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A double-digit price hike helped chemical maker DuPont (DD-N) report a higher-than-expected quarterly profit, with executives issuing a bullish forecast based in part on strong demand and tight supply for a key paint ingredient.
DuPont is the largest global producer of titanium dioxide, a white pigment also known as Ti02 that is used to make paint and other consumer goods.
Even though construction and automobile markets remain weak, DuPont has raised prices on the pigment 35 percent so far this year and said that in the third quarter it sold every pound it made.
Rival Ti02 producers include Huntsman Corp and Tronox Inc.
Demand was also brisk for DuPont's agricultural products, with a strong start to the Latin American corn and soy planting seasons.
Companywide, executives were able to boost third-quarter prices by 15 percent.
"When DuPont has the kind of pricing power they had this past quarter, that tells you they have the right products," said Hank Smith of Haverford Investments, which owns DuPont shares.
For the third quarter, the company posted net income of $452 million US, or 48 cents per share, up from $367 million, or 40 cents per share, a year earlier.
Excluding one-time items, such as charges from the buyout this year of Danish food enzyme maker Danisco, DuPont earned 69 cents per share. By that measure, analysts had expected 56 cents, according to Thomson Reuters I/B/E/S.
Net sales rose 32 percent to $9.24 billion. Analysts had expected $8.79 billion.
DuPont's 15 percent price jump was its largest quarterly increase in more than a decade. Most of the rise came in the performance chemicals unit, which makes the Ti02 pigment.
The companywide increase had an effect on demand: Total volume rose only 1 percent during the quarter.
Chief Executive Ellen Kullman said that while demand for Ti02 remains strong, she expects a "pause" during the fourth quarter, mostly due to slower growth in China where officials are trying to curb inflation and tighten fiscal policy.
Still, Wall Street likes the Ti02 advantage that DuPont has as the world's largest supplier of the material.
"Titanium dioxide remains a central element of the DuPont story," Ticonderoga Securities analyst Mark Gulley said. "We estimate that Ti02 will be about 25 percent of this year's earnings, and next year could be a third."
Strong Latin American sales partially offset heavy spending in DuPont's agriculture unit, where an operating loss shrank 64 percent from a year earlier to $69 million.
"From a seed perspective, they do have good technology and they do have a good foothold in Latin America," said Jeff Windau, a chemical industry analyst with Edward Jones.
The unit was hampered last August after DuPont recalled its widely used Imprelis herbicide. Many customers and several lawsuits had complained that the treatment killed thousands of trees.
The company spent heavily in its safety and protection unit, which makes the popular Kevlar material for bulletproof vests. DuPont recently expanded a South Carolina Kevlar plant.
Operating income in the safety and protection unit slipped 12 percent to $118 million.
Last month a federal court jury awarded DuPont $919.9 million in damages, ruling that Kolon Industries Inc had stolen Kevlar trade secrets. Kolon is appealing the ruling.
For the year, DuPont said it expects to earn $3.97 to $4.05 per share. The company previously forecast $3.90 to $4.05. Analysts expect $3.96, according to Thomson Reuters I/B/E/S.