TUESDAY UPDATE: DuPont Co. shares rose 11%, or $6 a share, in morning trading, rising above $57 and reversing most of this summer's loss, after CEO Ellen Kullman announced her abrupt departure Monday. She's leaving five months after reaching a truce with activist investor Nelson Peltz, who temporarily left her free to run the company without his public sniping -- until it was clear the company wouldn't meet its financial targets, again.
MONDAY: "Ellen Kullman, Chair and CEO of DuPont, announced that she will retire from the company effective October 16," writes DuPont Co. in a statement. "On that date, Edward Breen, a current member of the DuPont Board of Directors, will assume the role of Interim Chair and CEO of DuPont. The Board has engaged an executive recruitment firm to identify a full-time replacement." Earlier in the day, shares rose as investor Peltz's son-in-law Edward Garden on business TV reiterated his group's interest in restructuring the company to squeeze out more profits. DuPont statement here.
Kullman, 59, is leaving as DuPont posts yet another reduction in profits and accelerates cost-cutting. DuPont cut yearly per-share profit targets to $2.75, from a previous $3.10, blaming the strong U.S. dollar and weak foreign pesticide markets. And DuPont says it will speed up cost cuts "to achieve $1.3 billion of savings on a run rate basis by the end of 2016," instead of 2017, and will cut an additional $300 million in 2017. The company will disclose more in an investor conference call at 5 p.m. DuPont will put out third-quarter results Oct. 27.
Kullman, who narrowly beat back insurgent shareholders led by billionare investor Peltz in a contested board election this Spring, tried to paint her departure as a triumph, saying in her statement that the company has been successfully reorganized after its Axalta and Chemours spin-offs and "now is the right time for a new leader to continue to drive the pace of change to capitalize fully on the opportunity ahead."
She was popular among DuPont old-timers worried about Delaware's future without its formerly-dominant employer, including family heir and ex-Delaware Gov. Pierre S. "Pete" du Pont IV and his sons, who gave Kullman the "Pete du Pont Freedom Award" last Friday as the board was preparing to announce her departure.
It's not just DuPont: "Any industrial stock is getting cut," said Bob Costello, whose firm, Costello Asset Management in Huntingdon Valley, owns a small position in DuPont shares after selling its Chemours stock "immediately" after its spin-off this year, avoiding its subsequent 60 percent decline. "She's a good corporate person but it's too cyclical a business," depending on commodity prices and farmers' pesticide purchases, he told me. "They're getting hurt in the ag business, they're getting hurt on chemicals. There's nothing really working. It's not just them."
As CEO of Tyco International, Breen broke that company into more than six separate business groups, vastly enriching investors, after failing to boost the share price as a united company. He's also former President of Motorola and CEO of General Instrument Corp, and current co-owner of the Reeds at Shelter Haven hotel in Stone Harbor and the Riverfront at Odette's complex in New Hope where the Grove City College graduate raised his family.
"Ed Breen's record of achievement and broad experience make him well-suited to lead the company while the Board completes its search for the next executive to lead DuPont," lead director Alexander Cutler said in the statement.
The move brings Breen's tunaround career full circle: It was ex-DuPont Co. CEO and chairman John Krol who got Breen his defining job as Tyco's turnaround CEO in the early 2000s, leading to that industrial conglomerate's break-up. See my 2003 story here. Breen is also a member of the Comcast corporate board.
Breen and Cutler praised Kullman's record. "Looking ahead, we will continue to drive productivity, and we plan to conduct a deep dive into the details of our cost structure and allocation of capital to ensure we deliver appropriate returns for shareholders," Breen added, in a statement sure to chill any DuPonters who thought rounds of cost-cutting had already left the comapny lean.
"DuPont's unique science capabilities and leading positions in attractive growth markets are strong competitive advantages and we are committed to build on that base to drive DuPont's performance," he added.