Key questions from the second quarter earnings call conducted by EI DuPont de Nemours Co. on July 22, 2008.
David Begleiter (Deutsche Bank): What are your expectations for corn seed share and soybean share in March in 2009?
James C. Borel: We expect share to increase on corn in North America. We have hit the inflection point, and we feel great about the line-up. We expect it to start increasing. We increased soybean share this year, and with what we are going to do with the Y series, next year we expect share to grow up again.
Sergey Vasnetsov (Lehman Brothers): How do you see a flow-through of energy cost accrued on natural gas, for you given typically DuPont has a delay, what it used to have historically?
Jeffrey L. Keefer: If you look at the first half, we have covered our raw material and energy cost increase with pricing. We got out in front of the curve there on our pricing and standing us in good stead. We are going to be vigilant on pricing as we go forward to make sure we are keeping up with the raw material flow through.
Kevin McCarthy (Banc of America Securities): The chemical industry has seen two large multibillion deals so far this month. You mentioned in your prepared markets that the credit market dislocations may provide some opportunity. Could you comment on the activity industry wide and elaborate on DuPont''s latest thoughts with regard to external growth over the next year?
Charles O. Holliday, Jr.: As we outlined in March, the acquisitions particularly in Agriculture & Nutrition, Safety & Protection and other selected places across the company, including in these fast growing markets of China and India, developed parts of the world are going to be available to us as this year plays out. Given our cash good position, we are looking for those that are on target with our goals. If you look at our 2010 forecast, what we are trying to accomplish, we will be looking for acquisitions related to that. We have been more of a net divesture over the last years as we clean up our both portfolio and focus on higher growth businesses. Now we think the right time is to adjust for that, but we are not talking about some big massive acquisition. We think that will be disruptive to delivery with the consistence earnings pattern we show.
Jeffrey Zekauskas (JP Morgan): All things being equal, energy prices are higher than you expected for the second half. Auto and housing demand is lower, but you raised your guidance. What do you expect to be much better that is offsetting those weaknesses in the second half?
Jeffrey L. Keefer: We continue to expect strong emerging market growth, continued pricing gains. We will continue our productivity efforts, those that stood us in good stead. We are going to continue those in the second half.
Jeffrey Zekauskas (JP Morgan): How many domestic triple stack acres in corn did you achieve?
Jeffrey L. Keefer: On the triples we were about 30% this year. We expect that to be no issue going forward.
Jeffrey Zekauskas (JP Morgan): What is the size of the rollout in Optimum GAT in soy in 2011 and why is that late?
Jeffrey L. Keefer: We just got the USDA approval. If I go back to the Y series launch, first thing is we have got great technology in that product line already. We are going to bring out the Y series. We intend to bring Optimum GAT and integrate it into that line so that we have got the best yielding, best performing varieties going forward from where we are. We are timing that to make sure that we continue to have leading soybean position overall.
Mark Connelly (Credit Suisse): If you do experience a couple of years of subdued growth how do you manage to embed incentive program through that period of this long?
Charles O. Holliday, Jr.: One of the things in the changes that we described for you back in March that we implemented for this year, something we call dynamic planning factor. We think that is unique to run other businesses, so we can uniquely incent people based on changing economic conditions. If we do see a change, we do not follow people to either to get a windfall or necessarily lose our hope because there is no way to do it. We have that adjustment. We think we have got that balance across our units where it is much in line with the shareholding out, because our performance stock shares are how we compare to our new frame of reference companies on top of shareholder returns. We believe we have a management incentive better to perform for the shareholders than I have ever seen in the company.
Robert Koort (Goldman Sachs): What your pricing strategy is in the seed business going into 2009 given the escalation in commodity prices over the last couple of years?
Carl J. Lukach: We are bringing a lot of technology to the market. This is a market where farmers are looking to protect and maximize yield and they are willing to pay for that. We price per value. We are expecting pricing to go up on the product line to reflect that value that we are going to be delivering. In general, we could anticipate important price increases. We are price leader in soybeans and in corn, I would anticipate double-digit prices again in 2009 based on where we are.
Donald Carson (Merrill Lynch): You just got your approval for soybeans. You are going to have relatively margin reductions over the next few years. Do you feel more confident about regulatory approval now that you have got in soybeans?
James C. Borel: We are on track for commercial introduction in 2010. We will ramp up aggressively beyond that, and as we have said before, we expect to be largely converted by 2015. The intent here is to bring Optimum GAT into corn as we bring out new leading hybrids. I can not size the acres for 2010, but it will be a commercial introduction and leading hybrids there and it will be ramped up aggressively over the next several years beyond that.
Donald Carson (Merrill Lynch): You described some of the new SU mix as you will have for Optimum GAT beans. You have recently signed an agreement with Syngenta to get access the two active ingredients for corn. What benefit do you see to the SU franchise from these new mixtures and introduction of Optimum GAT in both corn and soy?
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