Lori D. Koch
Chief Financial Officer at DuPont de Nemours
Thanks, Ed and good morning, everyone. As Ed mentioned, customer demand in our key end markets remained strong in the fourth quarter. We continue to face unprecedented global supply chain challenges and rising inflation. However, the swift pricing actions that we continue to implement are benefiting top line performance and maintaining earnings on a dollars basis. These factors, along with our intense focus on execution, contributed to net sales, operating EBITDA and adjusted EPS results above our guidance. In addition, we had solid cash flow generation and returned over $650 million in capital to shareholders during the quarter through $500 million in share repurchases and over $150 million in dividends. For the year, we returned more than $2.7 billion in capital to shareholders through $2.1 billion in share repurchases and $600 million in dividends.
Turning to Slide 4, net sales of $4.3 billion were up 14% versus the fourth quarter of 2020, up 13% on an organic basis. Organic sales growth consists of 7% price gains, reflecting the continued actions we are taking to address inflationary pressure and 6% volume growth. A 2% portfolio tailwind reflects the net impact of strong top line results related to our acquisition of Laird and headwinds from non-core divestitures. Currency was a 1% headwind in the quarter.
Overall, sales growth was broad-based and reflects double-digit organic growth in all four regions and high single-digit to double-digit organic growth in all three reporting segments. From an earnings perspective, we reported fourth quarter operating EBITDA of $973 million and adjusted EPS of $1.08 per share, up 5% and 54% respectively from the year ago period. Our incremental margin in the quarter was pressured by price costs and logistics. Net of these impacts, our incremental margin was about 33% in 4Q.
Ed mentioned earlier, the pricing actions that we took throughout the year, resulting in us offsetting about $250 million of raw material inflation in the quarter and we also ended the year price cost neutral. The raw material inflation coupled with about $50 million of higher logistics cost in the quarter were headwinds to our margins. I will provide more detail of the margin compression we saw in the quarter in a few minutes.
From a segment perspective, E&I delivered 10% operating EBITDA growth on volume gains and earnings uplift from Laird, which more than offset raw material and logistics segments as well as startup costs associated with our Kapton capacity expansion. In W&P, operating EBITDA increased 7% as pricing gains and volume growth more than offset higher raw material and logistics cost. We will remain disciplined in our pricing approach as we move into 2022 to address continued inflation. M&M operating EBITDA declined 3% as net pricing gains were more than offset by lower equity earnings due to higher natural gas costs in Europe. In the quarter, cash flow from operating activities was $621 million and CapEx was $184 million, resulting in free cash flow of $437 million. Free cash flow conversion was 100%. In addition, we received gross proceeds of about $500 million during the quarter from our Clean Technologies divestiture, which was closed at the end of December.
Before we go to the next slide, I would also like to make a few comments on our full year performance. Full year net sales of $16.7 billion grew 16% and were up 14% on an organic basis. The organic growth consists of a 10% increase in volume and a 4% increase in price. Organic sales growth reflects double-digit growth in all four regions and in all three reporting segments. Further, all 9 of our business lines had organic growth in 2021 and 7 of the 9 business lines grew double-digits. The 10% increase in volume for the year consists of gains in all 3 reporting segments and within all 9 business lines, reflecting robust global customer demand in secular growth areas such as electronics and water, along with recovery in end markets negatively impacted by the pandemic in prior year, such as automotive, commercial construction and select industrial markets.
Full year operating EBITDA of $4.2 billion increased 21%, reflecting 1.3x operating leverage, operating EBITDA margin expansion of about 100 basis points, an incremental margin of 32%. Operating EBITDA increased for all three reporting segments during the year. Full year adjusted EPS of $4.30 per share was up about 95% from prior year on higher segment earnings, a lower share count and lower interest expense.
Slide 5 shows the impact that price cost inflation had on our operating EBITDA margin in the fourth quarter. As costs continued to rise throughout 2021, our fourth quarter results reflect the largest headwind to quarterly margins for the year. In total, pricing actions fully offset about $250 million of raw material inflation, which was higher than our expectations for input costs coming into the quarter and mainly in the M&M segment. While our pricing actions have enabled us to maintain earnings, the price cost inflation resulted in a significant headwind of about 150 basis points to operating EBITDA margins versus the year ago period. Additionally, higher logistics cost of about $50 million in the quarter resulted in a margin headwind of about 120 basis points. Offsetting the headwinds from raws and logistics was a 70 basis point improvement in operating EBITDA margin, which includes volume growth in E&I and W&P and the benefit associated with the Laird acquisition. If you exclude the price cost and logistics headwinds in the quarter on an ex-M&M segment basis, our operating EBITDA margin was above 26.5% in the fourth quarter, further illustrating our strong performance and putting an emphasis on our planned portfolio actions.
Turning to Slide 6, which provides more detail on the year-over-year changes in the net sales for the quarter. As I mentioned earlier, organic sales growth of 13% during the quarter consist of 7% pricing gains and 6% volume growth. In E&I volume gains delivered 9% organic sales growth for the segment led by higher volumes in semiconductor technologies of more than 20%. Semiconductor technologies demand was driven by the ongoing transition to more advanced node technologies resulting from growth in electronics mega trends. Semi tech was up mid-teens for the full year and we expect to continue to outpace MSI growth as we head into 2022. We are seeing more investments in semiconductor capacity, which we expect to be a positive for us in the long-term.
Industrial Solutions was up mid-teens during the quarter on volume growth, which was driven by ongoing strength for Caleres and Vesta[Phonetic] within electronics and industrial end markets, along with strong demand for medical silicones and biopharma and healthcare applications. Organic growth for Industrial Solutions was up mid-teens for the full year as well. As expected, organic sales growth for Interconnect Solutions was down in the quarter, reflecting the anticipated impact of the shift in demand related to premium next-generation smartphones to the first half of 2021, along with softness in automotive end-markets related to the semi chip shortage. For the full year, organic SaaS growth for our Interconnect Solutions was up mid single-digits and we expect to return to a more traditional seasonality in 2022.
In addition, we recently completed our Kapton expansion project here in the U.S., which expands our production of polyamide film and flexible circuit board materials. We will begin qualifying materials in the first half of this year for high value applications, which will start to accelerate in the second half of 2022. For W&P, 17% organic sales growth during the quarter consisted of a 12% increase in volume, including volume gains in all three businesses and 5% pricing gains. Sales gains were led by high-teens organic growth in Safety Solutions as continued recovery in industrial end markets resulted in significant volume improvement for Nomex and Kevlar air and mid fibers.
Within Water Solutions, high-teens organic sales growth reflects strong global demand for water technologies, primarily in industrial and desalination markets. Shelter Solutions sales increased on mid-teens organic growth, driven by continued strength in North American residential construction and continued recovery in commercial construction led by higher demand for quarry and services. Year-over-year pricing gains of 5% during the quarter relate primarily to actions taken in safety and shelter in response to raw material inflation and also reflect sequential price improvement from all three business lines and W&P versus the third quarter.
For the full year, W&P delivered 10% organic sales growth on 8% volume improvement and 2% pricing gains. Safety and Shelter Solutions were up low double digits organically, and Water Solutions was up mid-single digits for the year. The global demand for clean water technologies remained strong and expanding our capacity remains a priority for us. For M&M, 13% organic sales growth during the quarter was driven by a 16% increase in price, offset slightly by a 3% decline in volumes. M&M within the segment, within our portfolio, most significantly impacted by raw material inflation. The 60% local price increase during the quarter reflects continued actions taken to offset higher raw material and logistics costs. Volume declines reflect softness in global auto production due to supply constraints, primarily the semiconductor chip shortage. For the year, M&M organic sales growth was 24% on 12% higher volume and 12% pricing gains. All three business lines within M&M delivered organic sales growth of greater than 20% for the full year.
Turning to Slide 7, adjusted EPS of $1.08 per share was up 54% from $0.70 per share in the year ago period. Higher volumes and strong results from Laird more than offset higher logistics costs and other operating items such as cat time start-up costs. Below-the-line items continue to benefit our EPS results compared to the year ago period, primarily a lower share count. Lower interest expense was mainly offset by a higher tax rate. For full year 2022, we expect our base tax rate to be in the range of 21% to 23%.
Let me close with a few comments on our financial outlook on Slide 8. We expect continued top-line strength across the portfolio in 2022, led by ongoing strength in semiconductors as the industry continues to operate near capacity to meet demand, and consistent demand in areas such as industrial technologies, smartphone sales, housing starts, and water filtration. Our plan assumes these market dynamics will lead to solid volume growth in 2022.
In 2022, we are planning that raw material and logistics costs will remain at elevated levels with approximately $600 million of year-over-year headwinds versus 2021, primarily in the first half. Once again, the raw material inflation will be predominantly in our M&M segment. In response, we are implementing more price increases in all businesses, which will enable us to offset raw material and logistics costs on a full year basis, but we will lag in the first quarter. We expect our operating EBITDA margins to improve throughout 2022, driven by volume growth, productivity, acquisition synergies, and full implementation of pricing actions.
In the first quarter, we expect net sales between $4.2 billion and $4.3 billion and operating EBITDA between $940 million and $980 million. At the midpoint of our guidance range, we are anticipating first quarter operating EBITDA margins to be about flat sequentially with the fourth quarter 2021. We expect sequential improvement in E&I and M&M to be offset by W&P as manufacturing cost increases stemming from the Omicron variant and ongoing logistics cost headwinds lead to sequential margin decline.
For the full year, net sales of $17.4 billion to $17.8 billion and operating EBITDA of approximately $4.4 billion at the midpoint reflects volume growth and acceleration of additional pricing gains throughout the year to offset the impact of both raw material and logistics cost increases. We expect operating EBITDA margin in the back half of 2022 to return to more normalized levels as impacts from the Omicron variance subsides as well as gains from volume improvement, productivity actions, acquisition synergies and full implementation of price increases.
In closing, I want to note that our guidance is based on the current DuPont portfolio today, including the businesses and scope of the planned M&M divestiture. Once we sign a deal, the in-scope M&M businesses will move to discontinued operations, and we will reset the guidance for remaining DuPont.
With that, let me turn the call back to Ed.
