E. I. du Pont de Nemours and Company (NYSE:DD.PRB) Q3 2016 Earnings Conference Call - Final Transcript
Oct 25, 2016 • 08:00 am ET
Welcome to the DuPont Third Quarter 2016 Conference Call. My name is John, and I'll be your operator for today's call.
Please note that the conference is being recorded. Now I'll turn the call over to Greg Friedman, Vice President of Investor Relations. Greg, you may begin.
Thank you, John. Good morning, everyone, and welcome. Thank you for joining us for a discussion of DuPont's third quarter 2016 performance.
Here with me are Ed Breen, Chair and CEO; Nick Fanandakis, Executive Vice President and CFO; and Jim Collins, Executive Vice President responsible for our Agriculture segment.
The slides for today's presentation and corresponding segment commentary can be found on our website, along with our news release.
(Forward-Looking Cautionary Statements)
We will also refer to non-GAAP measures. We request that you review the reconciliation to GAAP statements provided with our earnings news release and today's slides which are posted on our website.
Our agenda today will start with Ed providing his perspective on the Company's performance and the advancement of our strategic initiatives. Then Nick will review our third quarter financial results and 2016 guidance. Third, Jim will discuss our Agriculture business. We will then take your questions.
With that introduction, it's now my pleasure to turn the call over to Ed.
Thank you, Greg. Good morning, everyone. Today I'd like to give an update on our third quarter performance, and the progress we are making with our three strategic priorities.
We continued our first half momentum in the third quarter. Highlights were sales and volumes grew, gross margins improved, our operating costs declined, segment operating earnings increased, operating margins expanded in all reportable segments, and free cash flow improved.
Total sales increased 1%. Total volumes increased 3%, despite a tough macro-economic backdrop. Five of the six reportable segments grew volumes. Performance Materials, Agriculture and Nutrition & Health contributed the most to the Company's volume improvement. Drivers included strength in the global automotive market for Performance Materials, higher corn seed and soybean volumes, and growth in probiotics, cultures and ingredient systems for Nutrition & Health.
5% volume growth in Industrial Biosciences reflected strong demand for bioactives and biomaterials. Prices for the total Company declined 2%, partly due to the pass-through of lower raw material costs. Operating earnings totaled $0.34 per share, which was a significant improvement versus last year's $0.13 per share. Notably, all of our businesses contributed to the increase in segment operating earnings.
While our Company-wide gross margins improved 45 basis points, the operating margin expansion in many segments largely came from our cost savings program. Total operating cost declined by about $235 million for the quarter. All-in, we are pleased with our financial performance. This morning, we raised our guidance for operating earnings per share to $3.25, a 17% increase from 2015.
We also continued to make steady progress on our strategic priorities. As we have said, our strategic priorities for 2016 center on three drivers of shareholder value creation; cost savings, capital expenditures, and working capital.