Q2 2023 DuPont De Nemours Inc Earnings Call
Thank you for standing by my name is Sydney and I'll be your conference operator today.
At this time I would like to welcome everyone to the Dupont second quarter 2023 earnings call.
Lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
If you'd like to withdraw your question again press the star.
And one thank you Chris.
Chris Mcrae you May now begin your conference.
Good morning, and thank you for joining us for Dupont's second quarter 2023 financial results Conference call. Joining me today are Ed Breen, Chief Executive Officer, and Laurie <unk>, Chief Financial Officer, we have prepared slides to supplement our remarks, which are posted on <unk> website under the Investor Relations tab and 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 and results may differ materially from forward looking statements our Form 10-K as updated by our.
Our periodic reports includes detailed discussion of principal risks and uncertainties, which may cause such differences unless otherwise specified all historical financial measures presented today are on a continuing operations basis and exclude 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.
Hosted your deposits Investor Relations website.
I'll now turn the call over to Ed.
Good morning, and thank you for joining our second quarter 2023 financial review.
This morning, we announced quarterly results with revenue and operating EBITDA.
Other than our previously communicated guidance.
This performance reflects our team's ongoing strong execution, while facing continued volume pressure in consumer driven end markets, namely electronics.
In the second quarter organic revenue declined 4% versus the year ago period, Despite mid teens organic declines from the interconnect solutions and semiconductor lines of business within Eni.
We continue to see broad demand strength in industrial end markets, including water automotive aerospace as well as healthcare.
Along with continued carryover benefit of pricing actions taken last year.
That inflationary pressure.
Notably operating EBITDA.
Operating EBITDA margin and adjusted EPS were all up sequentially from first quarter.
After nearly a year long downturn, we also saw a sequential sales lifts and interconnect solutions of 7%.
We also continue to be proactive in taking additional actions within our control to minimize the impact of volume declines given near term slowdown in select end markets, while also focusing on optimizing cash generation.
Turning to slide four we continue to advance a number of strategic priorities for accretive and value added capital deployment.
Yesterday, we announced completion of the spectrum acquisition, a leader in critical specialty devices for health care end markets.
This acquisition fully aligned with our strategic objectives of increasing top line growth.
<unk> driven innovation.
Expanding our industrial technologies growth pillar.
Adding to our current offerings in the high growth healthcare market.
Spectrum is being integrated into our industrial solutions line of business, where it fits nicely with our existing lithium franchise with.
With annual sales of about $500 million spectrum, together with Libya and our.
Hi Tech health care packaging business increased.
Increases our total revenue in healthcare markets to about 10% of our portfolio.
As expected growth rates above the company average.
Spectrum year to date performance has been solid and we are pleased that operating results are in line with our deal model estimates, which included an estimated operating EBITDA margin of approximately 22%.
We are excited by spectrum complementary fit.
And specifically our ability to leverage incremental growth opportunities, including synergies from cross selling and the complementary accounts.
Faster product development, and deeper design and co development partnerships with Oems.
Further on M&A, we continue to make progress with our domains business divestiture and our expectation of closing this transaction around year end 2023 remains unchanged.
There has been good interest in the asset to date.
Regarding share repurchases, we expect.
We will complete the $3 billion to $5 billion accelerated share repurchase transaction launched last November within a month.
We also intend to complete our remaining authorization through into $2 billion ASR.
To be executed shortly thereafter.
Regarding the water district settlement that was announced in June joined with Corus and for Teva settlement.
A settlement comprehensively covers PFA us related claims of public water systems, serving the vast majority of the U S population.
Our portion of the settlement is about $400 million and we expect final approval about six months following preliminary approval, which we expect to receive shortly.
Regarding broader capital allocation goals yesterday's closing the spectrum deal and the new $2 billion ASR essentially completed the deployment of excess cash remaining from the eminent divestiture last November .
Our current capitalization remains very sound and as a reminder, we have no significant debt maturities until November 2025, we.
We are comfortable with a net leverage around two X as an equilibrium target going forward.
Before I turn it over to Lori to review our financial performance, Let me add that we remain excited about the visible growth drivers enabled by our technical innovation teams and application engineers, who are squarely focused on helping customers solve their most complex challenges.
To name just a few strong growth is expected in the semiconductor industry with the ongoing global investment in new Fabs.
Overall growth of the semiconductor industry.
As anticipated to be high single digits over the coming five year period.
We are a leading materials that enable the next generation advanced chip manufacturing and packaging.
Which includes significant technology and support for the emerging generation AI Revolution.
Within water, we continue to drive growth in desalination and wastewater markets and then helping customers achieve their sustainability goals.
Finally, our auto pieces business is well positioned to continue to capture growth with its product offerings electric vehicles with that I'll turn it over to Laurie.
Thanks, Dan and good morning, our focus remains on operational excellence.
Strong execution and we are pleased to have delivered financial results.
Expectations, despite volume pressure.
All lines and all that.
Sure.
Turning to our financial highlights on slide five.
Our net sale of $3 5 billion.
Good morning.
On an organic basis.
Fair enough.
Currency resulted in a 1% headwind.
Thank you.
Yes.
I'll get back to you for some headwind related to portfolio changes.
Breaking that with 4% organic sales decline of 6% volume decline, partially offset by a 2% pricing gain.
If I can continue.
Actions taken last year Ross, it's Brian .
Please.
Volume decline, primarily reflects continued demand weakness in consumer electronics, coupled with inventory destocking across the channel.
Destocking in North American construction related markets.
Our volume in the consumer market, partially mitigated by continued strength in water.
Aerospace and healthcare markets.
Volume within electronics and construction markets.
And I'll.
Our remaining industrial base.
Absolutely.
From a regional perspective, Europe sales in the quarter up 4% on an organic basis, our North America and Asia.
8% 10, 8%.
Thanks.
Okay.
China sales were down 14% on an organic basis, driven mainly by the electronics.
An increase sequentially versus the first.
Good morning.
Second quarter operating EBITDA of $738 million decrease.
Matt.
Okay.
And the impact of reduced.
And electronics.
Alright with demand.
Operating EBIT margin during the quarter of 23, 9% with that 110 basis points.
No period, driven by volume pressure.
Right and mixed headwinds and high margin.
On a sequential basis operating EBITDA and operating EBITDA margins were up from the first quarter.
Decremental margins for the quarter with 40% exclude any impact of absorption headwinds related to reduced production rates are in electronics decremental margin was below 20% enabled by aggressive actions taken year to date to reduce discretionary spending.
Adjusted EPS in the quarter at 85 cents per share is down 3% versus last year.
Absolutely.
Looking at cash first of all I meant I would first like to highlight that we have made a reporting change effective with today's second quarter results and are now providing cash flow.
Great.
Thank you Mei and discontinued operations.
Changed David.
And cash flow generation and cash conversion of the ongoing.
On a continuing operations basis cash flow from operations during the quarter, a 400 million less capex.
$3 million.
And adjusted free cash flow of 277 million and this session conversion at 73%.
This reflects significant improvement versus last year on a comparable basis driven by lower inventory.
Adjusted free cash flow included a benefit of about $80 million and reduce inventory and a headwind of about 200 million related interest payments.
Optimizing cash flow continues to be a top priority for us all adjusted free cash flow conversion improve sequentially.
We have work to do to get to our targets.
Further improvement in working capital metrics by year end.
Turning to slide six adjusted EPS for the quarter at 85 cents decreased 3% compared to 88 in the year.
Period.
Segment results more than offset below the line benefit.
That benefit related to lower net interest expense and a lower share count.
A higher tax rate and exchange losses during the quarter resulted in adjusted EPS.
Sure.
Our tax rate for the quarter was 23, 7% up.
From 22, 6% in the year ago period, driven primarily by geographic mix.
Turning to segment results beginning with Eni on slide seven.
Second quarter net sales of $5 3 billion decreased 14% as organic sales declined 5% due to lower volumes, along with currency headwinds and an unfavorable portfolio impact.
At the line of business that all volumes for semiconductor technologies decreased 19%, while <unk> decreased 15%.
For that period.
The decline in semi tech resulted from a continuation of lower semiconductor fab utilization rate to weak end market demand as well as inventory destocking across the channel.
Chip fab utilization rate in the second quarter averaged in the low 70 percentage basis.
The decline in interconnection was driven by continued weak smartphone PC and tablets.
Along with channel inventory stocking.
<unk> customers in China operating in the second quarter with utilization rates improved from the mid $40 during the first quarter, which where the cycle though.
PCB market has been slow down for a year now and we are beginning to see signs of improvement.
In our interconnect business.
Illustrated by first or second quarter sequential growth of about 7% with further expected sequential growth in the third quarter.
Sales for industrial solutions were flat on an organic basis.
Pricing and ongoing strength in broad based industrial markets.
First by lower demand in March Richard in areas, such as advanced screening application and those types of electronic markets.
Thanks Blake.
Operating EBITDA for Eni of 349 million a.
A year ago period, primarily due to volume decline and lower operating rates to better align inventory with an <unk>.
They got set a reduced discretionary spend.
Turning to slide eight <unk> second quarter net sales of $1 5 billion or flat versus last year as organic sales growth of 1% offset by 1% currency headwind organic.
Organic growth of 1% reflects a 5% increase in price, resulting from the carryover impact of pricing actions taken last year, mostly offset by a 4% decrease in segment volume declines in shelter solutions.
At the line of business level organic sales growth was led by water solution for that mid teens, our continued demand growth for water filtration.
Asthma and ion exchange resin, along with benefits from carryover pricing.
AG solutions sales were up mid single digits on organic basis.
By carryover pricing and volume strength in Kevlar, nomex, and aerospace and automotive market, especially for ETE, coupled with timex.
Health care.
Self installations are down 12% on an organic basis, driven by demand softness in construction market as well as destocking, Although we do expect a reduced impact from destocking in the second half.
Operating EBITDA for Wip during the quarter with 368 million up 6% operating EBITDA margin of 24, 6% increased 140 basis points versus the year ago period.
Treatment resulted primarily from net pricing.
On cost control, especially more than offset volume declines.
Turning to slide nine I will close with a few comments on our outlook and guidance every quarter and full year 2023.
Regarding the demand environment, we continue to expect fairly steady demand in most of our industrial end markets.
And wip, although we expect sales moderation in our water business to lower demand in China.
Within electronics.
That stabilization and some already back in our interconnect solutions business.
7% sequential improvement in sales during the second quarter.
We expect mid single digit actual press to follow in the first quarter.
We believe that any markets likely bottomed during the second quarter and we assume that net sales in the second half I think slightly on a sequential basis.
Given ongoing consumer electronics demand headwinds, notably in China, we have tempered the rate of second half growth.
<unk>.
We are adjusting our full year 2023 guidance to account for the slower cadence of recovery and electronics, including our efforts to continue to reduce production to align inventory with demand.
In addition, our third quarter and full year guidance now includes the estimated contribution from spectrum beginning August one.
For the full year, we now expect net sales to be between 45, and 555 billion operating EBITDA to be between $2 975, and three point of two 5 billion and adjusted EPS to be between $3 40, and $3 50 per share.
For the third quarter 2023, we expect revenue of approximately $3 5 billion operating EBITDA of approximately 765 million.
And adjusted EPS, approximately <unk> <unk> per share.
With that we are pleased to take your questions at many turn it back to the operator to open the Q&A.
Yeah.
At this time I would like to remind everyone in order to ask a question Star then the number one on your telephone keypad.
For just a moment to compile the Q&A roster.
Your first question comes from the line of John Mcnulty from BMO capital markets.
Your line is open hi, good.
Hi, Good morning, this is Bob.
John .
Maybe on the water business, the water business tends to be a bit less cyclically compared to your other businesses can you add some color on what is driving the softness in China, what changed since maybe last quarter and what kind of recovery do you expect maybe over the next couple of quarters.
Yes, we think the next couple of quarters or just a little bit later would be close in China, That's really go.
All of this in the industrial.
Economy to China, right, now, which obviously should rebound here at some point, but we're expecting that to be a little softer in the second half of the year that fiber.
<unk> growth, we've had in that business as a double digit growth. So we're just saying it's going to moderate some store growth bunch of slower growth.
For the year.
But as that business has done quarter in quarter out it grows at a pretty nice clip and I expect as China improves.
Growth rate pick up also remember 70% of that business is pretty.
Renewable business.
It's steady.
Well I think a couple of quarters, maybe a little lighter on China what were seeing.
Got it.
And then electronics, great to see the inflection coming in into the next deletions.
We have also seen some positive MSA data points. What are you hearing in semi is technologies. When do you expect an inflection that in.
And maybe any color on your order books for electronics that Youre seeing this quarter so far.
Yes, so just probably just back to the Ics one.
That started to decline in Destocking started about the middle of 2022, so it's almost.
And months.
Will that be in the downturn in the first quarter. It was really wanted.
And then we did see 7% sequential pick up and we're expecting mid single digit pickup.
By the forecast we have for the third quarter. So obviously, that's starting to come up nicely off the bottom of the semi was the one we tempered a little more in the second half we look like.
It hit the bottom in the second quarter.
Not J&J much upturn in the third quarter. Instead, we are assuming we are another quarter kind of near the bottom or just very slightly up from that and then we think somewhere the inflection point is more in the fourth quarter, but it's hard to tell what path you actually see it. So we didn't pick it up a little bit to forecast in the fourth quarter, but not.
So that's a good thing.
We gave you the guidance here today, but I think we've seen the bottom in semi we're seeing the lift begin in Ics now remember Ics is still negative.
At ways to cut back still but it was down over 20% and we're starting to write it back those still be negative.
The third and fourth quarter on a year over year compare.
I appreciate the time thank you.
Thank you.
Your next question comes from Christopher Parkinson from Mizuho Securities.
Great. Thank you so much.
If we can just circle back very quickly to the Ics side, there's been a bit of a difference between how China handset sales have been trending.
<unk> versus the rest of the western World in terms of how to think about that I'd love. Some comments on how to think about that into the second half of the year.
As well as you do have a few customers with some potential new launches in the second half. So just in terms of the normalization process.
It would be very helpful to get some commentary on how to think about that as it turns more into the second half, but probably more importantly, even the 2024 based on kind of the renewed I'd say much lower bar than we've seen in the past once a year and a half or so thank you.
Yes, let me comment I'll turn it to Lori by we just don't want to say customer names, but we're in good shape. This year on the new models being introduced by a couple of the large cellphone players. So from a market share standpoint, we know which phones were in work.
In a better position than we were last year not that we were in a bad position at all there here, but.
We feel like we're in a good position with the launch of the new models coming in we know what we're in in those phones and Goodbye. We clearly one of the things I think you all know we're in the top top technology for the <unk> 10 is a key component for Russell along with some other components, but thats a key one where are you guys just talk about the timing of.
Smartphone and on Friday.
For electronics recovery that was part of the revision that we had in the second half.
Original expectation on a full year basis.
Smartphone or would be down about 1% in Pcs down about seven.
Revised expectations on each piece of that.
Along with industry forecast.
Mark going back to be more in the 5% range Ptc's powerfully low double digit so.
But that doesn't that year over year growth in the fourth quarter. So it sounds like one more quarter of year over year down in the third quarter, and then recovery and of course into a more normal market.
Setting up for a strong 2020 for this market may.
Safety through the destock I'm, referring to more of a normal demand.
Demanding.
That's very helpful and just as a very quick follow up just on the <unk> side.
You've seen some very very solid growth at a water solutions, but you did have some comments as it pertains to the kind of the second half based on some fairly difficult comps to my understanding can you just sit on kind of whats the outlook for this business. Just is that just is your commentary solely a function of just the difficult comps and you would expect kind of a reacceleration in 2024.
But if you could just hit on that kind of that cadence and how we should be continuously thinking about that business in the long term that would be very helpful. Thank you.
Yes, Chris I think the way to look at that business consistent.
It is choppy some quarters.
We have a big installation were doing and all of that so if I could be every single quarter, but generally that business grows.
Kind of mid to high single digits pretty consistently now this past quarter, we had spent a better quarter.
Not on the growth rates, but it can be lumpy, but when you kind of smooth out the whole year I think thats the way to look at it kind of in that <unk>.
6% to 8% growth range.
When you smooth out the year.
I expect China activity will pick up but it's hard to tell if there's a little bit of excess inventory also is part of it.
We're expecting a couple just lighter quarter slightly quarters with growth.
In the third quarter, but just later than we had in the second quarter.
I think again, it's a consistent business.
It has been since we have so.
Expect that to continue to grow in that range.
Comment on the Lumpiness, if you put a two year stack on the volumes were up high single digits and so there is lumpiness.
Comments around sometimes project.
Work going on but in general, it's very strong growth for us and there's no change in our go forward forecast, especially with.
The requirements are going around it.
It would be any accidents b why are there so the key growth drivers.
And the key here is it.
Business, 70%.
So.
As to the consistency of it.
Your next question comes from John Roberts from Credit Suisse.
Thank you Ed is it fair to say that Dell Rune will be a private equity transaction. It would seem to be hard for strategic to do a closing by year end at this point.
Yes.
Yes, we're pretty confident we'll close it.
Our year end.
It's a private equity has been interested along with.
Strategic.
Don't want to get into any more than that at this point in time, but I think we're.
Highly confident the deal there's been nice interest in it.
And then secondly, there's been some challenges to the <unk> <unk> settlement.
Are you anticipating having to go through a similar process with your settlement.
Yes, John .
What happened here was very typical of these bigger type of settlements.
These class actions if you go back and look at any of the other big one to what we would get that I think what you're referring to is the challenge from state Ags all of that.
I don't think by what.
No I think that we did increase that's about $140 million.
<unk>.
We have seen a step up and the expected benefit from deflation.
<unk> 800 million last year of a headwind empty signs and we've got obviously a fair bit of room, so to get all of that money back, but we're making really nice project. Initially a lot of of deflation is coming from the energy and logistics site you.
You can see what day, the natural gas prices at dawn from the P 55 in the third quarter of last year.
Stabilization in the supply chain at Mercy.
<unk> so the one piece of a working through with just the timing of when that fall through the PNM. So we actually in the first quarter predominantly a little bit of second quarter actually saw some headwinds carried over from the escalation in 2022 from a piano perspective.
Right into the back half of the year will start to see those benefits that we've been getting from my perspective drop into the Indian S.
Favorite kind of it takes four to five months.
<unk> customer.
<unk> 2024.
Put the procurement to use the word <unk>.
<unk> <unk> <unk>.
2024 force.
Just as a side note.
<unk> remember not much for the walls were Indian Ivy only raise prices, 2% there the predominant sorry, there's gonna be Coleman W. T and the thing that affected the margins Indian I is really be absorption charge.
Taken by credit take it again in the third quarter, we'll probably gonna take it in the fourth quarter.
Just to make sure everything's chewed up for 2024, and that's affected or like in the <unk> in the second quarter that affected our margins, India I by about 400 basis points. So.
Without the absorption we know we're running that business north of 30, <unk>, So I feel very confident.
Watchlist run that in a 32 33 per cent EBIT range I'm very comfortable look at our math, but we're in good shape their <unk>.
And and is is there any risk around and anything you're seeing in pricing in W. N. P. That you know when you look out to the second half or in the next year any any aggression on pricing and those businesses. Sir so very small the one area, we're going to give up some price that we for <unk>.
The second half of the year is in the construction related markets. We also have the raising very significantly in those markets because <unk> did last year. So we've made an assumption in this four case that will give up some of the pricing there otherwise.
Pretty solid across the rest of the portfolio.
Okay, great. Thanks, a lot.
Thanks.
The next question comes from David <unk>.
<unk> <unk> bank.
Thank you and Laurie how much did spectrum add 223 and twenty-three guidance.
Yeah. So in total it'll give you about a little annoyed at two.
$200 million and.
22 per cent margin, it's pretty consistent across the month, so you'll take two months.
And next corner and then that's all three months.
I'm trying to eat.
It's really only about a patty on a phone your visa.
Once you factor in a lot of the interest income from the castle.
It's more of an ebay.
I see.
Got it and then it just done Destocking and shelter, where do you think we are I know you said you were close to the end here or it's moderating how much further do you think we have to go and.
Shelter solutions Destocking.
I think it's.
Mostly Don Destocking by the end of this third order.
And that's talking to a couple of our key distributors and customers you're one of the big box guys by what he was doing a rebalancing of all their inventory by moving around to different stores and regions.
And they are pretty much through that process. So.
Six in the third quarter were kind of there.
Thank you.
Yep.
Your next question comes from my head from Barclays.
Alright. Thanks. Good morning. This first question your corporate and retain business came in a bit better than historically has can you just help us unpack what happened in this corner, there and just how 'bout your trend going for.
Yeah. So we had a really strong right.
Mr <unk>.
Magenta Myers, a segment of it and it's really from <unk>.
We're all auto mail address.
About 16%.
S S number T.
Pardon me.
<unk>.
You ever hear primarily.
Great and then so I can just on Eni, you talked about reducing production rates to help manage inventory.
You expect that this there'll be some degree of drag it in the second half to earnings and then just Relatedly, how should we expect working capital to finish up this year.
Yeah, No we're definitely gonna take the absorption.
<unk>, we're in the third quarter.
40 million.
And the fourth quarter is our plan. So we're really good inventory.
Lined up very well, but demand. So we just feels the prudent thing to do right now.
So that that's what's baked into the plan that we.
Here today.
Five 900 mandatory in a second.
About $80 million Alright action will have to continue to try that and if we get into the end of the year.
Yeah, we had an appointment sequentially and cashed generation on cast.
Pretty bad.
And to the back half of the.
I typically are strong.
Cash generation.
An interesting.
Having a second.
Let me check repair annual going into my first class.
Uhm from that perspective.
<unk> I have a nice amount of second to make sure I get Ya.
<unk> can I continue.
Cashback and we'll take out all the noise.
Component primarily.
Here that.
Which will take place a complaint.
And then at the other end of the.
Okay. So I can continue.
Anthony.
Great. Thank you.
Your next question comes from Josh Specter from U B S.
Yeah, Hi, Thanks for taking my question I guess first I wanted to ask on the other three Q guidance. So if we look organic sales and EBITDA, you're kinda cutting flat sequentially. So you're talking about I C. I S up mid single digits sounds like raw materials could be a little bit better to help.
Typically with Ics after you've got a mixed benefit there. So you know what drives at flat EBITDA, what if somebody offsetting items that will keep you with a flat versus having it up sequentially on an organic basis.
Yes, the three biggest items that we had.
Mentioned first being a wider deceleration and we see some moderation in one ear.
We are coming up with a really strong.
And the second quarter.
He had also mentioned that you expect to have to get back some price primarily in the shelter.
Uhm and then the third piece by something.
Raising with B T M.
Paul Destocking within my apartment.
Telegraph across stomach that other players and we are starting to see that a little bit.
Industrial sectors.
Okay.
Okay. That's helpful and I guess, when I think about Ics I'll look into 2024, so I haven't done the full NASA, maybe organic you down something like 10%. This year I guess, when we look at smartphone growth P. C. Grill, if there's not a massive influx of next year, there's better growth forecasted.
Very low single digits I guess, how do you think about that Ics.
Performing relative to that Dewey overbilled some inventory so we don't get the full balance back or do you expect it stronger if you could frame that that'd be helpful. Thanks.
Yeah, it's kind of hard to say at this point.
Restocking potentially could happen.
<unk>. So you would expect it to perform nicely alongside the market. The one airline that will happen for us.
And in your ear.
<unk> on ebay.
Won't have those absorption.
2022 said the predominance.
Yeah.
I T as in <unk>.
The 20th.
Okay. Thank you.
Alright.
Your next question comes from Vincent Andrews from Morgan Stanley .
Thank you and good morning wondering if you can speak just a little bit about the cost work you've been doing kind of past present and future just looking at the income statement I've got SG&A down about 76 million year to date is R&D down 32, and then sundry expense Uhm down 40, and maybe you can kind of contextualize.
Decreases and and how they play out over the balance of the year in which segments, presumably receiving the most of the ones that are that are having the most macro concerns and maybe just also remind us what sundry expense actually is.
Yes, Sir.
It's really not even name out for your email.
Are interesting and it's on February 9th.
Okay.
Alright.
P. P S come in so it's not really primarily related.
I see thank you uhm when that comes out tomorrow about like all the other stuff.
Alright, that's not really a reflection at all.
Control discretionary spend.
From from that perspective that we have in area and controlling the discretionary spending to minimize the decorate my house.
I think we've done a nice job doing that I made my first task.
Decrementals as record number 40 per cent, but if you if you take out the headwind from.
The absorption.
Having to reduce inventory.
Down.
<unk> 20th you said that's really.
70% accurate.
Taken from both we did as far restructuring.
And had cats, primarily in the G N H.
Uhm R&D in marketing.
And then we have and taking some read actually to our.
Missionary consultations.
Mr <unk> coming in through the <unk>.
That would be a piece of that and then I'll be S. T. D line, a small iced tea.
Head count.
Yes.
Okay.
We've been <unk> traveling entertainment budget.
Uhm.
People travel in the application engineers really be careful.
[noise] <unk>, we've really put the word out or T V. While we're in.
For environment here will come out with a nice but.
Just watch anything on the discretionary sorry.
Okay, and then just as a follow up at nothing happening presumably on the bolt on M&A side of the table for the rest of your any thoughts Sir.
I don't think you'll see anything obviously the rest of this year and.
At least well into next year.
Call your.
Pause, we love, where we've got the balance sheet.
<unk>.
Check sent it to your somewhere around two X, that's where we Wanna be.
So.
We're in a great spot I don't feel like we need to do anything.
You are where we got to where we need to be okay.
Excellent. Thank you very much.
Alright.
Your next question comes from Frank match premium research.
Hey, good morning, I had the.
Riverhouse Bennett that's on Sunday, It was very nice so congrats on that.
Well thank you.
[laughter].
But you haven't had a ear I highly recommend it I highly recommend it.
Following up on the M&A question.
Says is still in your corporate line item when when might we expect it to be folded back into the.
What are the businesses and or is that a candidate for divestiture.
So it's not a candidate for divestiture as per record was we liked the position, we especially with the.
B E V opportunity, we have <unk>, the grocery store and all so.
Like that business.
I don't think we're gonna make any new short term.
Pulling it out of there.
And at this point.
Got everything wrong with the way we want so.
Won't say anything in the next couple of hours.
Okay. Thank you and then if I if I looked geographically I mean Europe has been up.
Year over year based on price what are your thoughts in terms of.
Terms of volume growth in in that region.
[noise], Yeah survivor is in general.
Yeah, I would have expected.
We get into that.
<unk>.
S M S.
Okay.
Is China.
Pricey, so it will start to get into the back half of pier 75 kind of cut in half.
Right now.
2384, very rarely it would be like the negative.
The price of you would have to get that kind of ambition.
Counter space.
Great. Thank you.
<unk>.
Your next question comes from Steve Burn from Bank of America.
Yes. Thank you B P. A has estimated several thousand water districts that would need to comply with the.
Proposed M seals My my question for you is.
You mentioned, you think you could get final approval on the settlement six months or so do you need a certain fraction of those water districts to opt in and can you comment on how how that is going and do you have a view on how they will comply do Ya do Ya.
They will mostly use carbon or do you think some of them might.
Employ oral or ordering extremes you know your technologies.
Yeah. So.
There there's a per cent.
<unk> caught opt in or we can walk away from the settlement so <unk>.
That's a very high percentage and we sink just to bitch tee. It up with you know that that will not be a problem remember a lot of these water districts have been being talked to by the plaintiff side of this this isn't hasn't been done in a vacuum.
So you know they they've been.
Talk to along the way here to get to this preliminary or stolen so.
Alright, I think shortly as I said, we will get it approved by the charge on a preliminary basis that menu.
<unk> to make sure you get that done and then you have final.
Once you get that.
Threshold. So you know, it's really up to each of the different for water districts out there can handle that.
To clean up any P. Fast it's in there you know so I can.
I I don't want to comment on that.
And then.
You mentioned, that's 70% of your water businesses renewables.
I was just curious I was just curious what fraction of that are you selling directly to the customer versus going through.
<unk> service provider and do you have an interest in changing you know.
[noise] fraction by getting more aggressive and your own sales force.
Hi.
Any change that I go to market strategy.
As in history.
The customers.
Excellent.
Okay.
And they said that.
That's why I mentioned earlier.
Okay.
Right away for us.
Alright.
M a N.
Exactly why.
Thank you.
I see.
Your next question comes from Iran, Viswanathan fan or B C capital markets.
Great. Thanks for taking my question just wanted to ask about the electronics market here could you just elaborate on you know the destocking the volume trajectory I guess from here I think previously you'd expected this year to be the main you know <unk>.
Negative hit.
You'll be facing easier comps next year do do you think you should grow and kind of say the mid single digit level for next year, where where do you expect electronic swellings to be an extra thanks.
Yes, and we.
We had mentioned we believe with an Ics it will contain.
And then.
Thank you for them in a family we don't see.
And can we get it right.
<unk> definitely the ear over here.
And will start to eat.
Overall.
About 10%.
Okay.
So.
It's probably a little early to call at 2024, it looks like you know I I.
I think that's pretty good.
Given that you won't have to use that.
<unk>.
See you don't have that.
Every year and we're really encouraged at the headache of 2024.
<unk> will be.
Okay.
And I'll spell the last name.
Yeah.
It had been taken this year.
Alright, and then a further benefits.
Yeah.
<unk> and just a real quickly on the share buyback plans, so you'll be completing we 3.25.
Very soon could you just describe how how we should think about the the <unk>. The other 2 billion that you <unk>. Shortly thereafter would that be done ratably or I shouldn't think about that how close and.
Yeah, so it'll be a vanilla instruction reset the first three.
Yes, that'll complete that within a month.
Shortly thereafter.
$30.
You'll get 80 per cent of the share that upfront.
And then you'll get that 20 per cent clean up in the back and it probably would take us about six months.
Can you tell me about it.
Sure.
Thanks.
Alright.
Your next question comes from my <unk> from Wells Fargo.
Hi, good morning.
In terms of 76, nowadays and interconnect solutions I think historically after destocking event.
Some restocking but.
But you know given it's taken so long for the Destocking to and how how do you think that plays out. This time around is there any differences between the regions on that.
Yeah, I mean, it's it's hard to say what everyone's gonna do with respect to the reset after coming three such a significant.
You might change that.
<unk>.
Probably a little too early.
I'm in front of me.
I'll take care of.
[noise] next year.
[noise] stabilization that's happening uhm.
Yeah.
Being that.
Got it and then just a quick follow up.
Historically been about 30 per cent for EBITDA margins and started to get back there or is it just simply getting all the volume back.
Yeah. It's it's really two things are getting the volumes back, but remember appointment that I made earlier ones do Tucson, Arizona.
<unk> absorption.
<unk> second quarter already over 30%. So the absorption is what pulled it down the charges.
Sort of spam to the 26.6 ish.
So.
We can even in a sulphur five environment, we're running a little north of 30, and as you said and I said earlier you know we'd run this business 32 33 per cent EBITDA margins.
We'll get through but.
Come back.
Got it thank you.
Thanks.
Your final question comes from Patrick Cunningham from Citibank.
Hi, Good morning is there any update your expectations for $20 million in synergy capture from spectrum and what should we expect for the Qaeda Sir.
Yeah, No no lettuce.
20 million.
Probably will take the better part of 12 18 months.
I mean, obviously for us.
<unk>, Thank you for calling us together and birch.
Alright.
Medical advice.
Revenue.
For a second.
Got it that's helpful and how do you expect the health care business a trend throughout the year, both on the legacy and the spectrum side, there's been some commentary pointing to pockets of Destocking is companies to <unk> safety stocks have you seen any of that from any of their businesses.
Yeah, so diluted our Livio business worth so I think we're already mentioned this a little while ago in the biopharmaceutical received some destocking Darren.
I heard I think six other companies that I heard in the last week with.
The results that they were seeing some destocking and Biopharma God Oh, My God is that last a couple of orders just to correct that a little bit and you know it was another one of those mortgage just like send me I I remembered I was getting calls from C. E. O's in the health care business, though you know we need more we'd be more than <unk>.
Just like send me everyone overshot.
He was a little bit of a correction going on there, but I'd say, that's probably the the third and fourth.
Direction there.
You mentioned earlier the spectrum numbers are kind of right and wrong, where we thought they would be so they look like they're.
<unk> for the year, we thought they were gonna happen secondhand for the year here.
I would expect you know again is that the growth in our health care businesses.
<unk> company average certainly about G P.
Great. Thank you.
Thank you.
I now turn the call over to Christmas for concluding remarks.
Okay. Thanks, everybody for joining a call just for your reference and a coffee the transfer will be posted on our website. Once available. This concludes our call. Thank you.
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