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DuPont de Nemours Q3 2022 Earnings Call Transcript


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Participants

Corporate Executives

  • Christopher Mecray
    Vice President, Investor Relations
  • Edward Breen
    Executive Chairman and Chief Executive Officer
  • Lori Koch
    Chief Financial Officer

Analysts

Presentation

Operator

Good day, and welcome to DuPont's Third Quarter 2022 Earnings Conference Call. [Operator Instructions] thank you.

Chris Mecray, Vice President of Investor Relations, you may begin your conference.

Christopher Mecray
Vice President, Investor Relations at DuPont de Nemours

Good morning, and thank you for joining us for DuPont's Third Quarter 2022 Financial Results Conference Call. Joining me today are Ed Breen, Chief Executive Officer; and Lori Koch, Chief Financial Officer. We have prepared slides to supplement our remarks which are posted on DuPont's website under the Investor Relations tab through the webcast link.

Please read the forward-looking statement 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 or results may differ materially from our forward-looking statements. Our 2021 Form 10-K, as updated by our current and periodic reports, includes detailed discussion of principal risks and uncertainties which may cause such differences. Unless otherwise specified, all historical financial measures presented today 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 also posted to DuPont's Investor Relations website.

I'll now turn the call over to Ed.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Good morning, and thank you for joining our third quarter financial review. We posted strong quarterly results, above our previously communicated guidance, in an extremely challenging environment due to uneven macro conditions and persistent inflation globally. Our revenue growth of 4% versus the year ago period included solid organic growth of 11%. Customer demand remains strong across most of our key end markets, during the period, highlighted by double-digit volume increases in select areas, including Kalrez, Vespel, Laird, Semi, Water and Auto Adhesives. To combat persistent inflationary headwinds in raw materials, logistics and energy, we continue to implement necessary pricing actions, which have fully offset such headwinds to date. Given continued energy cost inflation, we now expect full year 2022 inflation of about $800 million year-over-year, which we anticipate will be fully offset by pricing actions.

Our third quarter results also demonstrated year-over-year operating EBITDA growth and margin improvement, reflecting DuPont's unique business mix, innovative solutions and highly diverse end markets as well as strong operational execution during the period. We are pleased to have reported strong performance during each of the first three quarters of 2022, and we remain firmly committed to continued strong execution in the coming periods.

Turning to Slide 4, I will comment on the details of our transformation progress. First, last week's announcement that we completed the sale of the majority of our M&M segment to Celanese marks the completion of our last contemplated large-scale divestiture for which we received $11 billion in gross cash. The M&M business is an excellent set of assets that we know will prosper, and we are confident that Celanese is the right owner going forward.

We are excited by the prospect of proving to the market that our multiyear transformation has brought DuPont to a truly different place. After the Dow merger, followed by the spins that created the new DuPont, we have further transformed our business with large-scale deals, including the N&B split-off and now the M&M transaction. We further sold eight smaller businesses over the last three years, with proceeds totaling over $2 billion. We are starting the next phase of our growth from a position of strength, leveraging highly profitable businesses with strong and leading market position centered in growing markets as well as a healthy balance sheet. These assets include some of the best intellectual property in their respective industry verticals with globally recognized brands familiar to us all as well as the thousands of long-time B2B industrial customers.

For DuPont, we are confident that our remaining mix of businesses offers a different dynamic with significantly lower volatility and higher expected long-term growth given our revenue mix. This is driven by a focus on secular tailwinds, including the 5G build-out and other electronics drivers, the global clean water infrastructure development, continued demand for safety and personal protection solutions, secular growth across multiple industrial technology verticals that we serve and from next-generation automotive growth. We believe we have built a portfolio that can perform alongside the best diversified industrial companies. Our businesses are aligned with secular growth trends, we deliver top-tier levels of profitability and we should clearly benefit from dampened business volatility compared to our portfolio from just a few years ago. These advantages are clear and will help us to generate superior shareholder value over time. Regarding the Delrin divestiture process, we continue to advance our internal work required to divest that business. We are being diligent with our overall marketing process to ensure we maximize value in proper market conditions and expect to have completed a sale in 2023.

Before I move on, I'd like to briefly address the intended Rogers acquisition. We terminated this deal on November 1, which was the outside date of the transaction agreement originally signed a year ago. This was an unfortunate outcome in that the potential strategic fit of Rogers with our business was strong and we saw a lot of opportunity, but we're unable to secure regulatory approval for the transaction. We wish the Rogers team well. For DuPont, the inability to close the acquisition has no material impact on our ongoing business outside of the obvious loss of opportunity. We remain confident in the quality of our portfolio and its growth potential, and we'll look to be opportunistic with select and targeted M&A moving forward.

Shifting to capital allocation on Slide 5. With the receipt of the proceeds from the M&M sale, we are now able to accelerate our capital return options and further strengthen our balance sheet, while maintaining flexibility to continue to grow the business through disciplined and targeted M&A. Today, we announced that our Board has authorized a new $5 billion share repurchase program which expires June 30, 2024. We intend to act immediately and enter an accelerated share repurchase agreement for $3.25 billion of common stock which includes the remaining $250 million under the previous authorization. We anticipate completing this ASR within about nine months, with 80% of the shares retired upfront during the fourth quarter. We currently expect to complete the full $5 billion of repurchases within the authorization period. In addition, we will retire $2.5 billion of our senior notes due 2023 in the fourth quarter. The prepayment reduces refinancing risk in a rising rate environment, while generating pretax annualized savings of over $100 million. Further, we plan to reduce our commercial paper balance to zero by year-end, of which we had $1.3 billion outstanding at the end of the third quarter.

In combination, the significant share repurchase authorization and our deleveraging plan demonstrates our continued commitment to returning capital to shareholders while maintaining a strong balance sheet. Our approach remains balanced and in line with our overall capital allocation strategy. We expect to finish the year with a leverage ratio significantly below our longer-term target, maintaining balance sheet capacity to further allocate excess capital through a combination of bolt-on M&A and potential share repurchases over time. Our M&A focus remains on targets that fit within our growth pillars and are aligned with key secular growth trends.

With that, let me turn it over to Lori to discuss third quarter details as well as our financial outlook.

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.

Questions and Answers

Operator

[Operator Instructions] Your first question comes from Jeff Sprague with Vertical Research.

Jeff Sprague
Analyst at Vertical Research

Thank you. Good morning everyone.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Good morning Jeff.

Jeff Sprague
Analyst at Vertical Research

Good morning Ed. Congrats on getting all that done. Just would love to put a finer point on how you're thinking about capital deployment beyond what you announced today. And specifically, as it relates to kind of M&A. Should we really think this will be bolt-ons and kind of neatly fitting with inside of how the portfolio is positioned? Certainly seems like you could benefit from just letting things settle down for a while and allowing people to digest kind of what you do and how the portfolio is taking shape.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Yes. Jeff, I think very good points you're making. We're in no rush to do an M&A deal. Eventually, especially in this environment. I don't think any of us know where things are actually headed. So we're going to take a pause here, see how the next set of months play out. We do have targets we've been interested in for quite a period of time, whether they're actionable or not is another kind of story. And they clearly would be in the pillars of the secular growth areas, the five areas that we've talked about. So we're not going to deviate off into anything else. But we're in the same mode, I think, as your opening comment, Jeff, let things settle down. We've made a lot of moves. We've pretty much finished our transformation except still for the sale of Delrin, which will happen in 2023 and so no rush to do anything. But we do have the capacity to do some bolt-on-type M&A, and that's the way we're thinking about it, is more on the bolt-on size of the deal.

Jeff Sprague
Analyst at Vertical Research

Great. Thanks for that context. And then maybe just a follow-up for Lori. Can you just kind of level set us on what you're expecting for the actual net proceeds for M&M, paid some tax here in Q3. And also you did note some free cash flow headwind from M&M. And I think you were talking about that all throughout the year. So are there actually some kind of favorable working capital adjustments here kind of on top of the gross kind of sales proceeds that we're talking about?

Lori Koch
Chief Financial Officer at DuPont de Nemours

Yes. So to your first question, I expect about $10.4 billion net after tax on all of the customary closing adjustments from the Milan transaction. So if you look to the end of the year with all the puts and takes, about -- we announced today on the capital allocation between the share repurchase authorization getting started with $3.25 billion and the fixed portion of the November 2023 is being paid down at $2.5 billion, that would put our year-end cash at roughly $4.8 billion, so a nice position to be in. As far as the working capital headwind, so there's no working capital benefit to be had from a cash flow perspective. It was more just calling out the headwinds that were in our numbers prior to the separation of the M&M business. And so if you look at our cash used kind of prior to their separation, the largest portion of the working capital headwind was from the M&M business. So we were just highlighting our actual cash performance would have been better without them in the portfolio, so in the quarter, we were 73% as reported for free cash flow conversion. We would have been more in the range of the greater than 90% that we target for the Remainco portfolio had we not had them in the results.

Jeff Sprague
Analyst at Vertical Research

Great thank you.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Thanks, Jeff.

Operator

Your next question comes from the line of John Roberts with Credit Suisse.

John Roberts
Analyst at Credit Suisse Group

Thank you. I'll ask just one here. In semiconductor materials, Entegris reduced the December quarter sales by about 10% for the new U.S. restrictions on China. And they also noted the memory chip weakness was affecting CMP disproportionately. Are you seeing anything different in the semiconductor market?

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Yes. Well, on the export control issue in China, there's really three restrictions on that. And by the way I would put it in a category of it's more because of advanced chip technology. So the -- for instance, one of them is logic chips at 14 nanometers or below is restricted, it's one of the key ones, so for us, it's not that big. Most of the fabs in China are not the high-end advanced chips. So if you look at it on an annual basis, if we are restricted and cannot get a license to supply that, there would be about $60 million of revenue for us on an annual basis, so say about $15 million on a quarterly basis, which we took that $15 million into account in our fourth quarter guide that we gave. Overall, on the semi side, we look at the inventory index, for instance, like Gartner puts out and it's, give or take, 1.1 right now. If you kind of go back to the last downturn of semi back in 2019, it peaked out at 1.31. So just to give you a little bit of a parameter on where that sits. So it's on the high end. We think there's two or three quarters of correction there that we'll see. But the downturn in 2019 was like 6% to 7% year-over-year downturn. So just to give you some perspective. But at this point in time, it's not at the peak of where it was in the '19 time frame.

John Roberts
Analyst at Credit Suisse Group

Great. Very helpful. Thank you.

Operator

Your next question comes from Scott Davis with Melius Research.

Scott Davis
Analyst at Melius Research

Hey good morning everybody.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Hey good morning Scott.

Scott Davis
Analyst at Melius Research

Are you guys surprised that the 8% price didn't fully cover cost this quarter? Were there some kind of intra-quarter cost increases or surprises there that caught you a little flat-footed?

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

No, Scott, it did not. Maybe we misstated it. We did cover all the costs. So our cost inflation, I think last quarter we reported we thought it was around $700 million. It's now $800 million for the year, and that's all based on mostly energy increase in Europe, as you're all aware of, on natural gas and by the way, just to give you kind of more color to that, we are obviously seeing commodities start to come off their peak. We thought we would start to maybe start seeing some benefit and hopefully we do in 2023. But then energy spike, so the energy just about to offset what we've been seeing the benefit on the commodity. So hopefully, now as we progress over the next months, we start to see some spread there, that would be helpful. But no, we did implement more price increase. We covered the whole $800 million that we're going to have for the year at this point in time. And just to remind you, every price increase we did, we put it into the product cost. We did not do it as surcharges that would fluctuate off an index. So customers would have to negotiate with us when there's any price changes.

Scott Davis
Analyst at Melius Research

All right. That's super helpful, Ed. And just a little follow-up on Interconnect. I mean, are you guys -- I assume you're selling to Foxconn, are you impacted by the plant shutdown that's been announced?

Lori Koch
Chief Financial Officer at DuPont de Nemours

Yes. So we did announce a deceleration in our expectations for the Interconnect Solutions in general. So it will be covered by what you're hearing in the headlines with respect to smartphone and consumer electronics and then, ultimately, the underlying PCB demand. So for the year, we now expect Interconnect Solutions to be down mid-single digits. So that would all be wrapped up in that number.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Yes. Just to give you a perspective, we thought in the second half of the year, ICS would be up mid-single digits. Now it's down mid-single digits. So I think we've taken all that into account. And by the way, just to remind you, it's hard to remember this, but we're already 2 quarters into the ICS, that whole PCB smartphone, laptop downturn. So they don't last forever, but we've already had two quarters of it.

Scott Davis
Analyst at Melius Research

Okay, that's good color thank you. I appreciate it.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Thanks Scott.

Operator

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

Steve Tusa
Analyst at JPMorgan Chase & Co.

Good morning.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Good morning, Steve.

Steve Tusa
Analyst at JPMorgan Chase & Co.

Given its election day, I'll make a recommendation, you should run for office someday, Ed.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

I like what I do now.

Steve Tusa
Analyst at JPMorgan Chase & Co.

Yes. I think you get the 10 -- votes from the 10 guys who cover the stock, for sure. So just on the fourth quarter price cost, you were 130 bps, I think, headwind this quarter, I believe you said. I might have missed that. Does that -- I assume that gets a little better in the fourth quarter. The math suggests that it may not get better in the fourth quarter.

Lori Koch
Chief Financial Officer at DuPont de Nemours

Yes. So the dollar does get a little bit less in the fourth quarter because we start to lap some of the prior year increases. And so we're expecting about a 5% price increase in the fourth quarter versus the 8% that we posted in third quarter and then 7% in the second quarter. As far as the margin headwind, it would be a little bit less, but our underlying guidance does suggest overall EBITDA margin improvement in the fourth quarter. So if you back into the fourth quarter from the full year guide that we gave, we'd be more in the low 24% range from an EBITDA margin perspective versus last year it's 23.2% and I'd highlighted that sequential decline, expected decline in EBITDA margin is really from one seasonality. So we tend to see some seasonality as our volumes are lowest in the fourth quarter. And also, we did elect to take down production to be able to better align our inventory levels. So we are seeing some stabilization in the supply chain that gives us confidence we can start to tweak down these inventory levels. And so there will be a unit cost headwind in the fourth quarter. So those two combined are the drivers of the sequential EBITDA margins' decline.

Steve Tusa
Analyst at JPMorgan Chase & Co.

And then just one more question on this. I know you gave the margin headwind, but just so we're on the same page, what was the -- out of the $800 million, how much of that came in 3Q?

Lori Koch
Chief Financial Officer at DuPont de Nemours

About $240 million.

Steve Tusa
Analyst at JPMorgan Chase & Co.

Of inflation?

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Yes.

Lori Koch
Chief Financial Officer at DuPont de Nemours

Yes. So we're at $650 million year-to-date and another $150 million in 4Q to get to the $800 million for the full year.

Steve Tusa
Analyst at JPMorgan Chase & Co.

Okay. And any carryover for next year when it comes to price? And you said now inflation, you probably won't get relief there, but any carryover on price into next year?

Lori Koch
Chief Financial Officer at DuPont de Nemours

Yes, there should be some, especially in first quarter. So that's when we really started to ramp the price increases. And then we did see some inflation start to ramp in the first quarter. Our number hasn't materially changed. I believe, back in Q2, we thought the full year would be $500 million. So we did see some escalation in the 2Q time frame. But the numbers have been starting to normalize in the back half of the year. So the increases that we just saw recently have been more in the European natural gas side versus the underlying raw material side.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Steve, it's going to be interesting for all of us going into 2023 as we work our way through it how carry through and handles this price cost issue because the commodities are definitely coming down pretty uniformly. Not crazy, but they're down 20%, 25% in many cases. So if the natural gas thing settles out, I think we've peaked on all this inflation and then how do we handle price cost as we move forward with all the price that we got.

Steve Tusa
Analyst at JPMorgan Chase & Co.

All right makes kind sense.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Yes.

Steve Tusa
Analyst at JPMorgan Chase & Co.

Thanks for all the detail. I appreciate it.

Operator

Your next question comes from the line of Mike Leithead with Barclays.

Michael Leithead
Analyst at Barclays

Great. Thanks. Good morning guys. Just one for me. Ed, I was hoping you could provide what -- to the degree you can, a bit more color about the decision to walk away from Rogers as opposed to pursuing another extension or rework transaction. It sounds like you're saying it was ultimately unworkable from a regulatory perspective. Is that fair? Was it just an issue of sitting in limbo for an elongated period of time here?

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

No, it's very simple. We did not get regulatory approval in China. It had been a full year. That was our outside date. And we ended it, which was the contractual agreement. So really, there's nothing more to it.

Michael Leithead
Analyst at Barclays

Okay, thank you.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Yes thanks.

Operator

Your next question comes from John McNulty with BMO Capital Markets.

John McNulty
Analyst at BMO Capital Markets

Yeah. Good morning. Thanks for taking my question. Ed, you spoke a little bit to the Interconnect Solutions' weakness. Can you speak a little bit broader in terms of the macro trends that you're starting to see right now? Some of your business is pretty resilient through that. But are you starting to pull any levers just on macro concerns at this point that we should be thinking about?

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Yes. I'll let Lori start out, and I'll add some color.

Lori Koch
Chief Financial Officer at DuPont de Nemours

Yes. I think as far as pulling leverage to make sure that we drive the best margin profile that we can, we did announce in the Q that we'll come out this afternoon a restructuring program. Initially, it's really just to get after the stranded cost from the M&M transaction now that it has closed. So we signaled about $50 million of stranded costs associated with the M&M transaction. So we'll get at those first to take those out to be able to drive further profitability and then we've got room underneath the restructuring that we announced to take further cost action as appropriate if we start to see further deceleration in the top line.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

And we have already, as a management team, laid out what those. So we'll do the stranded costs, as Lori said, but we've already laid out the detailed actions we do for some additional restructuring if we felt it was needed and then I'll go back to the point I made a minute ago, there's a big lever in price cost that we're going to have to figure how that plays out through 2023.

John McNulty
Analyst at BMO Capital Markets

Got it. Got it. No, makes sense. Fair enough. And then just -- maybe just a follow-up on the M&A questions from before. So I guess with Rogers clearly having some problems on the regulatory front, and maybe it's a political thing, U.S. and China or not, it seems like a lot of things are kind of getting held up at this point. Does it make it hard for DuPont going forward to make acquisitions in the electronics area? And should we be thinking going forward that bolt-ons would be more focused on the Water and protection area? Or is that really not the right read on this?

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Let me say it this way, just by the way it's played out, some of the things we're interested in happened to be in Water and happened to be in the industrial technology space. So I guess if it stays their kind of targeted for down the road when we want to do something, it's probably not an issue that we would have to deal with. And who knows on the electronics? I just don't know the answer to that. We don't know what we don't know but having said that, I mean, we loved Rogers coming in because it added some tools in the toolkit. But we have a very comprehensive portfolio in electronics. With the Laird in there, it's really been beneficial. Laird has been performing awesome. And they've gotten -- as we highlighted, I think last earnings, they've gotten some wins for DuPont technology with some Laird customers. And also, I don't feel bad about where we're at, at all in the electronics side. Again, it would have been nice to have Rogers, but -- and we're not probably looking at an electronics deal anyway at this point in time, so not going to be an issue.

John McNulty
Analyst at BMO Capital Markets

Got it. Thanks very much for the comments.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Yeah.

Operator

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

Aleksey Yefremov
Analyst at KeyBanc Capital Markets

Thanks. Good morning everyone. How do you think about the debt reduction versus potentially doing even larger buyback for this trench of capital allocation?

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Well, first of all, and we said this in our prepared comments, we'll do the $5 billion repurchase. And by the way, we can be in the market -- in the open market doing some of that if we feel it's appropriate during the year, depending on what the economy is looking like. So it's -- the ASR will take us 8, 9 months, but we can be over the top doing some additional purchase. So we'll just see how that plays out. But -- and have the opportunity to do another ASR right on the heels, if that's how we want to handle it. So we have our options open to us there but we also have a fair amount of firepower as we kind of go through 2023, if you do the math. And again, it would be for bolt-on potential acquisition, but we also have the opportunity to do more share repurchase if we want. So we don't need to make those decisions now, but we'll contemplate that as we go through 2023.

Aleksey Yefremov
Analyst at KeyBanc Capital Markets

Thanks, Ed. And going back to Interconnect business, would you try to maybe forecast when this reaches a bottom? Do you think Q4 or Q1 could be when it starts -- stops going negative?

Lori Koch
Chief Financial Officer at DuPont de Nemours

Yes. It does feel like we have reached the bottom in the Interconnect space between the PCB application. So as Ed had mentioned, we're a good two quarters in, so it feels like we bottomed out. We're not ready to call kind of growth in the next quarter or anything, but we do feel like the deceleration has plateaued.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Yes, we got a peak pretty deep into it at this point in time. I mean the PCB players in China really shut down. So I think they're correcting their inventory really quickly. I mean, they truly shut down. It's not like they cut back on production. So I think they can fix things pretty quickly. And so I don't want to put a date on kind of building out of it. But again, we are pretty far into it months wise at this point in time.

Aleksey Yefremov
Analyst at KeyBanc Capital Markets

Great thanks a lot.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Yes thanks.

Operator

Your next question comes from the line of Mike Sison with Wells Fargo.

Michael Sison
Analyst at Wells Fargo & Company

Hey good morning. Nice quarter. Just one question for me. It seems like the consensus view is for a recession next year. Can you maybe talk about each of the businesses and how it should perform in a downturn and just when I think about the fourth quarter outlook, multiplying that by four probably isn't the right way to think about a recession case and maybe walk through the puts and takes of that sort of potential.

Lori Koch
Chief Financial Officer at DuPont de Nemours

Yes. I mean, I think, first, starting in the financials, I think you're right to take the fourth quarter, it tends to be usually our seasonally weakest quarter. And so to take it and run rate it could be difficult. I wanted to highlight, too, just the natural EPS growth that we have from the actions that we've taken on the capital allocation side which will bolster us as we head into 2023. So between the share repurchase that we announced today at the $3.25 billion, the lower interest income that we called out of -- lower interest expense that we called out of $100 million and further interest income from the cash that we'll be holding in the balance sheet, we've got north of 15% EPS growth just from those actions alone. So nice to be -- positioned to be in as we head into 2023. As Ed had mentioned, we'll aim to maintain favorability on the price/cost side as we start to continue to see the commodity prices decline. And I did highlight that we have initiated a cost restructuring program should we need it beyond the stranded costs that we've highlighted to take out. So from that perspective and from maintaining a good margin profile, I feel like we're protected as we head into next year. And from an end market perspective, we've highlighted that we probably feel like we're already two quarters into the consumer electronics downturn and the semi piece that I had highlighted, the inventory index that we pay attention to.

And so while it is elevated versus where it was during the pandemic, it's not as elevated as it was back in the 2019 time frame when we saw semi volumes down in the mid-single-digit range. From the industrial side of the portfolio, so the remaining piece of electronics and then the broadness of W&P beside the shelter piece, those pieces, they're pretty stable. So Water, we've got a really nice backlog, at least six months of backlog in the Water business. A nice performance on the defense side, especially on the aero piece within the safety portfolio as we see those markets continue to recover. The one piece besides consumer electronics and semi that we're paying close attention to is obviously the Shelter business. The North America residential side, which is about 40% of the business, we'll pay close attention to, obviously, with the news out there on the potential headwinds in that space, but we're not seeing anything material at this point, so --

Michael Sison
Analyst at Wells Fargo & Company

Great. Thank you.

Operator

Your next question comes from the line of Laurence Alexander with Jefferies.

Daniel Rizzo
Analyst at Jefferies Financial Group

Hey, everyone, this is Dan Rizzo on for Laurence. Thank you for taking my question. You mentioned before about having prices not be surcharges, but just kind of be in the production cost or in the cost of the product. I was wondering, historically speaking, have you ever -- with that scenario, have you ever had to give price concessions? Or are they generally relatively sticky?

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Well, I think for all of us, it's hard to totally answer that question because we never had inflation like this in at least in my career and raised prices as much as all of us have. So our game plan clearly is to keep a spread there because I'm a strong believer we have big intellectual property, a lot of our products are needed, they're the best in the industry and they should have good EBITDA margins with them. And generally, we do have very good EBIT margins across the board. So the game will be to keep that spread there but when you've had this kind of inflation, I don't think you'll hold on to all of it, and I don't think any company holds on to all of it, by and large, but can you keep a spread will be the real game.

Daniel Rizzo
Analyst at Jefferies Financial Group

Thank you. That's helpful. And then just one other question. In terms of FX, you mentioned the headwinds. I was wondering if there's -- if you've ever given a rule of thumb, like a $0.05 move in the euro versus $1 or something like that where the basket translates into x percent in -- I'm sorry, in sales or EBITDA?

Lori Koch
Chief Financial Officer at DuPont de Nemours

So we've never given a rule of thumb the drop-down from the top line headwind. So in the fourth quarter, we expect about a 6% year-over-year headwind from a currency perspective. The drop through down into EBIT is not materially different than the overall EBITDA margin that we have for the total company. So you could use that to kind of model where we think the roughly $200 million year-over-year headwind in currency translates to EBITDA.

Daniel Rizzo
Analyst at Jefferies Financial Group

All right thank you very much.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Thank you.

Operator

Your next question comes from the line of Christopher Parkinson with Mizuho Securities.

Christopher Parkinson
Analyst at Mizuho Securities

Great thank you so much for taking my question. Just given the solid result on W&P margins on your longer-term pathway back to '27, '28, has the calculus changed at all between the buckets of price cost over intermediate to long term, improving ops and just overall business mix? Is there any change of thought process? Or is just hey, we have a lot of things going in the right direction, and we'll get there in due course.

Lori Koch
Chief Financial Officer at DuPont de Nemours

No, there's no change in the EBITDA margin improvement drivers that you had mentioned. The one piece that we'll continue to watch, as I had mentioned, was can we drive continued favorability within the margin improvement from price cost? So as the costs start to decelerate, are we able to maintain a more favorable price profile?

Christopher Parkinson
Analyst at Mizuho Securities

Got it. And just very quickly on E&I., are you seeing any changes in deferrals in leading-edge capacity ramps in any way, shape or form in terms of core MSI heading into 2023? In any way, does that change your expectation for 200 to 300 basis points of outperformance? Just any color on that, let's just say, preliminary framework would be very helpful. Thank you.

Lori Koch
Chief Financial Officer at DuPont de Nemours

Yes. I would say longer term, there's no material change in the profile of high single-digit CapEx going in and driving high single-digit increases in production. Some of the numbers, as we head into 2023 from a market research expectations, do see a decline in MSI. So the initial numbers right now are around a 5% decline in MSI, but we would still expect that same outperformance of 200 to 300 basis points. And so if MSI is down 5% next year, we would expect to be down 200 to 300 basis points ahead of that.

Christopher Parkinson
Analyst at Mizuho Securities

Very helpful. Thank you so much.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Thank you.

Operator

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

Joshua Spector
Analyst at UBS Group

Yeah, hi. Thanks for taking my question. I wanted to follow up on the recession question earlier. So you said not annualizing -- annualizing fourth quarter is not the right way to look at it. That's about $3 billion in EBITDA. Talked a lot about positive points that you could have on the price cost side and some of the restructuring items. I mean is it fair to say that you're starting bogey for next year from an EBITDA perspective is about flat year-over-year even in a recessionary environment?

Lori Koch
Chief Financial Officer at DuPont de Nemours

Yes. I think it's a little too early to call what 2023 EBITDA looks like. So we highlighted the actions that we're taking to drive EPS improvement from the share repurchase and from overall improved performance in interest expense and interest income. But we haven't really indicated anything yet about what the EBITDA profile would look like beyond the actions that we're taking on the cost side to take out the stranded costs and then we've got the ability to do more there should we see further need to.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

A lot of it, by the way, comes down to how you will individually model a recession scenario next year, and therefore, how do you model commodity inflation or deflation coming, because that's going to have a big bearing on all our -- all the multi-industrial companies if you start seeing that benefit. And then back to a question earlier, can you hold some of that, I think is really going to be an interesting question for all the multi-industrials. So how that plays out is very different than any other recession we've been through.

Joshua Spector
Analyst at UBS Group

Yes. Understood. Fair point. And I just wanted to follow up on W&P and just specifically, I guess, the Shelter side. Are you seeing any destocking? Is that baked into your fourth quarter guidance? I guess, we've seen other firms talk about pretty severe destocking globally and even in North America into construction markets. So I'm just curious where you stand on that cycle or what the risk is of that increasing or accelerating into early next year?

Lori Koch
Chief Financial Officer at DuPont de Nemours

Yes, I wouldn't say there's anything material at this point. There are elevated inventory levels at some of the big box retailers, but we haven't seen any material destocking yet at this point. So we did see positive volume growth in Shelter in Q4. And I'll just remind you of the distribution of the Shelter business, roughly $1.8 billion of sales, about 40% of it is commercial, which seems -- which remains to be very strong for us. So that's selling into health care and education and other types of commercial applications. 40% residential and then 20% kind of the do-it-yourself market.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

And we did -- just as a correction, we did see positive volume growth in Shelter in Q3. We're assuming that moderates a little bit going forward as Lori noted, given inventory in the channel. But it really hasn't changed materially in the order book today.

Joshua Spector
Analyst at UBS Group

Okay thank you.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Thanks.

Operator

Your next question comes from the line of Arun Viswanathan with RBC Capital Markets.

Arun Viswanathan
Analyst at RBC Capital Markets

Great. Thanks for taking my question. I guess I had two questions. So first off, when you think about the volume outlook, could you just describe maybe the volume outlook for Water in some of the portfolio -- parts of the portfolio that are less economically sensitive? Do you see kind of the lower peak-to-trough variability on earnings playing out as you expected with your earlier communication? Thanks.

Lori Koch
Chief Financial Officer at DuPont de Nemours

Yes, we do see continued strength in water. So in the quarter -- third quarter, volumes were up low double digits and we see kind of mid-single-digit growth in Q4. And as I had mentioned, we've got a really nice backlog there. So should there be any moderation in demand, we've got over six months of the backlog that we can work down to be able to bolster the overall volume profile for the Water business.

Arun Viswanathan
Analyst at RBC Capital Markets

And then just a question on capital allocation. You obviously have some proceeds left over after the debt reduction and the share repurchase. Is there a time line that you'd look to deploy that, say, $2 plus billion? Is there any kind of thoughts you could offer for us how to think about that will be deployed? Thanks.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Well, we -- so it's interesting. We're moving as fast as we can on the share repurchase. We can only take out so much volume so quick, so we'll move as fast as we can there. And then as we said earlier, just to puncture again, we are in no rush to do anything from a bolt-on M&A standpoint. We want to see how the economy is going to play out. There might even be a better entry point six months, eight months, a year down the road. So I wouldn't answer that we have -- whatever excess cash we have at this point in time, there's really nothing we're going to do with it presently and we'll just monitor the next few months on that and remember, we still have to sell Delrin, so we don't have the money for that yet, and that's probably more towards the back half of 2023 at this point in time.

Arun Viswanathan
Analyst at RBC Capital Markets

Thanks.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Yes. Thanks.

Operator

Your next question comes from the line of David Begleiter with Deutsche Bank.

David Begleiter
Analyst at Deutsche Bank Aktiengesellschaft

Thank you. Ed, Auto Adhesive is doing quite well. What are the prospects of this business? And will it always -- will it stay in Corporate & Other going forward?

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Well, Lori manages it, and it's growing like a weed so I'll let her answer it.

Lori Koch
Chief Financial Officer at DuPont de Nemours

Yes. So we are seeing really nice growth in the Auto Adhesives, primarily driven by the conversion and the opportunity that we have on the battery side. And so we saw the 25% organic growth in the third quarter, and we expect further growth as we move forward. The distribution between ICE and EV from a 2022 builds perspective is really pretty disparate. So the overall expectation for ICE vehicles is actually, I think, to be slightly down. And for EV, EV-related materials is to be up well into the double digits. And so that dynamic is what is playing into our growth portfolio as we move forward. As far as finding the permanent home for the Adhesives business, it will not stay in corporate. So here in short order, we'll figure out where those businesses need to be aligned. We wanted to make the decision after we had got through the Rogers decision. And now that we know that path forward, we can figure out where these businesses reside permanently going forward.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Yes. We think we can leverage it well with some of our other auto exposure, especially on the EV side. So we'll organize ourselves to advantage ourselves as we talk to that customer base that we have other products and opportunities to sell into. So it will advantage the adhesive business over time but by the way, we're feeling very good about our win rate there. And you can see by the organic growth, Lori, what was that? Yes, 25% growth is pretty spectacular in that business. And I don't see it slowing down just because of what Lori just described, the EV build rates coming over the next five years.

David Begleiter
Analyst at Deutsche Bank Aktiengesellschaft

Very good. Ed, do you have an update on PFAS and the South Carolina MDL?

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Nothing really new to report, although we've been in pretty intense conversations. Just let you know; I am personally involved with my General Counsel. And we're really hoping we get to a resolution, but I don't want to put a time line on it but -- and just I think this is public knowledge. The judge has continued to encourage settlement talks with the plaintiffs here. And that's a good sign and potentially even using a mediator. And so we've made tremendous progress, but I don't want to put a time line on it. It's a continuing process. And you know very well, we want to get the water district cases settled, that's really the big focus for us.

David Begleiter
Analyst at Deutsche Bank Aktiengesellschaft

Thank you very much.

Operator

Your next question comes from the line of Steve Byrne with Bank of America Merrill Lynch.

Steve Byrne
Analyst at Bank of America Merrill Lynch

Yes. Thank you. Ed, you made a comment about some cross-selling between Laird and legacy DuPont. And you also made the comment about [Technical Issues]

Christopher Mecray
Vice President, Investor Relations at DuPont de Nemours

Steve, are you there?

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

We lost Steve.

Christopher Mecray
Vice President, Investor Relations at DuPont de Nemours

Erica, we must have him. We can move on to the next.

Operator

Your next question comes from the line of Frank Mitsch with Fermium Research.

Lori Koch
Chief Financial Officer at DuPont de Nemours

Good morning Frank.

Frank Mitsch
Analyst at Fermium Research

Looking geographically, obviously, very strong growth in North America for the quarter, but still high single digits in Asia and in Europe. And I'm curious if you could provide an outlook here in Q4. What are you seeing so far in those regions as many others have talked about some of the difficulties that they've been seeing there?

Lori Koch
Chief Financial Officer at DuPont de Nemours

Yes. So as you had noted, we had really strong performance in North America and Asia Pacific. As we look into the fourth quarter, our overall volume expectation in the guidance that we had provided was to be about flat. So that's versus about the 3% that we saw in Q3, where the top of the house North America had mid-single-digit volume and Asia Pacific had kind of low single-digit volumes. So as we head into 4Q, we don't see a material change in the Asia Pacific volumes or Europe, we do see a little bit of a deceleration in the North America volumes, so more in the low single-digit range. And so overall, racking up to about flat year-over-year. On top of that, there was the price piece that would provide us with a nice organic number. And so we will continue to see, as I had mentioned earlier in the call about 5% price increase.

Frank Mitsch
Analyst at Fermium Research

Understood. And you indicated that you're going to lower operating rates in the fourth quarter. Obviously, Interconnect stands out as an area. Where else may be looking to lower your operating rates in the fourth quarter?

Lori Koch
Chief Financial Officer at DuPont de Nemours

Yes. It's generally across all the lines of business just as we get more comfortable with the supply chain environment. So we feel like things have normalized there so that we can be a little bit more aggressive on the inventory front. And so it's across all the lines of business that we'll be reducing production rates.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Yes. So look, we made a fundamental decision, we did it a couple of years ago. We were losing some EBITDA at the expense of lowering working capital, and we decided to make that decision to get more in line going into 2023 with where we want to be from an inventory standpoint.

Frank Mitsch
Analyst at Fermium Research

Thank you so much.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Thanks Frank. Good to hear from you.

Operator

Your final question comes from the line of Steve Byrne with Bank of America Merrill Lynch.

Steve Byrne
Analyst at Bank of America Merrill Lynch

Yes. Thank you. We'll give it another shot here. I just wanted to hear your view on your pipeline, in R&D in each of your businesses. Putting end market outlook aside, where do you see the potential for the most growth from internal R&D discovery?

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Well, the biggest -- look, the biggest area always for us and it's quicker cycle is the E&I business and more centered in electronics business. We have an 8% R&D spend there. It's very, very robust, and we're constantly introducing new products in that area, Steve. But one of the areas we're really focusing on -- remember, one of the strengths at DuPont is the application engineering expertise. We live with our customers and we do design and work with them. And we're really focused on leveraging, for instance, the Laird platform with the existing DuPont technology.

So one of the things I was alluding to, we've got a couple of auto customers where Laird was already into an electromagnetic shielding thermal management and they have now been pulling in some DuPont applications and products for wiring protection and all that. So there's a lot of focus there on how can we get the synergies from a revenue standpoint from those. So I'd say that's the biggest area but remember, R&D for us is the heart of the company and application engineering is the heart of the company. So it's across the board here. we're very big on intellectual property. When we look to do a bolt-on, I think I mentioned this in my remarks, intellectual property to us is very key. And the ability to have strong application engineering across the board in all our end verticals is very key for us.

Steve Byrne
Analyst at Bank of America Merrill Lynch

And maybe just one more to drill into your Water business. Do you monitor your customers' water treatment systems to seek ways to lower their energy costs or to upgrade into newer technologies?

Lori Koch
Chief Financial Officer at DuPont de Nemours

We do. Yes. We've got a really nice portfolio that we're growing in the lithium battery space that we've mentioned for the Water business. So there's about 30% of water is in the specialty, so kind of outside the Industrial applications. And that's where all of those high-growth opportunities sit. Also obviously, we're well aligned with the UN sustainability goals, and that sits front and center with the Water business as well.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

And to your point, by the way, one of the big things we work on with our technology is right to the heart of the question you asked, is reducing the energy consumption. So we're working on technologies around that, and that could be cutting-edge for us, give us a competitive advantage.

Steve Byrne
Analyst at Bank of America Merrill Lynch

Thank you.

Edward Breen
Executive Chairman and Chief Executive Officer at DuPont de Nemours

Yes. Thank you.

Operator

And at this time, I'll turn the call over to Steve -- to Chris Mecray for closing remarks.

Christopher Mecray
Vice President, Investor Relations at DuPont de Nemours

Yes. Just thank you, everyone, for joining our call. And for your reference, a copy of the transcript will be posted on our website. This concludes the call. Have a great day.

Operator

[Operator Closing Remarks]

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