years saw a precipitous decline, indicating that the cost of capital consistently exceeded the net operating profit after tax.
- Economic Profit Trends
- Economic profit shifted from a positive 130 million USD in 2015 to a severe deficit, reaching a peak loss of 30,855 million USD in 2017. Although absolute losses narrowed to 16,403 million USD by 2019, the company remained in a state of consistent economic loss for four consecutive years, highlighting a prolonged period of value erosion.
- Adjusted Net Sales Volatility
- Net sales exhibited significant fluctuations, increasing from approximately 48 billion USD in 2016 to a peak of 85,936 million USD in 2018. This expansion was followed by a sharp contraction to 21,512 million USD in 2019, suggesting substantial divestitures or a fundamental restructuring of the corporate portfolio.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the instability of the underlying profit and sales figures. After a negligible positive start of 0.27% in 2015, the margin collapsed into negative territory. Despite the reduction in absolute economic losses between 2017 and 2019, the margin deteriorated to its lowest point of -76.25% in 2019. This divergence indicates that the reduction in the sales base occurred more rapidly than the recovery of economic profit, thereby amplifying the negative margin percentage.