Return on Capital (ROC)
Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company debt and equity structure. It measures business productivity performance.
Return on Invested Capital (ROIC)
DuPont de Nemours Inc., ROIC 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | (572) | 4,932) | 2,498) | 3,846) | 8,206) | |
| Invested capital2 | 62,770) | 153,164) | 149,192) | 50,610) | 46,288) | |
| Performance Ratio | ||||||
| ROIC3 | -0.91% | 3.22% | 1.67% | 7.60% | 17.73% | |
| Benchmarks | ||||||
| ROIC, 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 NOPAT. See details »
2 Invested capital. See details »
3 2019 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × -572 ÷ 62,770 = -0.91%
4 Click competitor name to see calculations.
The period from 2015 to 2019 is characterized by a severe decline in capital efficiency, as evidenced by the Return on Invested Capital (ROIC) falling from 17.73% to -0.91%. This downward trajectory reflects a systemic inability to maintain profitable returns relative to the capital deployed during this timeframe.
- Net Operating Profit After Taxes (NOPAT) Volatility
- A significant contraction in operating profitability is observed, with NOPAT decreasing from US$ 8,206 million in 2015 to US$ 2,498 million by 2017. Although a partial recovery occurred in 2018, reaching US$ 4,932 million, the trend reversed sharply in 2019, resulting in a negative NOPAT of US$ 572 million. This volatility indicates substantial instability in core operating earnings.
- Invested Capital Expansion and Contraction
- The capital base experienced an abrupt and massive expansion between 2016 and 2017, increasing from US$ 50,610 million to US$ 149,192 million. This peak was maintained through 2018 at US$ 153,164 million before a drastic reduction occurred in 2019, where invested capital fell to US$ 62,770 million. The scale of these fluctuations suggests significant structural changes in the balance sheet, likely stemming from major acquisitions followed by substantial divestitures.
- ROIC Correlation and Capital Efficiency
- The collapse in ROIC is a direct result of the simultaneous decline in NOPAT and the surge in invested capital during the 2017-2018 period. The ROIC dropped precipitously from 17.73% in 2015 to 1.67% in 2017, as the capital base tripled while profits declined. Despite the reduction in invested capital in 2019, the transition of NOPAT into negative territory forced the ROIC to its lowest point of -0.91%, signifying that the company failed to generate any positive return on its remaining capital investments by the end of the period.
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Decomposition of ROIC
DuPont de Nemours Inc., decomposition of ROIC
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 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
The Return on Invested Capital (ROIC) exhibited a severe downward trajectory between 2015 and 2019, falling from 17.73% to -0.91%. This erosion of value is the result of systemic declines across the primary drivers of capital return, specifically operating profitability and asset turnover.
- Operating Profit Margin (OPM)
- A consistent contraction is observed in the operating profit margin, which plummeted from 21.25% in 2015 to 0.83% in 2019. While a marginal recovery was noted in 2018, the precipitous drop in 2019 indicates a significant loss in operational efficiency or a substantial increase in operating expenses relative to revenue.
- Turnover of Capital (TO)
- Capital turnover experienced a sharp decline, decreasing from 1.05 in 2015 to 0.34 in 2019. The most significant contraction occurred in 2017, where the ratio fell to 0.43, suggesting that the company generated progressively less revenue per unit of invested capital over the five-year period.
- Cash Tax Effect (1 – CTR)
- The tax component remained relatively stable from 2015 through 2018, fluctuating between 55.32% and 79.18%. However, a drastic anomaly occurred in 2019, with the value dropping to -318.42%, which heavily contributed to the negative ROIC recorded in the final year of the analysis.
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Operating Profit Margin (OPM)
DuPont de Nemours Inc., OPM 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | (572) | 4,932) | 2,498) | 3,846) | 8,206) | |
| Add: Cash operating taxes2 | 751) | 2,222) | 2,017) | 1,544) | 2,158) | |
| Net operating profit before taxes (NOPBT) | 180) | 7,154) | 4,515) | 5,389) | 10,364) | |
| 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) | |
| Profitability Ratio | ||||||
| OPM3 | 0.83% | 8.32% | 6.97% | 11.19% | 21.25% | |
| Benchmarks | ||||||
| OPM, 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 NOPAT. See details »
2 Cash operating taxes. See details »
3 2019 Calculation
OPM = 100 × NOPBT ÷ Adjusted net sales
= 100 × 180 ÷ 21,512 = 0.83%
4 Click competitor name to see calculations.
A significant downward trajectory in operating efficiency is observed between 2015 and 2019, characterized by a severe contraction in the operating profit margin. While the period began with strong profitability, the subsequent years show a consistent erosion of the company's ability to convert net sales into operating profit.
- Operating Profit Margin Erosion
- The operating profit margin experienced a precipitous decline from 21.25% in 2015 to 0.83% by 2019. A sharp reduction occurred between 2015 and 2016, where the margin nearly halved to 11.19%, followed by a further drop to 6.97% in 2017. Despite a marginal recovery to 8.32% in 2018, the margin collapsed to near-zero levels in 2019.
- Revenue and Profit Divergence
- Between 2015 and 2018, a divergence is noted between revenue growth and profitability. Adjusted net sales increased from 48,778 million US$ in 2015 to a peak of 85,936 million US$ in 2018. However, net operating profit before taxes did not scale proportionally, falling from 10,364 million US$ in 2015 to 7,154 million US$ in 2018, resulting in systemic margin compression.
- 2019 Operational Contraction
- The 2019 fiscal year reflects a dramatic contraction in both scale and profitability. Adjusted net sales fell sharply to 21,512 million US$, a significant decrease from the prior year's peak. Concurrently, net operating profit before taxes plummeted to 180 million US$, leading to the lowest recorded operating profit margin of 0.83% for the analyzed period.
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Turnover of Capital (TO)
DuPont de Nemours Inc., TO 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) | ||||||
| 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) | |
| Invested capital1 | 62,770) | 153,164) | 149,192) | 50,610) | 46,288) | |
| Efficiency Ratio | ||||||
| TO2 | 0.34 | 0.56 | 0.43 | 0.95 | 1.05 | |
| Benchmarks | ||||||
| TO, 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 Invested capital. See details »
2 2019 Calculation
TO = Adjusted net sales ÷ Invested capital
= 21,512 ÷ 62,770 = 0.34
3 Click competitor name to see calculations.
The turnover of capital demonstrates a significant overall decline between 2015 and 2019, signaling a reduction in the efficiency with which invested capital is utilized to generate net sales.
- Adjusted Net Sales Performance
- Revenue remained relatively stable between 2015 and 2016 before experiencing substantial growth through 2018, peaking at 85,936 million US dollars. However, a sharp contraction occurred in 2019, with sales falling to 21,512 million US dollars, representing a drastic reduction in the revenue base.
- Invested Capital Volatility
- The capital base exhibited extreme volatility, notably surging from 50,610 million US dollars in 2016 to 149,192 million US dollars in 2017. This expansion indicates a massive increase in the asset base. A subsequent sharp contraction was observed in 2019, with invested capital decreasing to 62,770 million US dollars.
- Turnover of Capital (TO) Ratio Trends
- The turnover ratio followed a downward trajectory, decreasing from 1.05 in 2015 to 0.34 in 2019. The most pronounced drop occurred in 2017, where the ratio fell to 0.43 as the increase in invested capital far outpaced the growth in adjusted net sales. Despite a moderate recovery to 0.56 in 2018, the ratio reached its period low in 2019, indicating that the reduction in sales was proportionally more severe than the reduction in invested capital during that fiscal year.
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Effective Cash Tax Rate (CTR)
DuPont de Nemours Inc., CTR 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | (572) | 4,932) | 2,498) | 3,846) | 8,206) | |
| Add: Cash operating taxes2 | 751) | 2,222) | 2,017) | 1,544) | 2,158) | |
| Net operating profit before taxes (NOPBT) | 180) | 7,154) | 4,515) | 5,389) | 10,364) | |
| Tax Rate | ||||||
| CTR3 | 418.42% | 31.06% | 44.68% | 28.64% | 20.82% | |
| Benchmarks | ||||||
| CTR, 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 NOPAT. See details »
2 Cash operating taxes. See details »
3 2019 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × 751 ÷ 180 = 418.42%
4 Click competitor name to see calculations.
The financial performance between 2015 and 2019 is characterized by significant volatility in operating profitability and an erratic trajectory in the effective cash tax rate. A general decline in operating efficiency is evident, culminating in a severe distortion of tax metrics in the final year of the period.
- Net Operating Profit Before Taxes (NOPBT)
- Operating profitability experienced a substantial downward trend, starting at US$ 10,364 million in 2015 and falling to US$ 4,515 million by 2017. A temporary recovery occurred in 2018, with profits rising to US$ 7,154 million, before a precipitous decline in 2019, where NOPBT collapsed to US$ 180 million.
- Cash Operating Taxes
- Cash tax expenditures remained relatively consistent from 2015 through 2018, fluctuating within a range of US$ 1,544 million to US$ 2,222 million. In 2019, cash taxes decreased to US$ 751 million, representing a significant reduction in absolute terms, although this decrease was not commensurate with the collapse in operating profit.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate exhibited extreme instability. After starting at 20.82% in 2015, the rate climbed to 44.68% in 2017, followed by a moderation to 31.06% in 2018. The 2019 fiscal year presents a critical anomaly, with the CTR spiking to 418.42%. This outlier is a mathematical result of the disproportionate relationship between the minimal NOPBT and the remaining cash tax obligations, indicating that tax payments far exceeded the operating profits generated during that period.
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