Lori Koch
Chief Financial Officer at DuPont de Nemours
Thanks, Ed, and good morning. As mentioned, we saw continued strong demand during the quarter in most of our end markets, with organic growth better than our expectations coming into the quarter. The global economy remains challenged in some respects, but our team's focus on disciplined pricing and operational execution contributed to operating EBITDA margin expansion on a year-over-year basis.
Turning to our financial highlights for the quarter on Slide 6. Net sales of $3.3 billion increased 4% as reported and increased 11% on an organic basis versus the prior year quarter. Global currencies remained highly dynamic as we saw a 4% headwind resulting from U.S. dollar strength against key currencies, including the euro, yen and yuan. The 3% portfolio headwind reflects the impact of noncore divestitures.
Breaking down organic sales growth, we saw 8% pricing gains and 3% higher volume. Volume growth reflects continued strong demand, most notably in semiconductor, water and general industrial, reduced somewhat by lower volumes for protective garments within Safety Solutions and ongoing softness in smartphone and personal computing markets globally within Interconnect Solutions.
On a segment basis, third quarter organic growth was 15% for W&T, 7% for E&I, and I'll highlight 25% organic growth for the retained businesses that we report in Corporate [Indecipherable] representing the adhesive portfolio from the former M&M segment. On a regional basis, we delivered organic sales growth in all four regions, led by volume increases in North America and Asia Pacific. From an earnings perspective, operating EBITDA of $856 million increased 5% versus the year ago period and adjusted EPS of $0.82 per share increased 4%. These increases were driven primarily by volume gains as pricing actions were offset by higher inflationary cost pressure. Adjusted EPS in the quarter included a higher-than-expected tax rate, which I'll detail shortly.
Operating EBITDA margin of 25.8% increased 30 basis points year-over-year on stronger volumes and productivity. Operating EBITDA margin in the quarter, adjusted to exclude price cost, was over 27%. Finally, incremental margin was 33% on a as-reported basis. Cash flow from operations during the quarter of $419 million, adjusted for capital expenditures of $172 million and the $115 million tax prepayment related to the M&M divestiture resulted in free cash flow of $362 million. We continue to experience significant headwinds from transaction costs related to the M&M separation as well as working capital headwinds primarily from the divested M&M business. Free cash flow conversion in the quarter for the total company was 73%. For the ongoing portfolio, if M&M was excluded, free cash conversion in the quarter would have been in line with our target of greater than 90%.
Turning to Slide 7. Adjusted EPS of $0.82 increased 4% compared to $0.79 in the year ago period. Stronger segment results versus the prior year contributed 8% to adjusted EPS growth or $0.06 driven primarily by volume growth. Benefits from ongoing share repurchases continue to drive earnings growth, providing a $0.04 benefit to adjusted EPS. The absence of earnings related to noncore business divestitures and the impact of currency headwinds negatively impacted third quarter results, and we expect both to be more significant headwinds to year-over-year earnings in the fourth quarter. Our tax rate for the quarter was 26.2%, up notably from 23.5% in the prior year, resulting in a year-over-year headwind to adjusted EPS of $0.03 and a $0.05 headwind in the quarter compared to the midpoint of our previous modeling guidance. Our full year base tax rate is now expected to be about 24%, with the increase driven by currency and mix and geographic earnings.
Turning to segment results, beginning with E&I on slide. E&I delivered third quarter net sales growth of 3% and organic growth of 7%, including a 4% increase in volume and a 3% increase in price, partially offset by a 4% currency headwind. Sales growth was led by Semiconductor Technologies, which increased mid-teens organically as strong demand continued led by the ongoing transition to more advanced new technologies and high semiconductor fab utilization along with growth in 5G communications and data centers. Industrial Solutions posted another strong quarter with organic sales growth of high single digits led by ongoing strength from Kalrez semiconductor-related product offerings, Vespel products serving recovering aerospace markets, OLED materials for new electronic displays related model launches and for health care applications such as biopharma tubing. Interconnect Solutions sales decreased mid-single digits on an organic basis due to volume decline.
Coming into the quarter, we expected a return to positive organic growth within Interconnect, but continued softness in consumer electronics specifically smartphones and lower PC and tablet demand globally, more than offset strong demand for Kapton film product applications in industrial end markets such as rail and defense and strength in Laird product offerings, including electromagnetic shielding and thermal management. Given this demand softening, we now expect Interconnect Solutions organic sales for the full year to be down mid-single digits. Operating EBITDA for E&I of $473 million was relatively flat as volume gains in semi and Industrial Solutions were offset by lower volumes and weaker product mix in Interconnect Solutions, along with lower JV earnings. Operating EBITDA margin of 31.3% was down 110 basis points from the prior year due primarily to the impact of price cost.
Turning to Slide 9. W&P delivered net sales growth of 10% as organic sales growth of 15% was partially offset by a 5% currency headwind. Organic growth for W&P reflected a 13% increase in price and a 2% increase in volume. Organic sales growth was led by Shelter Solutions, which increased high teens driven by pricing actions and further aided by volume growth on continued demand in North America commercial construction. Sales for Water Solutions were up an impressive mid-teens organic growth rate on strong global demand for reverse osmosis and on-exchange resin technologies as well as pricing gains. Sales for Safety Solutions were up low double digits on an organic basis as pricing actions were slightly offset by lower Tyvek volumes given the shift from garments to other Tyvek applications and the resulting impact of manufacturing line changeovers on production efficiency. Excluding the year-over-year Tyvek garment headwind, total W&P volumes would have been up approximately 5%. I will also acknowledge the dedicated work of our teams for safely and promptly restoring operations at our Spruance plant earlier in the third quarter from an unforeseen utility disruption with minimal impact on the quarter's results.
Operating EBITDA for W&P of $382 million increased 8% versus last year as pricing actions and volume gains more than offset higher product costs driven by inflationary pressure, weaker product mix and currency headwinds. Operating EBITDA margin of 24.9% included a 170 basis point headwind related to price cost. Excluding this price/cost impact, operating EBITDA margin would have been 26.6% during the quarter.
I'll close with a few comments on our financial outlook and guidance for the full year 2022 on Slide 10. We expect solid demand trends to continue in the fourth quarter in many of our key end markets such as Water, Industrial and Auto Adhesives, to name a few. That said, we anticipate continued softness within Interconnect Solutions related to smartphones and personal computing globally and expect some slowing in customer fab production rates in our semi business. Additionally, we expect some impact from reducing our production to drive down inventories on a consolidated basis. Lastly, we expect further currency headwinds to negatively impact both top and bottom-line results. Based on these assumptions, we are adjusting the midpoint of our full year 2022 net sales guidance to the low end of our previous range and now expect net sales to be about $13 billion. Compared to our previous midpoint, this change reflects about $150 million of incremental foreign currency headwinds, with the majority of those headwinds impacting the fourth quarter.
For the full year, we now expect foreign currency to be approximately a 4% headwind to reported net sales. Our organic net sales growth expectation of high single digits for the full year remains unchanged. Due to the same factors just noted, we are adjusting the midpoint of our operating EBITDA guidance to the low end of our previous range and now expect full year 2022 operating EBITDA to be about $3.25 billion. We now expect full year adjusted EPS to be about $3.30 per share, within our previous range. The higher-than-anticipated base tax rate for the full year that I discussed earlier, which equates to a $0.09 headwind versus our previous guide, is expected to be offset by a lower share count and net interest benefits resulting from a higher cash balance and the capital deployment actions we are taking in the fourth quarter. In closing, our team remains focused on operational execution and expect to use the levers within our control to meet our financial goals and continue to drive value for our shareholders.
With that, we are pleased to take your questions, and let me turn it back to the operator to open the Q&A.
