DuPont de Nemours Q4 2025 Earnings Call Transcript

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Provided by Quartr
February 10, 2026

Key Takeaways

  • Positive Sentiment: DuPont finished 2025 ahead of guidance with organic sales +2%, operating EBITDA +6%, adjusted EPS of $1.68 (+16%), and provided 2026 guidance targeting ~3% organic growth, adj. EPS $2.25–$2.30, 60–80 bps margin expansion and >90% free‑cash‑flow conversion.
  • Positive Sentiment: Management emphasized operational and commercial execution—building a companywide business system, new KPIs and Kaizen initiatives—while launching >125 new products in 2025 that generated >$2 billion of sales and a Vitality Index of ~30%, which management says is driving margin uplift.
  • Neutral Sentiment: Segment outlook is mixed—Healthcare & Water expected to grow mid‑single digits (strength in medical packaging, devices and RO/ion exchange), while Diversified Industrials faced a Q4 organic decline (-4%) from shelter/construction weakness and an APAC distributor change, though aerospace orders are improving.
  • Positive Sentiment: Capital allocation remains shareholder‑friendly—Aramids sale (expected close ~Q1) should deliver roughly $1B after tax, the company completed a $500M ASR, retains a $2B repurchase authorization, intends to keep dividends, and is selectively pursuing M&A (notably in healthcare).
AI Generated. May Contain Errors.
Earnings Conference Call
DuPont de Nemours Q4 2025
00:00 / 00:00

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Operator

Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to DuPont's Fourth Quarter and Full-Year 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question at that time, simply press star followed by the number 1 on your telephone keypad. And if you'd like to withdraw that question, again, press star one. Thank you. I would now like to turn the conference over to Ann Giancristoforo, Vice President, Investor Relations. Ann, please go ahead.

Ann Giancristoforo
VP of Investor Relations, Corporate FP&A and Strategic Finance at DuPont

Good morning, and thank you for joining us for DuPont's Fourth Quarter and Full-Year 2025 Financial Results Conference Call. Joining me today are Lori Koch, Chief Executive Officer, and Antonella Franzen, Chief Financial Officer. We have prepared slides to supplement our remarks, which are posted on DuPont's website under the Investor Relations tab and through the webcast link. Please read the forward-looking disclaimer contained in the slides. During this call, we will make forward-looking statements regarding our expectations or predictions about the future. Because these statements are based on current assumptions and factors that involve risks and uncertainties, our actual performance and results may differ materially from our forward-looking statements. Our Form 10-K, as updated by our current and periodic reports, includes detailed discussion of principal risks and uncertainties which may cause such differences.

Ann Giancristoforo
VP of Investor Relations, Corporate FP&A and Strategic Finance at DuPont

Unless otherwise specified, all historical financial measures presented today are on a continuing operations basis and exclude significant items. We will also refer to other non-GAAP measures. A reconciliation to the most directly comparable GAAP financial measure is included in our press release and presentation materials and has been posted to DuPont's Investor Relations website. As a quick reminder, on the basis of presentation for our fourth quarter and full year financial results, our total company net sales, operating EBITDA, and adjusted EPS reflect the separation of Qnity and the previously announced divestiture of the Aramids business reported as discontinued operations. I'll now turn the call over to Lori, who will begin on Slide three.

Lori Koch
CEO at DuPont

Good morning, and thanks everyone for joining our fourth quarter call. Earlier today, we reported our fourth quarter and full-year financial results, which were ahead of our previously communicated guidance. We finished the year strong, delivering full year organic sales growth of 2%, operating EBITDA growth of 6%, and 100 basis points of margin expansion. Operational discipline and a focus on productivity were key to our earnings growth and margin improvement. These results led to an adjusted EPS of $1.68 per share, up 16% year-over-year. Free cash flow generation was strong in the year. While delivering on our financial metrics, we also executed significant operational and portfolio transformation during the year. We successfully completed the separation of Qnity Electronics, standing up a premier pure-play technology solutions partner to the semiconductor value chain.

Lori Koch
CEO at DuPont

We also completed the build-out of my executive leadership team, adding external talent from well-run companies as well as promoting within the organization. We set the strategic direction of new DuPont, starting with enhancing our core values to drive a culture focused on growth and continuous improvement. This includes building a robust business system and continuing the progress on both our commercial and operational excellence frameworks. Finally, we set clear and robust medium-term financial targets aligned with our performance-based culture. I want to thank our employees for remaining focused on delivering these results and driving the transformation during the year. The momentum and progress we made in 2025 is carrying forward to our 2026 strategic priorities, which I will cover on Slide four.

Lori Koch
CEO at DuPont

Consistent with what we outlined at Investor Day, our strategic priorities for 2026 are clear: drive above-market organic growth, continue to build out a robust business system, deploy a balanced capital allocation model, all while consistently delivering financial results. We have successfully repositioned ourselves and have a streamlined portfolio of leading businesses, the majority of which are aligned to secular end markets, which will enable strong organic growth. We saw 2% organic growth for full year 2025 and expect that to accelerate to about 3% in 2026. We are well-positioned in secular end markets, and our top-line growth will continue to be bolstered by our innovation engine, which launched more than 125 new products in 2025. Our new products generated greater than $2 billion in sales this past year, and our Vitality Index remained strong at about 30%.

Lori Koch
CEO at DuPont

We are advancing the build-out of our business system and made significant progress last year. We introduced a core set of enhanced KPIs focused on driving improvement for our shareholders, customers, and employees. These KPIs are embedded in our refreshed set of management standards, which has added more visibility, rigor, and structure to our business processes. In addition, we will continue to expand the use of Kaizen events across the businesses and functions to identify areas to drive productivity, improve end-to-end processes, and accelerate commercial development. On commercial excellence, we continue to advance the framework across commercial enablement, sales effectiveness, and strategic marketing. We have completed a maturity assessment resulting in the identification of key initiatives in 2026 centered primarily on demand generation and pipeline discipline. Operational excellence enhancements will continue in 2026.

Lori Koch
CEO at DuPont

Last year, we rolled out an updated set of KPIs aligned with our focus on safety, quality, delivery, and cost, and refreshed our excellence toolkit with a stronger focus on lean methodologies. In addition, we invested in people and process capabilities across our supply chain and quality functions in order to enhance the customer experience. These improvements and investments will drive overall productivity in 2026. Across these disciplines, we are also actively deploying digital capabilities and AI to accelerate our progress. Within innovation, we are making investments in our labs to enable streamlined workflows and accelerate our product development cycle times. Within operations, we are utilizing tools in the reliability and maintenance space to improve uptime and reduce costs. And on the commercial side, we are focusing on investments in workflow and process automation to improve the customer experience.

Lori Koch
CEO at DuPont

On capital allocation, we have a proven model that enables both consistent investments and high-return organic opportunities, as well as bolting on to existing businesses with M&A to enable even greater returns. A strong balance sheet is a priority for us. We will continue to return cash to shareholders through a quarterly dividend in line with our targeted payout ratio, as well as utilizing share repurchases. We previously announced a $2 billion share repurchase authorization, and we executed a $500 million ASR in the fourth quarter of 2025. With these priorities, let's move to our 2026 outlook on slide 5. Our financial guidance for 2026 is in line with the medium-term targets that we outlined at our September Investor Day.

Lori Koch
CEO at DuPont

On a reported basis, we expect organic sales to grow about 3% year-over-year, operating margins to expand 60-80 basis points, and adjusted EPS of $2.25-$2.30 per share. On a pro forma basis, our EPS will grow 10%-12% year-over-year. Free cash flow generation will be solid with an expected conversion of greater than 90%. Underpinning our organic growth is a mixed macro environment. Market indicators for Healthcare and Water technologies continue to expect mid-single-digit growth in both spaces on increasing medical procedures to support an aging and growing population and strong global Water demand. Overall automotive demand is about flat in 2026 with weakness in the U.S. and Europe. However, we continue to expect EV builds to significantly outpace overall builds. In construction, after years of declines, market stabilization is expected with flatish demand year-over-year.

Lori Koch
CEO at DuPont

We are off to a good start to the year. Our January sales were in line with expectations, and overall, we are seeing improving order trends in our Industrial Technologies business, which we view as an indication that these markets, which were down last year, are beginning to stabilize and recover. Overall, our teams are executing with a focus on driving growth and operational discipline, and our strategic priorities position us well for long-term value creation. With that, I'll now turn the call over to Antonella to cover the financials and outlook in more detail.

Antonella Franzen
CFO at DuPont

Thanks, Lori, and good morning, everyone. The fourth quarter marked a strong operational finish to the year. We exceeded our financial guidance on better-than-expected top-line mix and productivity, resulting in strong EBITDA and margin improvement in the quarter. Beginning with fourth quarter financial highlights on slide 6. Net sales of $1.7 billion were about flat versus the year-ago period, as a 1% organic sales decline was offset by a 1% benefit from currency. Organic sales consisted of a 1% decrease in volume, which included a $30 million or 2% headwind from order timing shifts into the third quarter from the fourth quarter due to system cutover activities in advance of the electronic separation. Adjusting for the timing shift, organic sales would have grown 1% in the quarter. Looking at the second half, organic sales increased 2% versus the year-ago period.

Antonella Franzen
CFO at DuPont

From a segment view, during the quarter, organic sales grew 3% in healthcare and Water technologies, offset by a 4% decline in Diversified Industrials. From a second-half perspective, healthcare and Water technologies grew 5% on an organic basis, partially offset by a 1% decline in Diversified Industrials. From a regional perspective, in the quarter, we saw organic growth in Europe up 2% year-over-year, with Asia-Pacific down 2%. North America was about flat year-over-year. Fourth quarter operating EBITDA of $409 million increased 4% versus the year-ago period on favorable mix and cost productivity. Operating EBITDA margin during the quarter of 24.2% increased 80 basis points year-over-year. Turning to Slide seven. Adjusted EPS for the quarter of $0.46 was up 18% versus the year-ago period.

Antonella Franzen
CFO at DuPont

The increase was driven by higher segment earnings of $0.02, lower interest expense of $0.04, and a $0.02 benefit from exchange gains and losses. This was partially offset by a $0.01 headwind from a higher tax rate. Turning to Slide eight. Healthcare and Water technologies fourth quarter net sales of $821 million were up 4% versus the year-ago period on a 3% organic growth and a 1% benefit from currency. Organic growth included a headwind of approximately $15 million or 2% in order timing shifts into the third quarter. Adjusting for this headwind, organic sales growth was 5% in the quarter. For the fourth quarter, healthcare sales were up mid-single digits on an organic basis versus the year-ago period. Organic growth was broad-based, led by continued strength in medical packaging and medical devices.

Antonella Franzen
CFO at DuPont

Water sales were up low single digits on an organic basis, primarily due to strength in industrial Water markets. A majority of the headwind from the order timing shift was within Water. Operating EBITDA for the segment during the quarter of $255 million was up 4% versus the year-ago period on organic growth and productivity gains, partially offset by growth investments. Operating EBITDA margin during the quarter was 31.1%, flat with the prior year. Turning to Diversified Industrials on slide 9. Fourth quarter net sales of $872 million decreased 3% versus the year-ago period on a 4% organic decline, partially offset by a 1% benefit from currency. The organic decline included a headwind of approximately $15 million in order timing shifts into the third quarter. Adjusting for this headwind, organic sales declined 2% in the quarter.

Antonella Franzen
CFO at DuPont

At the line of business level, organic sales for Building Technologies were down high single digits on continued weakness in construction markets. Industrial Technologies organic sales were down low single digits as strength in aerospace was more than offset by weakness in printing and packaging markets. A majority of the headwind from the order timing shift was within Industrial Technologies. Operating EBITDA for Diversified Industrials of $197 million was up 2% versus the year-ago period on favorable mix and cost productivity. Operating EBITDA margin during the quarter was 22.6%, up 110 basis points versus the year-ago period. Turning to slide 10, which outlines our first quarter and full year 2026 financial guidance. For the first quarter, we estimate net sales of about $1.67 billion, operating EBITDA of about $395 million, and adjusted EPS of $0.48 per share.

Antonella Franzen
CFO at DuPont

Our first quarter net sales guidance assumes about 2% organic growth and about a 2% benefit from currency. Our operating EBITDA assumes a 10% increase year-over-year and margin expansion driven by business improvement and lower corporate costs. For the full year 2026, as Lori noted, our guidance is in line with our medium-term targets. We expect net sales of about $7.1 billion, operating EBITDA of about $1.74 billion, and adjusted EPS of $2.25-$2.30 per share. Our full year net sales guidance assumes about 3% organic growth and a currency benefit of about 1%. Our operating EBITDA assumes a 6%-8% increase year-over-year with 60 to 80 basis points of margin expansion. Our adjusted EPS guidance at the midpoint assumes about a 35% increase on a reported basis and an 11% increase on a pro forma basis.

Antonella Franzen
CFO at DuPont

For the Healthcare and Water segment, we expect full year 2026 organic sales growth in the mid-single-digits percent range. This assumed growth is expected to be driven by broad-based strength within healthcare, primarily due to demand in medical packaging applications and medical devices. In Water, we expect continued growth primarily driven by demand for reverse osmosis and ion exchange within industrial and municipal Water markets. For the diversified Industrial segment, we expect full year 2026 organic sales growth in the low single-digits percent range.

Antonella Franzen
CFO at DuPont

Within building technologies, after a year of market declines, we are expecting 2026 to be about flat, primarily driven by stabilization within U.S. construction markets. In Industrial Technologies, we expect a low single-digit growth year-over-year driven by strength in aerospace and demand recovery within markets served by our industrial-based product lines. With that, we are pleased to take your questions, and let me turn it back to the operator to open the Q&A.

Operator

Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you'd like to withdraw that question, again, press star one. We also ask that you limit yourself to one question and one follow-up. Any additional questions, please requeue. Your first question comes from the line of Jeff Sprague with Vertical Research Partners. Please go ahead.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

Hey, thank you. Good morning, everyone. Hey, nice to see you.

Lori Koch
CEO at DuPont

Good morning, Jeff.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

Good morning. Nice to see a solid, clean quarter. Also, Lori, your opening remarks there, all the focus on internal KPIs and growth. You were working on that along the way, but the shift to execution from portfolio moves is welcome on my behalf, anyhow.

Lori Koch
CEO at DuPont

Thank you. Thank you.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

Yeah. Good luck with all that. I wanted to shift, though, a little bit to the external, if I could. Can you just put a little bit finer point on the industrial side of the equation, sort of the soft U.S. industrial production in your guide that you mentioned, but then seems a little bit countered by your comments about industrial orders picking up? So maybe just a little bit more color, what you're seeing really in the core industrial parts of the portfolio, how orders are trending, and what you think is going on with channel inventories?

Lori Koch
CEO at DuPont

Yeah, thanks, Jeff. So on the Industrial side, so talking ex the Shelter business, which we had mentioned, we think will be about flat this year, so moderating from down mid-single digits in 2025 and the flat. On the Shelter side is general kind of low single digit growth expectations for the full year on non-Res and repair and remodel, and then down low to mid-single digits on the resi side. But on the Industrial side, it's primarily coming from the Advanced Mobility businesses, which comprise automotive and aerospace, and on the consumer packaged goods side with some of our packaging goods in Cyrel. So we've seen nice order pickup as we exited the year and went into Q1.

Lori Koch
CEO at DuPont

A lot of it is being driven by aerospace. We're seeing nice low double-digit improvement in order in aerospace. It's about 3%-4% of our revenue, so it's in that range. But all the businesses kind of in that industrial technology space are doing nicely and seeing kind of the short cycle recovery that other names have been pointing to.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

Great. Then just on price-cost, obviously, a lot of attention on metals costs, which is maybe less of an issue for you than some of the metal vendors I cover. But what's going on on the inflation side of the equation? What sort of kind of price is embedded in the outlook for 2026?

Antonella Franzen
CFO at DuPont

So, Jeff, when it's our organic growth of 3% is predominantly related to volume for 2026, I would tell you we're not really expecting any significant headwinds from any of the roles, logistics, and kind of utilities kind of going into next year. We expect that to be relatively flat. And given our productivity initiatives, we expect to see a nice improvement in our gross margins on a year-over-year basis.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

Got it. Great. Thank you.

Antonella Franzen
CFO at DuPont

Yep.

Operator

Thank you. Your next question comes from the line of Scott Davis with Melius Research. Please go ahead.

Scott Davis
Scott Davis
Chairman and CEO at Melius Research

Hey, good morning, Lori and Antonella.

Antonella Franzen
CFO at DuPont

Good morning, Scott.

Scott Davis
Scott Davis
Chairman and CEO at Melius Research

Echo what Jeff said. Nice to see a more normalized quarter here. I wanted to follow up a little bit on Jeff's question, but on the Shelter side, going from kind of a negative high single digits to something that's more flat-ish, how do we cadence that into 2026? Is it more backend-loaded, or do you see real green shoots here early in the year that you've already seen to be able to call a recovery?

Antonella Franzen
CFO at DuPont

Yes. So let me start on that one. So when you look at our overall Shelter business, we mentioned that it was down around mid-single digits in 2025. So when we start off 2026, I would tell you that we expect it to be slightly down as we start the year. So part of it's going to be the comps on a year-over-year basis. So just keep in mind that in Q1 of 2025, we were down around 6% in that business.

Antonella Franzen
CFO at DuPont

So on a year-over-year basis, when you look at the two-year stack, it's not really changing significantly from kind of the second half of the year of where we're exiting, kind of going into the beginning of the year. So we do expect slight improvement as we go through the course of the year. If we start out slightly negative, getting a little bit better, that gets you to the overall flat for the year.

Scott Davis
Scott Davis
Chairman and CEO at Melius Research

Okay. That's helpful and I don't recall hearing Vitality Index on these calls in the past. Maybe you do, and I just haven't heard it. But 30% seems like a pretty robust number, but I don't really have any context to what that's been historically. And perhaps just some color on how helpful is this as it relates to mix or price or volume? Are these iterative slight improvements, or are there real meaningful product changes? Just some color would be helpful, I think. Thanks.

Lori Koch
CEO at DuPont

Sure. Yeah. We had first talked about it in yesterday where we mentioned that the 2024 number was about 30%. We expect that same performance in 2025. So it is helpful on both the top-line side as well as the margin side. So there's work that goes into not only releasing new products where we can get enhanced price and get some incremental share, there's also work that goes on kind of the value engineering side to take cost out and deliver margin improvement. So if we look at the margin profile of those products that comprise the new product sales, it is higher than the overall margin of the company. And so we're seeing nice lift from both sides. Our efforts internally, we did 125 new products last year. We'll expect to continue to do nicely this year.

Lori Koch
CEO at DuPont

We'll focus on making sure that the shift is happening from renew versus grow. You had mentioned the impact to the top line. There is a portion of that 30% Vitality Index that is replacement and making sure that we stay competitive and differentiated. We want to continue to do that, but also shift the mix towards growth so that we can get incremental top-line growth out of the innovation engine.

Scott Davis
Scott Davis
Chairman and CEO at Melius Research

Okay. Thanks, Lori. Best of luck. I just appreciate it. Pass it on to Ken.

Antonella Franzen
CFO at DuPont

Hey, thank you.

Operator

Your next question comes from the line of Steve Tusa with JPMorgan. Please go ahead.

Chigusa Katoku
Chigusa Katoku
Vice President of Equity Research at JPMorgan

Hi. This is Chigusa Katoku on for Steve Tusa. Thanks for taking my question. So my first question is on, so you're making great progress on the margin front and I just wanted to go back to the margin bridge that you provided at Analyst Day. You provided 0-50 basis points of productivity here. And I was wondering, given the execution, is there potential upside here, or are you tracking ahead of plan?

Antonella Franzen
CFO at DuPont

Yes. Well, I'll say let's take it one year at a time as we progress through the three-year plan. But I would say we're clearly starting out of the gates in a nice good spot. And when you look at our guidance for 2026, we have at least 20 basis points of margin expansion coming from productivity. Clearly, the teams are doing a great job. Lori outlined a lot of activities that we have ongoing in the organization. I think you saw some of the benefit of that in our Q4 results. You'll see that continue as we go into 2026, and we'll continue to drive that as we move through the three-year period.

Chigusa Katoku
Chigusa Katoku
Vice President of Equity Research at JPMorgan

Okay. That's great. Thanks. Then on the Aramids divestiture, I think, is expected to close at the end of the first quarter, which is going to bring in about $1.2 billion of pre-tax proceeds, if I remember correctly. But any initial thoughts on what you were thinking about capital deployment? Thanks.

Lori Koch
CEO at DuPont

Yeah. So we're still in that range of closing around the end of the first quarter, and it'll be about $1 billion on an after-tax basis. Keep in mind, we've already deployed about half of that with the $500 million ASR that we announced last quarter and have completed already with EPS growth for us this year. So we'll continue to be shareholder-friendly with respect to deployment of the proceeds. We have mentioned that we would like to continue to add to the top line through M&A. So we've got some opportunities that we're looking at primarily in the healthcare side right now within similar aspects to what we did with Spectrum and Donatelle.

Lori Koch
CEO at DuPont

We'll continue to be mindful, obviously, about ensuring a really strong return. So we'll look to get up to higher than our cost of capital by year five with respect to the IRR on the deal. So we'll continue to be shareholder-friendly. We've proven that we've done it in the past significantly, and we'll look to deploy them efficiently.

Chigusa Katoku
Chigusa Katoku
Vice President of Equity Research at JPMorgan

Okay. Great. Thank you.

Operator

Your next question comes from the line of John McNulty with BMO. Please go ahead.

John McNulty
John McNulty
Managing Director and Chemicals Analyst at BMO

Yeah. Good morning. Thanks for taking my question. Maybe you wanted to dig into the diversified margin lift. It was a pretty chunky lift. I guess, how much of that is around the mix with the benefit of aerospace kind of hanging in as a really strong driver versus how much of it is tied to some of that 80/20 kind of work that I know Beth is working on really kind of accelerating as we push over the next 12-18 months? Can you help us to think about that?

Antonella Franzen
CFO at DuPont

Yeah. So a couple of things that I would mention there. I would say you're not really yet seeing the benefits of 80/20. It's a little too early. As you know, Beth recently arrived, so yes, she's working on that. But the benefits of that, I would say, are to come as we move forward. When you kind of look at the activity in the fourth quarter, I would point more towards what drove the margin expansion to be a bit of mix related to the businesses that were growing when you look at the line of business level, as well as a strong push relative to productivity is what really drove the nice margin expansion in the fourth quarter on a year-over-year basis.

John McNulty
John McNulty
Managing Director and Chemicals Analyst at BMO

Got it. Okay. No, thanks for the color and then in terms of innovation, I mean, you mentioned the Vitality Index. You kind of spoke to, I think it was $2 billion of growth that you saw from some of the new products. I guess, can you help us to think about some of the more exciting innovations, the ones that are starting to move the needle maybe more than others that we should be looking for as we kind of look through 2026 into 2027?

Lori Koch
CEO at DuPont

Yeah. So the $2 billion is the total new product sales that are within the roundly $7 billion of sales that we reported. So it's a portion of replacement and a portion of growth. So we'll continue to try to shift that mix towards more growth versus replacement in the future. But as far as exciting innovations that are on the come, I think, one, for this year, we highlighted on the last call, and I'll highlight again just because it was such a sizable improvement, were the enhanced Tyvek garments. So we announced at a trade show late last year that we came out with a new model that has the best breathability and the best protection in the industry and we've seen really, really nice customer reaction to that. We announced it first in Europe, and we'll continue to roll it out across the globe.

Lori Koch
CEO at DuPont

On the Water side, we continue to advance the latest technology within the reverse osmosis side. So this year, we're expanding capacity at our Edina site to be able to produce the Gen 4, which would be the highest-end technology that would enable a significant total cost of ownership to our customers. So we're continuing to advance that, and we'll look to commercialize that in 2027. So those are just two of the highlights. But obviously, with 125 new products last year, it's happening kind of all across the portfolio.

John McNulty
John McNulty
Managing Director and Chemicals Analyst at BMO

Got it. Thanks very much for the color.

Operator

Your next question comes from the line of John Roberts with Mizuho. Please go ahead.

John Roberts
John Roberts
Managing Director at Mizuho

Good. Thank you and congrats on a good start here. Could you provide some margin color on the four subsegments: Water, Health, Building, and Industrial? I'm not sure how much detail you want to provide there.

Antonella Franzen
CFO at DuPont

Yes. We typically give color on the revenue side of our segments. But when you do look from a margin perspective, I mean, what I would add is you will see margin improvement, I would say, in both of our reportable segments as we move forward. And we'll also, obviously, get some margin expansion from a lower corporate cost as well. And that's certainly what's going to drive the 60-80 basis points of margin expansion in 2026.

John Roberts
John Roberts
Managing Director at Mizuho

Your Asia-Pacific sales were down 2% organic. Was that Water supply chain contraction again, or is there something else going on there?

Lori Koch
CEO at DuPont

No, it wasn't Water. It was primarily within the diversified side. We had a supply chain change in our Shelter business that was the single largest item. So it was really just a change in the distributor joint venture relationship. So nothing permanently will push it into 2026. So nothing material. We expect a return to growth across all the regions, both in the quarter and the full year for 2026.

John Roberts
John Roberts
Managing Director at Mizuho

Great. Thank you.

Operator

Your next question comes from the line of Josh Spector with UBS. Please go ahead.

Josh Spector
Josh Spector
Executive Director of Chemicals Equity Research at UBS

Yeah. Hi. Good morning. I had two questions on Water, maybe one slightly related to the comment earlier on Asia. Is that when you're forecasting, you're talking about mid-single-digit growth in Water for 2026. China's lower than that. Can you go into some of the details on why and what you're seeing there? I mean, you and some other peers are seeing slower growth in China in general. And then secondly, does that help or hurt your mix in the overall segment?

Lori Koch
CEO at DuPont

Yeah. So we are seeing a slower start in China with respect to overall growth within the Water business. And it's primarily stemming from just the reduced industrial production in the region. So we'll start in the low single digits in China in Water, and then we'll ramp into the back half to get overall to that mid-single digit. And I think, as you had mentioned, our peers are seeing a similar dynamic. So it's really just a reflection of the industrial production malaise in China. About half of our Water is used in the industrial wasteWater treatment or industrial utility water space. And so when industrial production is down, obviously, it would have an impact on that. As far as the mix, no material change in mix depending on where the regional growth is or margin.

Josh Spector
Josh Spector
Executive Director of Chemicals Equity Research at UBS

Okay. Thank you. I'll leave it there.

Operator

Your next question comes from the line of Aleksey Yefremov with KeyBanc Capital Markets. Please go ahead.

Paul Knight
Paul Knight
Managing Director at KeyBanc Capital Markets

Hi. This is Paul on for Aleksey. Can you discuss what you're currently seeing in auto trends right now and maybe the cadence for your outlook for 2026? Thanks so much.

Lori Koch
CEO at DuPont

Yeah. Overall, the expectation for auto builds from IHS is to be about flat. We would expect a slightly outperform that just based on our EV growth. And so we did see nice EV growth in 2025, and we'll continue to see nice EV growth in 2026. It'll vary by quarter, but overall, the full year is about flat and will be slightly up.

Operator

Your next question comes from the line of Matthew DeYoe with Bank of America. Please go ahead.

Matthew DeYoe
Matthew DeYoe
Senior Equity Research Analyst at Bank of America

Morning, everyone. Clearly, the portfolio is shaken out a lot. But as we settle here, is there any hope to establish annual pricing initiatives in any of the businesses that could be enough to actually drive structural pricing gains across consolidated DuPont, whether that's 50 basis points or 100 basis points? Do we have a framework there?

Lori Koch
CEO at DuPont

We do. I mean, obviously, the past two years have been the unwind of the sizable price that we took through the inflationary environment coming out of COVID. But going forward, we would expect to see structural price lift. As Antonella mentioned at the beginning, in 2026, our 3% organic is primarily volume. But underneath that, there is some price in some of the businesses. We continue to expect to have to give back a little bit on the Shelter side primarily as that sizable price raise that we drove in the 2022-2023 timeframe starts to unwind. But yes, there is opportunity to drive structural price in most of the businesses in our portfolio.

Matthew DeYoe
Matthew DeYoe
Senior Equity Research Analyst at Bank of America

Thanks for that. As you comment on something like Tyvek with the new advanced garments, right, how much margin uplift would something like that give versus a legacy product? I guess maybe I don't know if you want to comment specifically on that, but as a different one, maybe what is the average margin uplift? If you were to look at the Vitality Index and you're thinking about replacement, is this through the index of 30 basis points or 100 basis points, or is it flat? What's the uplift look like as we think about layering?

Lori Koch
CEO at DuPont

Yeah. I'd rather not comment on the margin lift at kind of at the product line level. But overall, in the Vitality Index in the 30%, we have about 145 basis points of margin lift from those products that are introduced in the past five years.

Matthew DeYoe
Matthew DeYoe
Senior Equity Research Analyst at Bank of America

That's great. Thank you.

Operator

Your next question comes from the line of Chris Parkinson with Wolfe Research. Please go ahead.

Chris Parkinson
Chris Parkinson
Managing Director at Wolfe Research

Great. Thanks so much for taking my question. We just take a step back and look at your healthcare portfolio. I know this is a focus of your CMD. But Lori, where are you the most enthusiastic as you go through 2026 and perhaps even the longer-term growth algo? Is it on the biopharma side? Is it pharma solutions, med device? If you could just comment on your enthusiasm in terms of your product portfolio, Lori, that would be particularly helpful. And then I'll have a follow-up. Thank you.

Lori Koch
CEO at DuPont

Yeah. It's really across all three. So both med packaging, med device, and biopharma all are nicely contributing to the kind of mid to high single-digit range in 2026. They all participate nicely in the higher-end aspects of the med device universe. So if you think about the majority of our applications, they're more in the cardiovascular space, which has an overall higher growth rate with respect to overall surgical procedures. So all three of them are going to contribute nicely. We'll continue to differentially invest in those businesses to ensure that we can continue to grow.

Chris Parkinson
Chris Parkinson
Managing Director at Wolfe Research

Got it. And just a similar question for the Water business now that all the dust is settled post the split. When you take a look at your Water portfolio, filtration, in particular, across NF, RO, UF, it's clearly a great business, but do you feel as though you're missing any scale? Do you feel as though there's a piece of your portfolio? Obviously, you've added other things in on ion exchange over the years. What else do you think you need to do, if anything, quite frankly, to further garner investor appreciation for that specific business?

Lori Koch
CEO at DuPont

Yeah. I think from a technology perspective, we've got the leading technology across all the main components within water filtration, so leading in RO, leading in ion exchange, leading in UF, and nanofiltration. So we're nicely positioned there. We've mentioned the desire to start to build around Water, so potentially going into spaces beyond filtration, just given filtration would be difficult from a regulatory perspective for us, given that we've got the leading position. So we continue to scout and look for opportunities to expand in the water space. Obviously, we'll be highly in tune to the valuations there. They can be quite pricey. We've seen a few assets with some of our competitors trade in the last few quarters that had a high valuation that would make it difficult for us. But we'll continue to see.

Lori Koch
CEO at DuPont

We recently added just to continue to shore up our supply chain in the water space, an asset in China. RO has huge growth in China. We didn't have an established footprint. We bought an asset outside of Shanghai that gave us established membrane capacity in the region for us to continue to be competitive and local to our customers there.

Chris Parkinson
Chris Parkinson
Managing Director at Wolfe Research

Helpful as always. Thank you so much.

Lori Koch
CEO at DuPont

You're welcome.

Operator

Your next question comes from the line of Vincent Andrews with Morgan Stanley. Please go ahead.

Vincent Andrews
Vincent Andrews
Managing Director at Morgan Stanley

Thank you very much. I wanted to ask on healthcare. You called out in the deck that surgical procedures are expecting to be up mid-single digits this year. Can you just give us a sense? Is that sort of the normal growth rate, and is that favorable, about the same versus 2025? And then is your portfolio sort of well-represented across that entire cohort, or how should we think about it?

Lori Koch
CEO at DuPont

Yeah. I would say it's a similar growth rate to what we saw in 2025 minus the de-stock that happened in the first quarter that kind of drove up the overall healthcare growth for the year. So we're nicely positioned, as I mentioned, in the areas that are driving kind of above the average surgical procedure rate. So if you say general surgeries, it's about 4%. Where we play, we expect that overall average to be more market-weighted to about 5%. So we're nicely positioned on both the healthcare side with the Tyvek packaging as well as on the Spectrum and Donatelle side on the device. Our single largest end market there is also within the cardiovascular and vascular space.

Vincent Andrews
Vincent Andrews
Managing Director at Morgan Stanley

Okay. And then just to follow up on the balance sheet and capital allocation, the end of the year with, I think, $715 million in cash, you've got the $1 billion coming in. Earlier, you spoke to, "Well, we've kind of spent some of that $1 billion already with the $500 million ASR." So can you just refresh us on sort of what the minimum level of cash is that you want to carry?

Vincent Andrews
Vincent Andrews
Managing Director at Morgan Stanley

And then as you move forward through the year and generate more cash, obviously, expecting another very strong year of cash conversion, understanding sort of the dual track of pursuing M&A as well as share repurchases, should we think about that sort of remaining proceeds from the divestiture to be sort of earmarked for M&A but the sort of free cash flow generation from this year to sort of be ratably allocated to CapEx, to dividends, and to repurchases? Or is that not the right way to think about it?

Antonella Franzen
CFO at DuPont

Yeah. So let me start with your first question. So typically, on the balance sheet, we would carry around $1 billion in cash. So we were a little bit below that at the end of the year given the cash that we spent on the ASR of $500 million. So as you mentioned, we will have a nice cash flow generation year in 2026. So we do expect our free cash flow conversion in 2026 to be greater than 90%. In addition to that, we do have the proceeds that are coming in the door related to the Aramids transaction. As Lori kind of mentioned earlier, I would say in terms of capital allocation, we view that in the eyes of a shareholder in terms of what creates the most amount of value.

Antonella Franzen
CFO at DuPont

So I wouldn't say there's a specific amount earmarked towards an M&A deal or a specific amount earmarked towards share repurchases. We'll continue to look at both. We do have a pipeline of some M&A that we are looking at. Ultimately, you'll see if they come to fruition or not. But clearly, we will continue to deploy capital in the best interest of our shareholders as we move forward.

Vincent Andrews
Vincent Andrews
Managing Director at Morgan Stanley

Thank you very much.

Operator

Your next question comes from the line of Patrick Cunningham with Citi. Please go ahead.

Rachel Leoff
Rachel Leoff
Equity Research Analyst at Citi

Hi. This is Rachel Leoff for Patrick. So I think in an earlier response, you mentioned all regions should be up organic sales-wise this year and in 1Q. So with recent PMIs trending more favorably, can you just provide more color on that response and maybe what you're seeing in terms of organic sales growth versus GDP?

Lori Koch
CEO at DuPont

You kind of dropped off at the end, so I couldn't hear which quarter you were referencing. But to the earlier comment, we do expect to see organic growth across all regions both in the first quarter and in the full year. The improvement, kind of the first quarter being at 2% organic and the full year being at 3%, most of that improvement is going to be in North America just based on the improvement that we expect to see on the Shelter side. So with Shelter starting kind of slightly negative and then trending to even on the full year, you'll see that lift given the majority of the end markets in Shelter are in North America.

Rachel Leoff
Rachel Leoff
Equity Research Analyst at Citi

Got it. Thank you. Can I just ask what sort of level of visibility you have for order books across the healthcare portfolio in general?

Lori Koch
CEO at DuPont

Yeah. I'll answer the question broadly for the company because it's a bit about we don't have a long lead time, put it that way. So we start each month with about 80% of the orders on the books, and we start each quarter with about 50% of the orders on the books, and then we build from there. Shelter is definitely the shortest cycle. On the longest cycle, I would say it would be our Aerospace businesses and our Water business would be on the longer end, and everyone else would kind of fall in between.

Rachel Leoff
Rachel Leoff
Equity Research Analyst at Citi

Great. Thank you so much for the color.

Operator

Your next question comes from the line of Michael Sison with Wells Fargo. Please go ahead.

Michael Sison
Michael Sison
Managing Director at Wells Fargo

Hey. Good morning. Nice quarter and outlook. Just a quick one on U.S. construction. Your outlook is flat. Any differences between non-Res, Res, and repair and remodel in that outlook?

Antonella Franzen
CFO at DuPont

Yes. So as we look into 2026, our expectations would be that non-res would be up in the low single-digit range as well as repair and remodel, and that would be offset by a low to mid-single-digit decline on the resi side of the business.

Michael Sison
Michael Sison
Managing Director at Wells Fargo

Got it. Quick follow-up. Your outlook and your results, particularly the organic growth, continues to look a lot better than the chemical folks. Are you still looking to? Is it still possible to change your industry designation, and how does that work, given I think your results have been much more steady than my group?

Antonella Franzen
CFO at DuPont

Yeah. So when you take a look clearly at the portfolio, our portfolio is not a chemical company portfolio. And to your point, when you look at our performance, our performance is not mirroring that of a specialty chemical company either. So I would tell you we continue to make some progress in terms of the GICS classification. But what I would tell you is our first priority is just to continue to execute. But we will continue to move forward in terms of trying to get the GICS code changed to more appropriately reflect the portfolio that we have today.

Michael Sison
Michael Sison
Managing Director at Wells Fargo

Thank you.

Operator

Our last question comes from the line of Arun Viswanathan with RBC Capital Markets. Please go ahead.

Arun Viswanathan
Arun Viswanathan
Senior Equity Analyst at RBC Capital Markets

Great. Thanks for taking my question. I just wanted to, I guess, clarify on both Healthcare and Water. So did you see any de-stocking there? We did see maybe one of your competitors within healthcare packaging reference some of that. And then similarly, on Water, maybe some of the downstream players are also speaking about that in different regions. So I guess you're not seeing that given your robust outlook for Healthcare. Is that correct?

Lori Koch
CEO at DuPont

Correct. Yeah. I mean, the de-stock was behind us in the first quarter of 2025. So we continue to see normalized inventory levels across both those businesses.

Arun Viswanathan
Arun Viswanathan
Senior Equity Analyst at RBC Capital Markets

Just given that being the case, sorry if I missed this, but did you also mention maybe M&A across both of those businesses if there are opportunities and where you are kind of in that trajectory? Thanks.

Lori Koch
CEO at DuPont

Yeah. Sure. No. We continue to scout opportunities in both spaces. I would say the pipeline is more robust on the healthcare side just given the fragmentation that exists as well as the valuations are a little lower in that area. So we continue to look hard at both. We've been busy looking on the med device side similar to the acquisitions that we did with Spectrum and Donatelle as we continue to build out a total suite of offerings to our customers, really building our relationship with them and them viewing us as a solutions partner and an application development partner. But we continue to look.

Arun Viswanathan
Arun Viswanathan
Senior Equity Analyst at RBC Capital Markets

Thanks a lot.

Operator

Ladies and gentlemen, I will now turn the conference back over to Ann Giancristoforo for closing comments.

Ann Giancristoforo
VP of Investor Relations, Corporate FP&A and Strategic Finance at DuPont

Great. Thank you, everyone, for joining our call. For your reference, a copy of our transcript will be posted on DuPont's investor website. This concludes today's call.

Operator

Ladies and gentlemen, thank you for your participation, and you may now disconnect.

Analysts
    • Ann Giancristoforo
      VP of Investor Relations, Corporate FP&A and Strategic Finance at DuPont
    • Antonella Franzen
      CFO at DuPont
    • Arun Viswanathan
      Senior Equity Analyst at RBC Capital Markets
    • Chigusa Katoku
      Vice President of Equity Research at JPMorgan
    • Chris Parkinson
      Managing Director at Wolfe Research
    • Jeffrey Sprague
      Founder and Managing Partner at Vertical Research Partners
    • John McNulty
      Managing Director and Chemicals Analyst at BMO
    • John Roberts
      Managing Director at Mizuho
    • Josh Spector
      Executive Director of Chemicals Equity Research at UBS
    • Lori Koch
      CEO at DuPont
    • Matthew DeYoe
      Senior Equity Research Analyst at Bank of America
    • Michael Sison
      Managing Director at Wells Fargo
    • Paul Knight
      Managing Director at KeyBanc Capital Markets
    • Rachel Leoff
      Equity Research Analyst at Citi
    • Scott Davis
      Chairman and CEO at Melius Research
    • Vincent Andrews
      Managing Director at Morgan Stanley
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