Daily Chemical Reactions

Loving You To Pieces – DuPont Splits To Drive Value, More Global Chemical Sector Break-ups Likely
May 23, 2024
Commodities Mentioned:
Natural Gas, Crude Oil, Polyolefins, Water, Electronics, Methanol, Ammonia, NGLs, Propane, LNG, Hydrogen, Carbon Capture, RNG, EVs, Renewable Power
Companies Mentioned:
DuPont, Corteva, Nvidia, Mitsubishi Electric, BHP, Anglo, Orlen, Entegris, Xylem, Veralto, Crescent Energy, SilverBow Resources, Shell, Phillips66, ExxonMobil, Equinor, Centrica, Johnson Matthey, LSB, Target

Daily Chemical Reaction

Loving You To Pieces – DuPont Splits To Drive Value, More Global Chemical Sector Break-ups Likely

Key Findings

  • General Thoughts: We discuss the DowDuPont break-up in 2019, and the now proposed DuPont separation into three companies – attractive sum-of-the-parts valuations do not ensure post-split relative outperformance.
  • Supply Chain/Commodities: We view the three businesses set to form with the proposed DuPont separation as attractive, though we view its water business as among its most globally underappreciated and attractive pieces.
  • Energy/Upstream: Global natural gas prices have surged higher in May relative to Crude Oil, and this has been a major development on our mind, as it suggests US chemical margins face downward pressure relative to 1Q24.
  • Sustainability/Energy Transition: We discuss the high expectations surrounding clean hydrogen production this decade, though we observe more net risk to forecasts in the West relative to China that could beat expectations.
  • Downstream/Other Chemicals: We highlight US home sale weakness amid low inventory levels, which supports home prices and domestic homeowner equity, and strength in North American rail traffic YTD relative to 2023.

Exhibit 1: DuPont has underperformed Corteva, Dow, the S&P 500, and S&P 500 chemicals index since June 1, 2019.

Source: Bloomberg, C-MACC Analysis, May 2024

See PDF below for all charts, tables and diagrams

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