Q2 2024 DuPont De Nemours Inc Earnings Call

July 31, 2024

Pam: My name is Pam, and I will be your operator today. At this time, I would like to welcome everyone to the DuPont second quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise.

Thank you for standing by. My name is Pam and I will be your operator today. At this time, I would like to welcome everyone to the DuPont second quarter 2024 earnings call.

Unknown Executive: At this time, I would like to welcome everyone to the DuPont second quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise.

Unknown Executive: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the conference over to Chris Mecray.

All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.

Pam: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the conference over to Chris Mecray.

If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the conference over to Chris Mecray. You may begin.

Chris Mecray: You may begin. Good morning, and thank you for joining us for DuPont's second quarter 2024 financial results conference call. Joining me today are Ed Breen, Executive Chairman; Lori Koch, Chief Executive Officer; and Antonella Franzen, Chief Financial Officer. We've prepared slides to supplement our remarks, which are posted on DuPont's website under the Investor Relations tab and through the webcast link. Please read the forward-looking statement disclaimer contained in the slide. During this call, we'll make forward-looking statements regarding our expectations or predictions about the future.

Chris Mecray: Good morning and thank you for joining us for DuPont's second quarter 2024 financial results conference call. Joining me today are Ed Breen, Executive Chairman, Lori Koch, Chief Executive Officer, and Antonella Franzen, Chief Financial Officer.

Chris Mecray: Because these statements are based on current assumptions and factors that involve risks and uncertainties, our actual performance and results may differ materially from our forward-looking statements. Our Form 10-K, as updated by our current periodic reports, includes a 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 significant items.

Speaker Change: We've prepared slides to supplement our remarks, which are posted on DuPont's website under the Investor Relations tab and through the webcast link. Please read the forward-looking statement disclaimer contained in the slides.

Speaker Change: During this call, we'll make forward-looking statements regarding our expectations or predictions about the future. Because these statements are based on current assumptions and factors that involve risks and uncertainties, our actual performance and results may differ materially from our forward-looking statements.

Speaker Change: Our Form 10-K , as updated by our current periodic reports, includes detailed discussion of principal risks and uncertainties which may cause such differences.

Speaker Change: Unless otherwise specified, all historical financial measures presented today are on a continuing operations basis and exclude significant items.

Speaker Change: We will also refer to other non-GAAP measures. A reconciliation to the most directly comparable GAAP financial measure is included in our press release and presentation materials and has been posted to DuPont's Investor Relations website.

Chris Mecray: We'll also refer to other non-GAAP measures. A reconciliation to the most directly comparable GAAP financial measure is included in our press release and presentation materials and has been posted to DuPont's Investor Relations website. I'll now turn the call over to Lori. Good morning, and thank you for joining us.

Lori D. Koch: I'm excited to be here today for my first quarterly call as CEO and to be joined by Antonella, our newly appointed CFO. We both look forward to partnering with Ed and our global team to continue to drive value creation for all stakeholders. We remain focused on driving results and demonstrating the performance potential of our combined portfolio while furthering the plans to unlock value through our previously announced separation. This morning, we reported second quarter financial results ahead of our previous guidance, reflecting continued positive momentum led by broad-based electronics recovery, as well as sequential improvement from all W&P lines of business. We were very pleased with this outcome and by the continued focus and strong execution of our global strategy.

Speaker Change: I'll now turn the call over to Lori.

Lori: Good morning and thank you for joining. I'm excited to be here today for my first quarterly call as CEO and to be joined by Antonella, our newly appointed CFO . We both look forward to partnering with Ed and our global team to continue to drive value creation for all stakeholders.

Speaker Change: We remain focused on driving results and demonstrating the performance potential of our combined portfolio while furthering the plans to unlock value through our previously announced separations.

Speaker Change: This morning, we reported second quarter financial results ahead of our previous guidance, reflecting continued positive momentum led by broad-based electronics recovery, as well as sequential improvement from all W&P lines of business.

Speaker Change: We were very pleased with this outcome and by the continued focus and strong execution of our global team.

Lori D. Koch: On a consolidated basis for the quarter, we saw improvement across all key financial metrics. Net sales and operating EBITDA were both up year over year and sequentially, including a 17% pickup in operating EBITDA versus the first quarter. We saw strength in the SEMI business driven by growth and advanced technology applications, including AI. We also realized continued recovery and new wins within the consumer electronics markets to drive both year-over-year and sequential growth for interconnect solutions.

Speaker Change: On a consolidated basis for the quarter, we saw improvement across all key financial metrics. Net sales and operating EBITDA were both up year-over-year and sequentially, including a 17% pickup in operating EBITDA versus the first quarter.

Speaker Change: We saw strength in the SEMI business driven by growth in advanced technology applications, including AI. We also realized continued recovery and new wins within consumer electronics markets to drive both year-over-year and sequential growth for interconnect solutions.

Lori D. Koch: We did see some favorable timing benefits within each of these businesses during the second quarter relative to our expectations. In the W&P segment, we were pleased to see a better-than-anticipated sequential step-up in our water business in China, as well as improvement in Tyvek medical packaging within Safety Solutions, which was in line with our expectations. Our year-over-year growth in Operating EBITDA reflects solid margin expansion, with an Operating EBITDA margin improvement of 130 basis points, driven by favorable business mix, stronger production rates in our electronics businesses, and realization of infrastructure-related cost savings, although partially offset by higher bearable compensation expense. Second quarter adjusted earnings per share increased 14% year over year.

Lori D. Koch: We did see some favorable timing benefits within each of these businesses during the second quarter relative to our expectations. In the W&P segment, we were pleased to see a better than anticipated sequential step-up in our water business in China, as well as improvement in Tyvek medical packaging within Stacy Solutions, which was in line with our expectations. Our year-over-year growth in Operating EBITDA reflects solid margin expansion, with an Operating EBITDA margin improvement of 130 basis points, driven by favorable business mix, stronger production rates in our electronics businesses, and realization of infrastructure-related cost savings, although partially offset by higher bearable compensation expense. Second quarter adjusted earnings per share increased 14% year over year.

Speaker Change: We did see some favorable timing benefits within each of these businesses during second quarter relative to our expectations.

Speaker Change: In the W&P segment, we were pleased to see a better-than-anticipated sequential step-up in our water business in China, as well as improvement in Tyvek medical packaging within Safety Solutions, which was in line with our expectations.

Speaker Change: Our year-over-year growth in Operating EBITDA reflects solid margin expansion, with Operating EBITDA margin improvement of 130 basis points, driven by favorable business mix, stronger production rates in our electronics businesses, and realization of infrastructure-related cost savings.

Speaker Change: Partially offset by higher variable compensation expense.

Speaker Change: Second quarter adjusted earnings per share increased 14% year over year.

Lori D. Koch: Strong cash generation and related conversion of over 100% was another bright spot for the quarter, highlighting disciplined working capital management amid a sequential sales ramp. For the full year 2024, we are raising our guidance for net sales, operating EBITDA, and adjusted EPS, which Antonella will detail shortly. I also wanted to highlight that earlier this week we closed our acquisition of Donatel, a manufacturer of sophisticated medical devices. We are delighted to welcome the Donatel team to DuPont and are excited about this transaction, which will deepen and complement our expertise in the medical device markets alongside Spectrum, which we acquired last year.

Speaker Change: Strong cash generation and related conversion of over 100% was another bright spot for the quarter, highlighting disciplined working capital management amid a sequential sales ramp.

Speaker Change: For the full year 2024, we are raising our guidance for net sales, operating EBITDA, and adjusted EPS, which Anne Scinella will detail shortly.

Anne Cannella: I also wanted to highlight that earlier this week, we closed our acquisition of Donatel, a manufacturer of sophisticated medical devices.

Speaker Change: We are delighted to welcome the Donatel team to DuPont and are excited about this transaction, which will deepen and complement our expertise in medical device markets alongside Spectrum, which we acquired last year.

Edward D. Breen: Don and Ted will be managed within our E&I Industrial Solutions line of business alongside the Spectrum. Together, these offerings are expected to enhance our position as a partner of choice for customers in the high-growth medical device field. I'll now turn the call over to Ed, who will provide a progress update on our planned separation. Thanks and good morning, everyone.

Lori D. Koch: Don and Ted will be managed within our E&I Industrial Solutions line of business alongside the Spectrum. Together, these offerings are expected to enhance our position as a partner of choice for customers in the high-growth medical device field. I'll now turn the call over to Ed, who will provide a progress update on our planned separation. Thanks and good morning, everyone.

Speaker Change: Donatell will be managed within our E&I Industrial Solutions line of business alongside the Spectrum team.

Speaker Change: Together, these offerings are expected to enhance our position as a partner of choice for customers in the high-growth medical device field.

Speaker Change: I'll now turn the call over to Ed who will provide a progress update on our planned separations.

Edward D. Breen: As seen in our second quarter results, we are well into the recovery phase from last year's inventory corrections in most key end markets, and electronics may be setting up for a prolonged positive cycle. Turning to the separations, we've received very encouraging feedback since our May announcement of our intent to separate the electronics and water businesses and the formation of three independent companies. We believe our investors broadly appreciate the value creation opportunity of having three industry-leading global companies with compelling growth opportunities and distinct investment propositions.

Ed: Thanks and good morning everyone. As seen in our second quarter results, we are well into the recovery phase from last year's inventory corrections in most key end markets and electronics may be setting up for a prolonged positive cycle.

Speaker Change: Turning to the separations, we've received very encouraging feedback since our May announcement of our intent to separate the electronics and water businesses and the formation of three independent companies.

Speaker Change: We believe our investors broadly appreciate the value creation opportunity of having three industry-leading global companies with compelling growth opportunities and distinct investment propositions.

Edward D. Breen: As we shift gears to ramp up our separation activities, we have also worked to ensure our teams internally are highly motivated to remain focused on serving customers and driving business performance. That remains the top priority, and I'm confident our operating teams will continue to execute. As you can see on slide four, we have already begun working on the rigorous project management processes necessary to ensure the separation work is executed smoothly. Our teams have plenty of experience to rely on to ensure we stay within the 18 to 24 month timeline from our May announcement with all three companies well positioned for day one.

Speaker Change: As we shift gears to ramp up our separation activities, we have also worked to ensure our teams internally are highly motivated to remain focused on serving customers and driving business performance.

Speaker Change: That remains the top priority, and I'm confident our operating teams will continue to execute.

Speaker Change: As you can see on slide 4, we have already begun working on the rigorous project management processes necessary to ensure the separation work is executed smoothly.

Speaker Change: Our teams have plenty of experience to rely on to ensure we stay within the 18 to 24 month timeline from our May announcement, with all three companies well positioned for day one.

Edward D. Breen: One key short-term milestone that has already been completed is the establishment of key workstream leaders as part of our integrated project management team under Lori and Antonello's leadership, along with myself. Key separation work streams underway include Legal Entity Stand-Up, IT Separation and STAND, Car Financials, and Talent Selection. A current priority, along with our board, is to complete executive leadership appointments for electronics and water, along with corporate governance aspects, including board appointments.

Speaker Change: One key short-term milestone that has already been completed is the establishment of key workstream leaders as part of our integrated project management team under Lori and Antonello's leadership, along with myself.

Speaker Change: Key separation work streams underway include legal entity stand-up, IT separation and stand, car financials, and talent selection.

Edward D. Breen: A current priority, along with our board, is to complete executive leadership appointments for electronics and water, along with corporate governance aspects, including board appointments. We currently anticipate announcements in early 2025. We are also making progress towards the future capital structures of the three intended companies. Specifically, during June, we redeemed $650 million of our 2038 bonds and entered into new interest rate swaps to hedge the rate risk on our longer-dated maturity. To the extent that it becomes necessary to repay these bonds.

Speaker Change: A current priority, along with our board, is to complete executive leadership appointments for electronics and water, along with corporate governance aspects, including board appointments.

Edward D. Breen: We currently anticipate announcements in early 2025. We're also making progress towards the future capital structures of the three intended companies. Specifically, during June, we redeemed $650 million of our 2038 bonds and entered into new interest rate swaps to hedge the rate risk on our longer-dated maturity, to the extent that it becomes necessary to repay these bonds.

Speaker Change: We currently anticipate announcements in early 2025.

Speaker Change: We are also making progress towards the future capital structures of the three intended companies.

Speaker Change: Specifically, during June , we redeemed $650 million of our 2038 bonds and entered into new interest rate swaps that hedged the rate risk on our longer-dated maturities.

Speaker Change: To the extent that it becomes necessary to repay these bonds, the new swaps hedge the risk of higher debt repayment costs that would occur in a lower interest rate environment.

Edward D. Breen: The new swaps hedge the risk of higher debt repayment costs that would occur in a lower interest rate environment. So while it is still early in the process, you can see that the separation work is progressing. And we look forward to updating you as we move forward. Before I turn it over to Antonella, I'd like to mention one of the updates detailed in our 10-Q, which will be filed later today, specifically regarding the South Carolina MDL.

Speaker Change: So while it is still early in the process, you can see that the separation work is progressing along, and we look forward to updating you as we move forward.

Speaker Change: Before I turn it over to Antonella, I'd like to mention one of the updates detailed in our 10-Q, which will be filed later today, specifically around the South Carolina MDL.

Edward D. Breen: Now that the Water District settlement has become final, the court has indicated a focus on the personal injury case. Earlier this year, the court ordered cases not involving one of the eight medical conditions to be dismissed by August 22, unless certain evidence is presented.

Speaker Change: Now that the Water District settlement has become final, the court has indicated a focus on the personal injury cases.

Speaker Change: Earlier this year, the Court ordered cases not involving one of the eight medical conditions to be dismissed by August 22, unless certain evidence is presented.

Edward D. Breen: About half of the 6,000 cases pending on June 30th are expected to be dismissed on that basis. They can be refiled over the next four years if those evidence requirements are later met. We do not, however, expect any trials in 2024 in the South Carolina MDL.

Edward D. Breen: About half of the 6,000 cases pending on June 30 are expected to be dismissed on that basis. They can be refiled over the next four years if those evidence requirements are later met. We do not, however, expect any trials in 2024 in a South Carolina MDL.

Speaker Change: About half of the 6,000 cases pending on June 30th are expected to be dismissed on that basis.

Speaker Change: They can be refiled over the next four years.

Speaker Change: If those evidence requirements are later met.

Antonella: We do not, however, expect any trials in 2024 in the South Carolina MDL. With that, let me turn it over to Antonella, who will provide additional details on our financial results and outlook.

Antonella B. Franzen: With that, let me turn it over to Antonella, who will provide additional details on our financial results and outlook. Thanks Ed and good morning everyone. I'm excited to be here today and honored to serve as CFO of DuPont.

Antonella Franzen: With that, let me turn it over to Antonella, who will provide additional details on our financial results and outlook. Thanks Ed and good morning everyone. I'm excited to be here today and honored to serve as CFO of DuPont.

Antonella: Thanks, Ed, and good morning, everyone. I'm excited to be here today and honored to serve as CFO of DuPont.

Antonella B. Franzen: Turning to slide five, I will cover our second quarter financial highlights in further detail. Our second quarter results were clearly encouraging. Volume recovery is a key driver of our improved Q2 financial performance. Additionally, our ongoing commitment to drive productivity and operational efficiency, as well as continued savings from restructuring actions announced last November, are also contributing to top-line growth, margin expansion, and cash flow improvement. Net sales of $3.2 billion increased 2% versus the year-ago period as a favorable portfolio benefit of 4%, reflecting the spectrum acquisition, was partially offset by a 2% currency headwind. However, organic sales were flat as a 2% increase in volume was offset by a 2% decrease in price.

Antonella: Turning to slide 5, I will cover our second quarter financial highlights in further detail.

Antonella: Our second quarter results were clearly encouraging. Volume recovery is a key driver of our improved Q2 financial performance.

Antonella: Additionally, our ongoing commitment to drive productivity and operational excellence, as well as continued savings from restructuring actions announced last November , are also contributing to top-line growth, margin expansion, and cash flow improvement.

Antonella: Net sales of $3.2 billion increased 2% versus the year-ago period, as a favorable portfolio benefit of 4%, reflecting the spectrum acquisition, was partially offset by a 2% currency headwind.

Antonella: Organic sales were flat as a 2% increase in volume was offset by a 2% decrease in price.

Antonella B. Franzen: Higher volume was driven by broad-based growth in electronics markets within SEMI and InterConnect solutions, with year-over-year reported volumes of more than 20% and mid-teens, respectively. However, these gains were partially offset by year-over-year declines in China within water solutions, as well as Tyvek medical packages. However, we did see sequential improvement in these areas, as Lori mentioned. On a segment view, E&I Organic Sales increased to grow 8%, while W&P Organic Sales declined, but moderated to 6%.

Antonella: Higher volume was driven by broad-based growth in electronics markets within SEMI and InterConnect solutions, with year-over-year reported volumes up more than 20% and mid-teens, respectively.

Antonella: These gains were partially offset by year-over-year declines in China within water solutions, as well as Tyvek medical packaging. However, we did see sequential improvement in these areas, as Lori mentioned.

Lori: On a segment view, E&I Organic Sales inflected to grow 8% while W&P Organic Sales declined moderated to 6%.

Antonella B. Franzen: Organic sales in corporate were 5% versus the year-ago period. From a regional perspective, Asia-Pacific delivered 3% organic sales growth versus the year-ago period, with growth driven by China, where organic sales were up 8%, led by strong growth in ENI. In other regions, North America was down 2%, and Europe was down 7%.

Lori: Organic sales in corporate 5% versus the year-ago period.

Lori: From a regional perspective, Asia Pacific delivered 3% organic sales growth versus the year-ago period, with growth driven by China, where organic sales were up 8%, led by strong growth in E&I.

Lori: In other regions, North America was down 2% and Europe was down 7%.

Antonella B. Franzen: Second quarter operating EBITDA of $798 million increased 8% versus the year-ago period as volume gains, lower product costs, savings from restructuring actions, and the earnings contribution from Spectrum were partially offset by higher variable compensation. Operating EBITDA margin during the quarter was 25.2 percent, up 130 basis points versus the year-ago period and up 190 basis points sequentially from the first quarter. Additionally, I am very pleased with our cash flow performance as we recorded another quarter of strong cash generation and conversion. Cash from operations of $527 million, less capital expenditures of $102 million, resulted in adjusted free cash flow of $425 million. Adjusted free cash flow conversion during the quarter was 104 percent.

Lori: Second quarter operating EBITDA of $798 million increased 8% versus the year ago period as volume gains, lower product costs, and higher cost of living.

Lori: Savings from restructuring actions and the earnings contribution from spectrum were partially offset by higher variable compensation.

Lori: Operating EBITDA margin during the quarter was 25.2%, up 130 basis points versus the year ago period, and up 190 basis points sequentially from first quarter.

Lori: Additionally, I am very pleased with our cash flow performance as we recorded another quarter of strong cash generation and conversion.

Lori: On a continuing operations basis, cash from operations of $527 million, less capital expenditures of $102 million, resulted in adjusted free cash flow of $425 million.

Lori: Adjusted free cash flow conversion during the quarter was 104 percent.

Antonella B. Franzen: Turning to slide 6, adjusted EPS for the quarter of $0.97 per share increased 14% from $0.85 in the year-ago period. Higher segment earnings of $0.10 and the benefit of a lower share count of $0.09 were partially offset by lower interest income of $0.05, resulting from a reduction in cash on hand versus the prior year. Other below-the-line items totaled a net 2 cent headwind as a higher tax rate and depreciation were partially offset by lower exchange losses versus the year-ago period. Our base tax rate for the quarter was 26.4 percent, up from 23.7 percent in the year-ago period, driven by certain discrete tax expenses, as well as geographic mix in earnings.

Lori: Turning to slide 6, adjusted EPS for the quarter of $0.97 per share increased 14% from $0.85 in the year-ago period.

Lori: Higher segment earnings of $0.10 and the benefit of a lower share count of $0.09 were partially offset by lower interest income of $0.05, resulting from a reduction in cash on hand versus the prior year.

Lori: Other below-the-line items totaled a net two-cent headwind as a higher tax rate and depreciation were partially offset by lower exchange losses versus the year-ago period.

Lori: Our base tax rate for the quarter was 26.4%, up from 23.7% in the year-ago period, driven by certain discrete tax expenses, as well as geographic mix in earnings.

Antonella B. Franzen: Our full year 2024 base tax rate is now estimated to be at the high end of our prior range, or approximately 24 percent. Turning to segment results, beginning with E&I on slide 7. E&I's second quarter net sales of $1.5 billion increased 15% versus the year-ago period as a result of a spectrum sales contribution of 9%, and organic sales growth of 8% were partially offset by a currency headwind of 2%.

Lori: Our full year 2024 base tax rate is now estimated to be at the high end of our prior range, or approximately 24 percent.

Lori: Turning to segment results, beginning with E&I on slide 7.

Lori: E&I's second quarter net sales of $1.5 billion increased 15% versus the year-ago period, as the spectrum sales contribution of 9% and organic sales growth of 8% were partially offset by a currency headwind of 2%.

Lori: Organic sales growth of 8% reflects a 10% increase in volume, partially offset by a 2% decrease in price.

Antonella B. Franzen: Organic sales growth of 8% reflects a 10% increase in volume, partially offset by a 2% decrease in price. At the line-of-business level, organic sales for SEMI were up more than 20 percent, driven by continued demand recovery for SEMI products, including AI-driven technology ramps, as well as higher volumes for OLED materials led by new product launchers. A resurgence of demand for leading-edge materials requiring higher content and accelerated buying in support of new fab capacity, primarily in China, also contributed to the volume increase in the second quarter.

Lori: At the line-of-business level, organic sales for SEMI were up more than 20%, driven by continued SEMI demand recovery, including AI-driven technology ramps, as well as higher volumes for OLED materials led by new product launches.

Lori: A resurgence of demand for leading-edge materials requiring higher content and accelerated buying in support of new fab capacity, primarily in China, also contributed to the volume increase in the second quarter.

Antonella B. Franzen: Overall, Semi-FAB utilization improved from the first quarter with average utilization in the mid-70s. Within InterConnect Solutions, organic sales were upload teams, driven by mid-team volume gains, reflecting continued broad-based consumer electronics recovery. Incremental share gains and a demand benefit from AI-driven technology ramps. We also saw earlier-than-expected timing of orders within certain consumer electronics markets. That helped volumes in the second quarter. However, as expected, organic sales for industrial solutions were down low double digits, due primarily to ongoing destocking for CalRes and Biopharma markets.

Lori: Overall, Semi-FAB utilization improved from the first quarter, with average utilization in the mid-70s.

Speaker Change: Within InterConnect Solutions, organic sales were upload teams driven by mid-teams volume gains reflecting continued broad-based consumer electronics recovery.

Speaker Change: Incremental share gains and a demand benefit from AI-driven technology ramps.

Speaker Change: We also saw earlier-than-expected timing of orders within certain consumer electronics markets that helped volumes in the second quarter.

Speaker Change: As expected, organic sales for industrial solutions were down low double digits due primarily to ongoing destocking for CalRes and biopharma markets.

Antonella B. Franzen: On a sequential basis, sales for industrial solutions increased 9% during the second quarter, including an improvement in CalRes and biopharm. Operating EBITDA for E&I of $419 million was up 20% versus the year-ago period, driven by volume growth and the impact of increased production rates in both SEMI and interconnect solutions. Savings from Restructuring Actions and the Earnings Contribution from Spector. However, these gains were partially offset by lower volume in industrial solutions and higher variable compensation.

Speaker Change: On a sequential basis, sales for industrial solutions increased 9% during the second quarter, including an improvement in CalRes and Biopharma.

Speaker Change: Operating EBITDA for E&I of $419 million was up 20% versus the year-ago period, driven by volume growth and the impact of increased production rates in both SEMI and InterConnect solutions.

Speaker Change: Savings from Restructuring Actions and the Earnings Contribution from Spectrum.

Speaker Change: These gains were partially offset by lower volume in industrial solutions and higher variable compensation.

Antonella B. Franzen: Operating EBITDA margin of 27.8% increased 120 basis points versus the year-ago period. Turning to slide 8, W&P's second quarter net sales of $1.4 billion declined 7% versus the year-ago period. Due to a 6% organic sales decline, of which 4% related to volume and 2% related to price, as well as a 1% currency had. Within safety solutions, organic sales were down high single digits versus the year-ago period on lower volume, driven mainly by channel inventory destocking for Tyvek medical packaging.

Speaker Change: Operating EBITDA margin of 27.8%, increased 120 basis points versus the year-ago period.

Speaker Change: Turning to slide 8, W&P's second quarter net sales of $1.4 billion declined 7% versus the year-ago period.

Speaker Change: Due to a 6% organic sales decline of which 4% related to volume and 2% related to price as well as a 1% currency headwind.

Speaker Change: Within Safety Solutions, organic sales were down high single digits versus the year-ago period on lower volume, driven mainly by channel inventory de-stocking for Tyvek medical packaging.

Antonella B. Franzen: However, we did see a sequential increase of more than 20% in this end market, confirming that a recovery is in process. Within water solutions, organic sales were down high single digits versus the year-ago period, driven primarily by lower volumes resulting from distributor inventory DSTOX.

Speaker Change: However, we did see a sequential increase of more than 20% in this end market, confirming a recovery is in process.

Speaker Change: Within water solutions, organic sales were down high single digits versus the year-ago period, driven primarily by lower volumes resulting from distributor inventory de-stocking.

Antonella B. Franzen: Market conditions and water solutions also improved during the second quarter, with net sales of 12% sequentially, which was ahead of our expectations and driven primarily by an initial recovery in China. Shelter solution sales increased low single digits on an organic basis due to demand improvement in construction markets compared to the prior year period. Operating EBITDA for W&P during the quarter of $344 million was down 7% due to lower volumes and higher variable compensation.

Speaker Change: Market conditions and water solutions also improved during the second quarter with net sales of 12% sequentially, which was ahead of our expectations and driven primarily by an initial recovery in Shire.

Speaker Change: Shelter solution sales increased low single digits on an organic basis due to demand improvement in construction markets compared to the prior year period.

Speaker Change: Operating EBITDA for W&P during the quarter of $344 million was down 7% due to lower volumes and higher variable compensation, partially offset by the impact of lower product costs and savings from restructuring actions.

Antonella B. Franzen: Although partially offset by the impact of lower product costs and savings from restructuring actions, W&P saw a nice step up sequentially from the first quarter in both the top and bottom line, with nearly 50% incremental markets. Moving to our Outlook on slide 9, for the third quarter, we expect net sales, operating EBITDA, and adjusted EPS to increase sequentially to approximately $3.2 billion. $815,001.03 per share, respectively.

Speaker Change: W&P saw a nice step up sequentially from the first quarter in both the top and bottom line with nearly 50% incremental margin.

Speaker Change: Moving to our Outlook on slide 9.

Speaker Change: For the third quarter, we expect net sales, operating EBITDA, and adjusted EPS to increase sequentially to approximately $3.2 billion, $815 million, and $1.03 per share, respectively.

Antonella B. Franzen: For the full year 2024, we are raising our guidance for net sales, operating EBITDA, and adjusted EPS. At the midpoint of the revised ranges provided, we now expect full-year net sales of about $12.45 billion, operating EBITDA of about $3.085 billion, and adjusted EPS of $3.75 per share.

Speaker Change: For the full year 2024, we are raising our guidance for net sales, operating EBITDA, and adjusted EPS.

Speaker Change: At the midpoint of the revised ranges provided, we now expect full-year net sales of about $12.45 billion, operating EBITDA of about $3.085 billion, and adjusted EPS of $3.75 per share.

Speaker Change: Our full-year net sales guide reflects about $50 million of incremental foreign currency headwinds in the second half of the year versus prior guidance assumptions.

Speaker Change: which are expected to be partly offset by a sales contribution from the Donatel acquisition, which closed earlier this week.

Operator: Our full year net sales guide reflects about 50 million of incremental foreign currency headwinds in the second half of the year versus prior guidance assumptions, which are expected to be partly offset by a sales contribution from the Donatell acquisition, which closed earlier this week. With that, we are pleased to take your questions, and let me turn it back to the operator to open the Q&A. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue.

Speaker Change: With that, we are pleased to take your questions, and let me turn it back to the operator to open the Q&A.

Speaker Change: If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad.

Operator: If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask a question and are listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Speaker Change: To raise your hand and join the queue, if you would like to withdraw your question, simply press star 1 again. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Jeffrey Todd Sprague: And your first question comes from the line of Jeff Sprague of Vertical Research Partners. Please go ahead. Thank you. Thank you. Good morning, everyone. Lori and Antonella?

Speaker Change: And your first question comes from the line of Jeff Sprague of Vertical Research Partners.

Jeffrey Todd Sprague: Please go ahead. Thank you. Thank you. Good morning, everyone. Lori and Antonella. Yeah. Thanks.

Unknown Executive: Yeah, Antonella, good to hear you on the call, congrats, whoever would like to take it. I'd just love to drill a little bit more into electronics, you know; a couple things you said were quite interesting. First, maybe, is there any kind of inventory rebuild that's going on in that market, or is this growth you think, you know, clearly indicative of what end demand is? And I wonder if you could just elaborate a little bit for us what, you know, in the context of DuPont AI-driven demand really means, how significant it might be, content per chip, or anything that you could give to provide some perspective on that question. Yeah, good morning, Jeff.

Speaker Change: And it's always good to hear you on the call. Congrats.

Jeffrey Todd Sprague: Whoever would like to take it, I'd just love to drill a little bit more into electronics. A couple of things you said were quite interesting.

Speaker Change: First, maybe, is there any kind of inventory rebuild that's going on in that market, or is this growth, you think, clearly indicative of what end demand is?

Speaker Change: And I wonder if you could just elaborate a little bit for us what, you know, in the context of DuPont AI-driven demand really means, how significant it might be, content per chip or anything that you could give to provide some perspective on that question.

Unknown Executive: To answer your first question, maybe the majority of the growth that we saw within the SEMI and ICS business was just market recovery, but there was probably about $30 million of pre-buy, especially within Asia-Pacific, as some of the new fabs came online. So, you know, that drove the Q2 performance up a little bit, and then it will mute a little bit the ramp into Q3 in the back half of the year. But overall, still a really nice recovery in the electronic space.

Speaker Change: Yeah, good morning, Jeff. Maybe to your first question. So, yeah, the majority of the growth that we saw within the SEMI and ICS business was just market recovery, but there was probably about 30 million of pre-buy, especially within Asia Pacific, as some of the new fabs come online. So, you know, that, that drove the,

Speaker Change: Q2 performance up a little bit, and then it will mute a little bit the ramp into Q3 in the back half of the year. But overall, still really nice recovery in the electronic space. As we had noted, a lot of it is coming from the AI acceleration that's felt.

Unknown Executive: As we noted, a lot of it is coming from the AI acceleration that's felt in both the SEMI and the ICS business. In total, AI is about $250 million of sales for us today, so a lot of improvement to be able to drive growth there. As I had mentioned, it's felt across the board in SEMI, as well as in ICS on the packaging and the thermal management side.

Speaker Change: In both the SEMI and the ICS business.

Speaker Change: In total, AI is about $250 million of sales for us today, so a lot of improvement to be able to drive growth there. Like I had mentioned, it's built across the board in SEMI, as well as ICS on the packaging and the thermal management side.

Unknown Executive: And also on the consumer side of electronics, I think there was a comment about orders being stronger. Is that, are there just some timing issues there? You know, there's certainly some hope that there's a stronger iPhone cycle here into the holidays. Is that what you're starting to see? Any other color there would be helpful.

Speaker Change: And also on the consumer side of electronics, I think there was a comment about orders.

Speaker Change: being stronger. Is that, is there just some timing issues there? You know, there's certainly some hope that there's a stronger iPhone cycle here into the holidays. Is that what you're starting to see? Any other color there would be helpful. Thanks.

Speaker Change: Yeah, we did. So the $30 million of pre-buy was probably about $20 million in semi and about $10 million of interconnect. So on the interconnect side, it would be a little bit of a timing shift for some of the premium smartphone deliveries.

Speaker Change: Great, thank you.

Unknown Executive: Yeah, so the $30 million of pre-buy was probably about $20 million in SEMI and about $10 million in InterConnect, so on the InterConnect side, it would be a little bit of a timing shift for some of the premium smartphone deliveries. Great. Thank you. Pam, next question, please. The next question comes from the line of Scott Davis of Millie's Research. Please go ahead. Good morning, everybody. Ed and Lori, Antonella,

Pam: Pam, next question please.

Pam: The next question comes from the line of Scott Davis of Millie's Research. Please go ahead.

Scott Reed Davis: Good morning, everybody, Ed and Lori, Antonella, Chris.

Scott Reed Davis: Good morning. Good morning, Lori Antonella.

Unknown Executive: Good to have you guys leading the call here. Thank you. Thanks. Bye.

Scott Reed Davis: This could do. Morning. Lori Antonow, good to have you guys leading the call here.

Unknown Executive: Welcome. I wanted just to dig in a little bit on price. I was expecting price to be down. Is that, is it mostly kind of a pass-through and... Tyvek, what are the... I'm trying to picture why price would come down on water.

Lori D. Koch: Thank you.

Scott Reed Davis: You're welcome. I wanted just to dig in a little bit on price. I was expecting price to be down in E&I, but maybe not necessarily in WNP.

Speaker Change: Like Tyvek, what are the...

Speaker Change: I'm trying to picture why price would come down in water, I guess, but perhaps it's just kind of the comps and how you had to raise price into

Antonella B. Franzen: Perhaps it's just kind of the comps and how you had to raise the price. Sure, Scott. It's Antonella.

Speaker Change: into that big inflation pickup at the beginning of last year. Maybe just some color there would be helpful.

Antonella B. Franzen: So just a couple of quick things that I would mention. I think it's important to keep in mind, particularly in W&P, we had some really strong pricing over the last couple of years. And I would say, you know, there are a few businesses where our pricing over the last two years was about in the mid-teens, which more than compensated for any of the cost increases that we saw.

Anselma: Sure, Scott. So just a couple of quick things that I would mention. I think it's important to keep in mind, particularly in W&P,

Scott Reed Davis: We had some really strong pricing over the last couple of years, and I would say, you know, particularly, there's a few businesses where our pricing over the last two years was about in the mid-teens, that more than compensated for any of the cost increases that we saw.

Unknown Executive: So it's not unlikely that we would see a couple of points where we would kind of give back really more just so to maintain share. So to your point, it's really the timing of the price increases that we had. Okay, that's what I thought. I'm just going back to Jeff's question, and it's just, I'm not an expert in electronics... Is it the same?

Speaker Change: It's not unlikely that we would see a couple of points that we would kind of give back really more just so to maintain share. So to your point, it's really the timing of the price increases that we have.

Speaker Change: Okay, that's what I thought and just going back to Jeff's question and this is just you know I'm not an expert in electronic chemicals at all but is it the same

Unknown Executive: Product mix going into the AI application. I assume it's higher volume, etc. But is it the same product? or other variations?

Speaker Change: Is the product mix going into AI applications, I assume it's higher volumes per chipset, etc., but is it the same product or are there variations of that?

Unknown Executive: It's the same product; it just takes up more space because of the advanced nodes. And so the advanced nodes have more stacks and more thermal management requirements that require more of our material. So, 1 rule of thumb that we point out is in the semi-space, MSI is a typical indicator of market growth, and we would be 200 to 300 basis points above market growth because of the advanced node exposure that we have. So, they need more material to be able to produce the higher-end chips.

Speaker Change: It's the same product, it's just more content into the space because of the advanced nodes. And so the advanced nodes have more stacks and more thermal management requirements that require more of our material. So, one rule of thumb that we point out is in the semi-space, MSI is a typical indicator of market growth.

Speaker Change: And we would be two to three hundred basis points above market growth because of the advanced node exposure that we have. So they need more material to be able to produce the higher end chips.

Unknown Executive: Okay, that makes sense. Thank you. Best of luck. You're welcome.

Speaker Change: Okay, that makes sense. That's what I thought. So, thank you. Best of luck. You're welcome. Thank you. Thanks.

Stephen V. Byrne: Thank you. Thank you. Your next question comes from the line of Steve Tusa of J.P. Morgan. Please go ahead. Hey guys, good morning. Good morning.

Speaker Change: Your next question comes from the line of Steve Tusa of J.P. Morgan. Please go ahead.

Unknown Executive: Congratulations to everyone in the room there. Thank you. Just on the guidance, what is the kind of normal seasonality now for EBITDA? It looks like it should be up, you know, mid-single digits, quarter to quarter, at least that's kind of what it did last year, but you're more in recovery mode, it feels like, so unclear to me why it would only be up, you know, a couple percent like you have it guided. Yeah, I think to your point, we haven't.

Stephen V. Byrne: Hey guys, good morning.

Stephen V. Byrne: Good morning. Congrats to everyone in the room there.

Speaker Change: Thank you.

Stephen V. Byrne: Just on the guidance, what is kind of normal seasonality now for EBITDA? It looks like it should be up, you know,

Speaker Change: the mid single digits, you know, quarter to quarter, at least that's kind of what it did last year, but you're more in recovery mode, it feels like so not unclear to me why it why it would only be up, you know, a couple percent, like you have it guided.

Unknown Executive: Yeah, so I think you have to go back a couple years to kind of see the more normal seasonality pattern that would exist. And so if you go back, it's probably more about a $50 to $100 million lift from Q2 to Q3, and then normally about a $100 million decline from Q3 to Q4. So this year's recovery is muting that, and also the pre-buy in Q2 is muting that a bit from Q2 to Q3, so we're up about $30 million.

Speaker Change: Yeah, I think to your point, we haven't.

Speaker Change: Yeah, so I think you have to go back a couple of years to kind of see the more normal seasonality pattern that would exist. And so if you go back, it's probably more about.

Speaker Change: $50 to $100 million lift from Q2 to Q3, and then normally about $100 million decline from Q3 to Q4.

Speaker Change: So, this year's recovery is muting that, and also the pre-buy in Q2 is muting that a bit from Q2 to Q3, so we're rising about $30 million.

Unknown Executive: But our decline from Q3 to Q4 is muted down to about $50 in the guide because of the continued recovery that we see across the board. So, you know, seasonality is a bit challenging, to your point, whenever you're having market inflections, but that's what's based on our number. Yeah. Okay. Take away the pre-buy. Yep, yeah, like if you took away the pre-buy, then you would see more of the normal seasonality. Okay, that makes sense.

Speaker Change: But our decline, Q3 to Q4, is muted down to about $50 million in the guide because of the continued recovery that we see across the board. So, you know, seasonality is a bit challenging, to your point, whenever you're having market inflections, but that's what's based into our number.

Speaker Change: Yeah. Okay. Got it.

Speaker Change: Yeah, like if you take away the pre-buy, then you would see more of the normal seasonality.

Unknown Executive: And then, Ed, you mentioned the change in the PFAS item there. Where do we stand on that like state AG as well as just remind us what the other major, you know, moving items around PFAS actually are and how significant this South Carolina news is in the context of, you know, what's remaining here. Yeah, Steve, there are really two buckets left. Obviously, we settled the big one on the water district cases. The two remaining buckets are the state cases and the personal injury cases.

Speaker Change: Okay, that makes sense. And then, Ed, you mentioned the change in the...

Speaker Change: PFAS item there. Where do we stand on like state AG as well as just remind us what what the other major you know moving items around PFAS actually are and how significant this

Ed: South Carolina news is in the context of, you know, what's remaining here.

Ed: Yes, Steve, there's really two buckets left. Obviously, we settled the big one on the water district cases. The two buckets left are the state AG cases and the personal injury cases, and I think

Edward D. Breen: And I think the comment we made this morning on the P.I. cases is fairly significant because it reduces the number of cases from about six thousand down to about three thousand. And remember, this is not like some of the other settlements we did where we had a location and we settled because we had used PFAS. In this case, this is because of firefighting foam again.

Speaker Change: The comment we made this morning on the PI cases I think is fairly significant because it reduces the cases from about 6,000 down to about 3,000.

Speaker Change: And remember, this is not like some of the other settlements we did where we had a location and we settled because we had used PFAS.

Edward D. Breen: So only three thousand cases. And this goes back to what the plaintiffs also said in our settlement, that we are probably responsible for three to seven percent as a consortium group. And we're only a third of that three to seven percent.

Speaker Change: In this case, this is because of firefighting foam again.

Speaker Change: So, only 3,000 cases, and this goes back to what the plaintiffs also said in our settlement, that we are probably responsible for 3-7% as a consortium group.

Edward D. Breen: So I think you can wrap your head around that number. It's pretty reasonable here. And I don't think, I guess for PFAS more broadly, though, does that mean, you know, for the other guys that are involved, the ones with the larger exposures, I mean, is there any, I would assume that it's kind of a similar impact to those guys as well. Now, is there any reason why, you know, judging how injured somebody actually is is different from, you know, company to company when it just comes to Oh, no. I think the difference is just that distinction that we didn't make a fire fighting film.

Speaker Change: And we're only a third of the three, seven percent. So I think you can wrap your head around a number that's pretty reasonable here.

Speaker Change: And, and I, but again, I don't think.

Speaker Change: I guess for PFAS more broadly, though, does that, I mean, you know, for the other guys that are involved, the ones with the larger exposures, I mean,

Speaker Change: Is there any, I would assume that it's kind of a similar impact to those guys as well, no? Is there any reason why?

Speaker Change: You know, judging how injured somebody actually is, is different from, you know, company to company when it just comes to the basic injury, if you will.

Edward D. Breen: Yeah. So if you made it, you're in a different little bit of a category, but we did not make it. So that is, I think why our percent of the plane is just three to seven.

Edward D. Breen: And we're a third of that. And then any update on the pretty, pretty nice news? Any update?

Speaker Change: Oh, no, I think the difference is just to distinguish that we didn't make firefighting film. Yeah. So if you made it, you're in a different little bit of a category, but we did not make it, which is, I think, why our percent.

Speaker Change: And the plane is just three to seven, and we're a third of that. And then any update on 3DG? Pretty nice news. Any update on 3DG? No update.

Edward D. Breen: I don't expect, I don't expect, Steve, any settlement this year, but we are working hard to settle as much of the rest of PFAS as we can by the time of the spins to get them out clean. So we're working hard at it. Yeah, you're always working hard, so we appreciate that. Thanks a lot.

Speaker Change: I don't expect, Steve, any settlement this year, but we are working hard to settle as much of the rest of PFAS as we can by the time of the spins to get them out, you know, clean. So, we're working hard at it.

Stephen V. Byrne: Yeah, you're always working hard, so we appreciate that. Thanks a lot. Thanks, Matt.

Stephen V. Byrne: Your next question comes from the line of Josh Spector of UBS. Please go ahead. Hi, good morning.

Speaker Change: Your next question comes from the line of Josh Spector of UBS.

Joshua David Spector: Thanks for taking my question. I wanted to ask about W&P, just within the guidance and the context. The year-on-year comps get easier, so you're clearly expecting some growth there in the second half, but it kind of seems like you're guiding things somewhat sladdishly from a sales and EBITDA perspective. So I'd be curious, are you seeing continued improvement from de-stocking? Are you not?

Joshua David Spector: Please go ahead. Hi, good morning. Thanks for taking my question. I wanted to ask on W&P, just within the guidance and the context,

Joshua David Spector: The year-on-year comps get easier, so you're clearly expecting some growth there in the second half, but it kind of seems like you're guiding things somewhat sladdish from a sales and EBITDA perspective. So I'd be curious, are you seeing continued improvement from destocking? Are you not? And what are your assumptions around that?

Antonella B. Franzen: And what are your assumptions around that? Thanks. Yep. So, hi, this is Antonella.

Joshua David Spector: Hi, this is Anne Sella, just a couple of comments there. So, as we mentioned, you know, we did see a nice lift.

Speaker Change: Also, Q1 in both medical packaging in Tyvek, as well as in our water business, where we saw the biggest impacts of de-stocking. As we move forward, we do continue to expect that there'll be a little bit more lift in medical packaging as we go through the year.

Antonella B. Franzen: Just a couple of comments there. As we mentioned, you know, we did see a nice lift in Q1 in both medical packaging in Tyvek, as well as in our water business, where we saw the biggest impacts of destocking. As we move forward, we do continue to expect that there will be a little bit more lift in medical packaging as we go through the year. For water, as we mentioned, we actually saw a bigger lift headed into Q2 than we were originally expecting.

Antonella B. Franzen: So that'll be pretty consistent as we head into the third quarter, and we'll see a little bit more of a lift in the fourth quarter as well. So overall, revenue is relatively flattish as we go into the second half of the year for W&P. And I would just keep in mind, you know, there's probably a little bit of muted seasonality that we built in to the shelter business just given the soft resi market.

Speaker Change: For water, as we mentioned, we actually saw a bigger list headed into Q2 than we were originally expecting, so that'll be pretty consistent.

Speaker Change: As we head into the third quarter, and we'll see a little bit more of a lift in the fourth quarter as well. So overall, revenue is relatively...

Speaker Change: As we go into the second half of the year for W&P. And I would just keep in mind, and know there's probably a little bit of muted seasonality that we built in in the shelter business. Just given the soft RISI market, and just, you know, we're keeping a close eye.

Antonella B. Franzen: And just, you know, we're keeping a close eye on the macros out there. And so that's a little bit of a cautious view, I would say, that we have built into our guidance currently. Thanks. And I guess, what about margins? Kind of the same line of thought there.

Speaker Change: On the macros out there, and so that's a little bit of a cautious view, I would say, that we have built into our guidance currently.

Joshua David Spector: I mean, that was a bright spot in the quarter here, getting back to kind of year-ago margins, the volume still down. Is there something incrementally negative on the margin sequentially? Because it seems like you're assuming that it's a little bit lower versus what you did in 2Q. No, actually, the margins in W&P are expected to be flattish to up a little bit, actually, as we head into the third quarter and expected to continue to improve as we head into the fourth quarter as well. Okay, thank you. Your next question comes from the line of John McNulty of VML Capital Marketing. Please go ahead. Yeah, good morning.

Speaker Change: Thanks. And I guess, what about marches?

Speaker Change: This is Chris Mecray, Edward Breen, Christopher Mecray, Lori Koch

Speaker Change: No, actually the margins in W&P are expected to be flattish, to up a little bit actually as we head into the third quarter, and expected to continue to improve as we head into the fourth quarter as well.

Speaker Change: Okay, thank you.

Speaker Change: Your next question comes from the line of John McNulty of BMO Capital Markets. Please go ahead.

John Patrick McNulty: Thanks for taking my question. This one regarding the split. So, you know, you've had the big announcement this past quarter. I guess, can you speak to the interest that you may be seeing in some of those assets? You know, sometimes there's not a lot of interest until announcements get made, and then all of a sudden, people start lining up.

John Patrick McNulty: Yeah, good morning. Thanks for taking my question. This one regarding the split. So, you know, you've had the big announcement this past quarter. I guess, can you speak to interest that you may be seeing in some of those assets? You know, sometimes there's not a lot of interest until announcements get made and then all of a sudden people start lining up. So maybe you can help us to think about that, especially around maybe the water business. And if not,

Edward D. Breen: So maybe you can help us to think about that, especially around maybe the water business. And if not, I guess I'd also ask, it does look like the M&A markets are heating up in a couple areas, especially in water. Would you consider bolting on businesses, you know, ahead of the split to any of these other assets? Or is that just too much to deal with for the organization at this point?

John Patrick McNulty: I guess I'd also ask, it does look like the M&A markets are heating up in a couple areas, especially in water. Would you consider bolting on businesses, you know, ahead of the split to any of these other assets, or is that just too much to deal with for the organization at this point? How should we be thinking about that?

John Patrick McNulty: How should we be thinking about that? Yeah, yeah. So your last point, no, we wouldn't do anything where we bolt something on to the asset. I don't want to get out in front of ourselves on any speculation of what's going on. But as I said in the last earnings quote, John, if there is interest in the water business, we obviously will look at it and study it hard. If there's a better path to creating value for our shareholders, we would clearly do that. And I'll just leave it at that for now. Okay, fair enough.

Speaker Change: Yeah, yeah, so your last point, no, we wouldn't do anything where we bolt something on.

John Patrick McNulty: To the asset, I don't want to get out in front of ourselves on any speculation of what's going on. But as I said on the last earnings quote, John .

John Patrick McNulty: If there is interest in the water business, we obviously will look at it and study it hard. If there's a better path to creating value for our shareholders, we would clearly do that, and I'll just leave it at that for now.

Edward D. Breen: And then I guess just a question on the PFAS issue. So look, you guys have been doing a pretty good job of cleaning up the liability so far. Earlier this quarter, we had the Chevron decision kind of overruled by the Supreme Court. I guess I'm wondering, what that does in terms of how you think about the liability and the ability to put that to rest? Does it change the kind of strategy or how you're thinking about that, what that liability might mean going forward?

Speaker Change: Earlier this quarter, we had the Chevron decision kind of get overruled by the Supreme Court. I guess I'm wondering...

Speaker Change: What does that do in terms of how you think about the liability and the ability to put that to rest? Does it change kind of the strategy or how you're thinking about what that liability might mean going forward?

Edward D. Breen: Yeah, so, you know, it kind of goes back to the whole Superfund CERCLA issue. And to make it very clear, manufacturers of products are not responsible under CERCLA. There are kind of four key categories, if you don't mind me telling you these for a minute, just to clarify this issue. The responsible parties are current owners and operators of facilities where substances are located, past owners of facilities where hazardous substances were disposed of, aggregators and generators, persons who arrange for disposal of hazardous substances at a site, and transporters who transported them to those sites.

Speaker Change: Yeah, so, so, you know, it kind of goes back to the whole Superfund circlet.

Speaker Change: And to make it very clear, manufacturers of products are not responsible under CERPLA. There's kind of four key categories, if you don't mind me telling you these for a minute just to clarify this issue.

Speaker Change: The responsible parties are current owners and operators of facilities where substances are located.

Speaker Change: Past Owners of Facilities.

Speaker Change: where hazardous substances were disposed.

Speaker Change: Aggregators and generators, persons who arrange for disposal of hazardous substance at a site, and transporters who transported it to those sites.

Edward D. Breen: So, by the way, there's a Supreme Court case on this, just to clarify it more. An entity will not be held liable as an arranger merely for selling a new and useful product if the purchaser of that product later, and unbeknownst to the seller, disposed of the product in a way that led to contamination. So I think it's pretty darn clear, as we've said all along, that we don't have responsibility in this. Thanks very much for the clarification. Yep, thank you. Your next question comes from John Roberts of Mizuho. Please go ahead.

Speaker Change: So, by the way, there's a Supreme Court case on this, just to clarify it more. An entity will not be held liable as an arranger merely for selling a new and useful product if the purchaser of that product later, and unbeknownst to the seller, disposed of the product in a way that led to contamination.

Speaker Change: Great, thanks very much for the clarity.

Speaker Change: Your next question comes from John Roberts of Mizuho. Please go ahead.

John Ezekiel E. Roberts: Thank you. On the spin-off, will we have to wait until the SEC filings for the income statements and debt allocations to the spin codes, or do you think DuPont will begin reporting more like a holding company and give us electronics and water, at least summary income statements and summary balance sheets before the SEC filings? Yeah, we intend to report in the new structure prior to the Form 10 detailed filings going out.

Speaker Change: Thank you. On the spin-off, will we have to wait until the SEC filings for the income statements and debt allocations to the spin codes?

John Ezekiel E. Roberts: Or do you think DuPont will begin reporting more like a holding company and give us electronics and water, at least summary income statements, summary balance sheets before the SEC filings?

John Ezekiel E. Roberts: So we're targeting, you know, sometime early next year to have leadership appointments and then ultimately report on the new segments would be the future spins. Okay, and then, will the new DuPont Xspin report medical or health as a separate segment, or is it going to continue to be split across industrial and safety? I think it's going to be over 25% of new DuPont, but it's a little hard to see in the current reporting. Yeah, so we will most likely have three reportable segments for RemainCo, one of which is health care, which would be the combination of the Tyvek spectrum. The Livio Biopharma business, and now Donatel, given that the acquisition closed.

Speaker Change: Yeah, we intend to report in the new structure prior to the Form 10 detailed filings would go out. So we're targeting, you know, sometime early next year to have leadership appointments and then ultimately report on the new segments would be the future spin.

Unknown Executive: And the other 2 reportable segments would be next-gen mobility, which would house all of our EV automotive exposure. And then the remaining would be, generally, the safety business and the shelter business and the rest of the printing businesses and industrial businesses, industrial solutions that aren't semi-related.

Speaker Change: And the other two reportable segments would be a next-gen mobility, which would house all of our EV automotive exposure, and then the remaining would be generally the safety business and the shelter business and the rest of the printing businesses.

Speaker Change: Fantastic. Thank you.

Unknown Executive: Thank you. Your next question comes from the line of Chris Parkinson of Wolf Research. Please go ahead.

Speaker Change: Your next question comes from the line of Chris Parkinson of Walsh Research. Please go ahead.

Christopher S. Parkinson: Great, thank you so much. Just two quick questions on E&I. The first question is, do you mind just kind of, as we enter into the second half, can you just offer a little bit more color on Semituck, just given some of your commentary around the broader strokes, but if we dig in, you know, to pad slurries, you mentioned all the materials in your PR as well as the PowerPoint. Can you just help us conceptualize how we are trending into 25, 26, and perhaps into a

Christopher S. Parkinson: Great, thank you so much. Just two quick questions on E&I. The first is, do you mind just kind of, as we enter into the second half,

Christopher S. Parkinson: Can you just offer a little bit more color of Semituck, just given some of your commentary around the broader strokes, but if we dig in, you know, to pad slurries, you mentioned all of the materials in your PR as well as the PowerPoint, can you just help us conceptualize how we are trending into 25, 26, and perhaps into a larger upcycle? Thank you.

Christopher S. Parkinson: Thank you. Yeah, so we expect nice high single-digit growth in the current contract at E&I as we head into 2025. You know, a lot of that coming from the growth acceleration from AI as well as the overall continued pickup within the consumer electronics space. So we think we'll be from a utilization perspective on a semi-conductor front more in the high 70s as we exit 2024 overall. It's more like in the low 80s in the advanced nodes and DRAM and then lower than that in the legacy nodes and some of the more legacy memory applications.

Speaker Change: Yeah, so we expect nice high single-digit growth in the current construct at E&I as we head into 2025, you know, a lot of that coming from the growth acceleration from AI, as well as overall continued pickup within the consumer electronics space.

Speaker Change: So we think we'll be, from a utilization perspective, on a semi-front.

Unknown Executive: And Lori, I have to bring it back a couple of years because the follow-up is on ICS, and specifically, Laird, when you originally did that transaction, you kind of mentioned AI as an optionality. And obviously, you were kind of, you know, at the time, talking up the shielding, the thermal management portfolio there; can you just kind of help us think about the ICS business, you know, right here, as it stands today, versus the legacy way of thinking around handsets? It seems like there's perhaps a lot more, you know, going on under the hood. There in terms of how we should be thinking about sustainable growth rates.

Speaker Change: And Lori, I have to bring it back a couple of years because the follow-up is on ICS.

Speaker Change: And specifically, Laird, when you originally did that transaction, you kind of mentioned AI as an optionality, and obviously, you were kind of, you know, at the time, you're talking up the shielding, the thermal management portfolio there. Can you just kind of help us think about the ICS business?

Unknown Executive: Thank you. Yeah, so ICS, I kind of think about it in two big buckets as far as market opportunities are concerned. One is like a powerhouse with respect to interconnect solutions, and one is a powerhouse with respect to thermal management.

Laird: Yeah, so ICS, I kind of think about it in two big buckets as far as market opportunities are concerned. One is like a powerhouse with respect to interconnect solutions and one is a powerhouse with respect to thermal management. You see opportunity.

Unknown Executive: And you see opportunity on the three lines of business under the surface across both of those segments. And so the layered acquisition has continued to play out nicely for us and drive opportunities across the ICS portfolio. It's been really timely with the AI boost and the ADAS boost that's coming to have that thermal management business within our portfolio. Thank you. Your next question comes from the line of David Begleiter of Deutsche Bank. Please go ahead. Avery Weathers

Speaker Change: On the three lines of business under underneath across both of those segments. And so the layered acquisition has continued to play out nicely for us and drive opportunity.

Laird: Across the ICS portfolio. It's been really timely with the AI boost and the ADAS boost that's coming to have that thermal management business within our portfolio.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of David Begleiter of Deutsche Bank. Please go ahead.

Avery: Avery, you with us?

Speaker Change: Christopher Mecray, Edward Breen, Christopher Mecray, Lori Koch

Speaker Change: Pam, you can go to the next.

David L. Begleiter: Pam, you can go to the next question. All right. Our next question comes from the line of Mike Leithead of Barclays. Please go ahead.

Speaker Change: All right.

Speaker Change: Our next question comes from the line of Mike Leithead of Barclays. Please go ahead.

Michael James Leithead: Great. Thank you. Good morning, guys. Just one on E&R.

Michael James Leithead: Great, thank you. Good morning, guys.

Unknown Executive: Morning. One on E&I, just strong results mostly across the board with the exception of maybe industrial, and you called out the one headwind around the kind of ongoing CalRes destocking. I just wanted to dig into that. So your volumes, in your sense, are broadly consistent with end-market trends for the product, or is there any competitive dynamics impacting CalRes specifically there? No, no, there's no competitive dynamics. It's really just the DSTOC from the 2023 high volumes that went on. So there's nothing competitively.

Speaker Change: Morning. One on E&I just...

Speaker Change: Strong results.

Speaker Change: Mostly across the board with the exception of maybe industrial.

Michael James Leithead: And you called out the one headwind around kind of ongoing CalRES destocking. I just wanted to dig into that. So is your volumes, in your sense, broadly consistent with end market trends for the product? Or is there any competitive dynamics impacting CalRES specifically there?

Unknown Executive: We did see nice sequential improvement in CalRES, as we had expected. We actually do forecast a return to volume growth in industrial solutions overall in the back half. So it's really just us getting through the DSTOC in CalRES and also in BioPharma, which are both industrial solutions. Okay, great. And then just as a quick follow-up, maybe a question for Antonella on the cash flow statement this quarter. It looks like cash flow from operations for discontinued operations was a $400 million use of cash in the quarter. Can you just help us understand that?

Speaker Change: No, no, there's no competitive dynamics. It's really just the D-stock from...

Speaker Change: from the 2023 high volumes that went on. So there's nothing competitively. We did see.

Speaker Change: Sequential improvement in CalRES as we had expected. We actually do forecast a return to volume growth in industrial solutions in total in the back half. So it's really just us getting through the DSTOX in CalRES and also in the Biopharma, which are both in industrial solutions.

Speaker Change: Okay, great. And then just as a quick follow-up, maybe a question for Antonella on the cash flow statement this quarter. It looks like cash flow from operations for discontinued operations was a $400 million use of cash in the quarter. Can you just help us understand that?

Antonella B. Franzen: Yeah, so keep in mind, as Ed mentioned earlier, we did have the settlement, so really, that's predominantly all the cash out of about $408 million related to the MOU settlement. Okay, perfect. Thank you. Your next question comes from the line of Frank Mitsch of Firmium Research. Please go ahead. Good morning, and nice result.

Antonella: Yeah, so keep in mind, as Ed mentioned earlier, we did have the settlement, so really that's predominantly all the cash out of about $408 million related to the MOU settlement.

Speaker Change: Okay, perfect. Thank you.

Speaker Change: Your next question comes from the line of Frank Mitsch of Firmium Research. Please go ahead.

Frank Joseph Mitsch: If I could stay on the cash flow side of things. Lori, when you were wearing your prior hat as CFO, there was an expectation that the second quarter cash flow conversion might be lower than the first quarter, in part due to interest payments. And obviously, it came in materially above or, nicely above, I should say. So, can you speak to the factors behind that as well as what the outlook is in terms of cash flow generation? Yeah, so it's a good memory.

Frank Joseph Mitsch: Good morning, a nice result. If I could stay on the cash flow side of things. Lori, when you were wearing your prior hat,

Lori: As CFO , there was an expectation that the second quarter cash flow conversion

Speaker Change: might be lower than the first quarter in part with interest payments. And obviously it came in materially above or nicely above, I should say. So can you speak to the factors behind that as well as what the outlook is in terms of cashflow generation?

Unknown Executive: I had signaled that usually Q2 is a little muted because of the interest payment, which we did pay. But it was really a reflection of better working capital performance for the most part. So we had eight percent sequential revenue, but we're really able to use the working capital headwind. So we've done a really nice job, primarily on the inventory front around driving productivity across our businesses to get better at cash. So we're still in that, you know, 90 percent target range for the year.

Speaker Change: Yeah, so good memory. I had signaled that usually Q2 is a little muted because of the interest payment, which we did pay. It was really a reflection of better working capital performance for the most part. So, we had…

Speaker Change #100: 8% sequential revenue, but we're really able to use the working capital headwind. So we've done a really nice job, primarily on the inventory front.

Speaker Change #100: around driving productivity across our businesses to get better at cash. So, we're still in that, you know, 90% target range for the year. We're at about 96% quarter to date. So, we're in good shape to be able to deliver against the target that we have out there.

Unknown Executive: We're at about 96 percent quarter to date. So we're in good shape to be able to deliver against the target that we have out there. All right, terrific. Thank you. And then maybe just a second or two on terms of the corporate line, you know, sales were relatively flat sequentially, yet EBITDA picked up materially. Can you talk about the factors there and what your outlook is?

Antonella B. Franzen: Thank you. Yeah, really that was driven by a bit of our corporate expenses, so there's always a little bit of timing from quarter to quarter. So I would say when you take a look at kind of corporate expenses, we're probably a little heavy in Q1, a little light in Q2, and on average, kind of expected where we would typically be. As you kind of look into the second half of the year, as you look at corporate as a segment, we did point out in the materials that we do expect overall less income coming from corporate in the second half of the year than we had in the first Terrific. Thanks so much.

Speaker Change #102: Alright, terrific. Thank you. And then maybe just a second or two in terms of the corporate line, you know, sales were relatively flat sequentially, yet EBITDA picked up materially. Can you talk about the factors there and what your outlook is?

Speaker Change #105: Thank you.

Speaker Change #101: Yeah, really that was driven by a bit of our corporate expenses, so there's always a little bit of timing from quarter to quarter.

Frank Joseph Mitsch: Your next question comes from the line of David Begleiter of Deutsche Bank. Please go ahead. Hi, this is David Huang here for Dave.

Speaker Change #107: Your next question comes from the line of David Begleiter of Deutsche Bank. Please go ahead.

David L. Begleiter: I guess first, industrial solutions: when do you expect volumes to recover and turn positive? Yeah, we expect volumes to be up low single digits in the third quarter year-over-year for industrial solutions and then more in the low double-digit range for the fourth quarter. So, you know, we saw a nice inflection sequentially, and then we'll see a return to year-over-year volume growth in the second half. And I guess just on the potential waters, though, I guess there are some interested parties there. And it sounds like PFAS has continued to progress positively. I just want to talk to potential interested parties.

Speaker Change #103: Yeah, we expect volumes to be up low single digits in the third quarter year over year for industrial solutions and then more in the low double-digit range for the fourth quarter. So, you know, we saw nice inflection sequentially and then we'll see a return to year over year volume growth in the second half.

Speaker Change #106: And I guess just on the potential water sale, I guess there's some interested parties there and sounds like PFAS continue to progress positively. I just want to talk to you potential interested parties. What's the initial thoughts from them in taking over some of the PFAS liabilities?

Unknown Executive: What are their initial thoughts on taking over some of the PFAS liabilities? And, I guess, is there a threshold they're willing to accept? Or is it, in general, still a big hurdle for them?

Speaker Change #111: And I guess, is there a threshold they're willing to accept, or is it in general still a big hurdle for them, and you think if that scenario were to play out, it will not involve any PFAS liability allocation at all?

Unknown Executive: And you think if that scenario were to play out, it would not involve any PFAS liability allocation at all? Yeah, so we haven't had any conversations about selling the water business. So our intent is still to spin out. Each of the three spins will pick up their pro rata share of the PFAS liability per their trailing 12-month EBITDA under the sharing agreement with Corteva. Okay. Your next question comes from the line of Lawrence Alexander of Jefferson. Please go ahead.

Speaker Change #108: Yeah, so we haven't had any conversations on selling the water business, our intent is still to spin. Each of the three spins will pick up their pro-rata share of the

Speaker Change #108: of the PFAS liability per their trailing 12-month EBITDA underneath the sharing agreement with Corteva.

Speaker Change #104: Okay, thanks.

Speaker Change #112: Your next question comes from the line of Lawrence Alexander of Jeffreys. Please go ahead.

Laurence Alexander: Good morning, can you give a little bit more detail on the sequential momentum in water and safety solutions, you know, sort of, you know, into Q3 and how much visibility is the visibility improving in those two businesses or lead times improving? So, for the water business, as we mentioned, from Q2 to Q3, we do expect it to be, you know, relatively flat. As we get into the fourth quarter, we do expect a sequential increase in terms of the top line, and some of that is just driven by some project-related activity that we have there. In terms of safety, we did talk about that being where our medical packaging business is within Tyvek.

Speaker Change #113: Good morning. Can you give a little bit more detail on the sequential momentum in water and safety solutions, you know, sort of, you know, into Q3 and how much visibility, is the visibility improving in those two businesses or lead times improving?

Speaker Change #116: So for the water business, as we mentioned, from Q2 to Q3, we do expect it to be, you know, relatively flat. As we get into the fourth quarter, we do expect a sequential increase in terms of the top line. And some of that is just driven by some project-related activity.

Speaker Change #116: In terms of safety, we did talk about that's where our medical packaging business is within Tyvek. We do expect to see some sequential improvement there as well. I think there the growth will be a little less muted as we go through the course of the year because there's just a couple little other puts and takes within that business.

Speaker Change #110: Thank you.

Antonella B. Franzen: We do expect to see some sequential improvement there as well. I think there the growth will be a little less muted as we go through the course of the year because there's just a couple of little other outputs and takes within that business. Thank you. Your next question comes from the line of Mike Sison of Wells Fargo. Please go ahead. Hey, good morning.

Speaker Change #120: Your next question comes from the line of Mike Sison of Wells Fargo. Please go ahead.

Michael Joseph Sison: Nice quote on Outlook. Ed, just one question. How do you expect the agencies to assign sort of industry codes for each of the entities of the SPIN? You know, maybe that would help investors assign the right multiple or comps longer term. And I assume you don't expect the entities to get assigned materials or chemicals, but any color and how you think you can help them sort of make that right decision.

Michael Joseph Sison: Hey, good morning. Nice quote on Outlook. Ed, just one question. How do you expect the agencies to assign industry codes for each of the entities of the SPIN?

Speaker Change #125: You know, maybe that would help investors assign the right multiple or comps longer-term. And I assume you don't expect the entities to get assigned materials or chemicals. But any color on how you think you can help them sort of make that right decision.

Edward D. Breen: I'll just say it this way, we are going to work at LARP. You know, the electronics are very clear where that should be, and we will work that issue. I mean, they're pure-play comps in those industries, and there's only a couple key competitors against them that have their mark in the water businesses the same way, so that'll be worked out.

Speaker Change #117: I'll just say it this way, we are going to work at LARC. You know, the electronics is very clear where that should be, and we will work that issue.

Speaker Change #115: I mean, they're pure play comps in those industries, and there's only a couple key competitors against them that have their...

Speaker Change #115: Marking and the water business is the same way, so that'll be worked. Yeah, and we'll work to get the Remainco SIC code changed as well. So we've been trying for, since we've spun out of DuPont, to get a change more to the, you know, multi-industrial diversified.

Unknown Executive: Yeah, and we'll work to get the Remainco SIC code changed as well. So we've been trying for, since we spun out of Dowdy Pond, to get a change more to the, you know, multi-industrial diversified SIC code. And so I think we continue to make our case that we should not have the chemicals SIC code anymore, and so we'll work that one as well. Your next question comes from the line of Arun Viswanathan of RBC Capital Markets. Please go ahead.

Speaker Change #115: SIC code and so I think we continue to make our case that we should not have the chemicals SIC code anymore and so we'll work that one as well.

Michael Joseph Sison: It's a good question.

Speaker Change #123: Your next question comes from the line of Arun Viswanathan of RBC Capital Markets. Please go ahead.

Arun Shankar Viswanathan: Great, thanks for taking my question. I guess I was just kind of curious about the guidance. So, you know, you're raising it by looks like around $110 million or so on the EBITDA line for the full year. The Q2 beat was around, you know, $80 million or so. So $88 million. So, you know, that remaining kind of $22 million, it seems like there could be a little bit of seasonal drop-off and maybe some moderation and growth.

Arun Shankar Viswanathan: Great, thanks for taking my question. I guess, just kind of curious on the guidance. So, you know, you're raising it by

Arun Shankar Viswanathan: Looks like around $110 million or so on the EBITDA line for the full year.

Speaker Change #119: The Q2 beat was run.

Speaker Change #129: you know, 80-something million, so, 88 million, so, you know, that remaining kind of 22 million

Speaker Change #118: It seems like there could be a little bit of seasonal drop-off and maybe some...

Speaker Change #121: Moderation and growth. I know you mentioned the pre-buy $30 million, but anything else you'd call out there as to why you're not raising guidance, maybe buy a little bit more? Thanks.

Arun Shankar Viswanathan: I know you mentioned the pre-buy $30 million, but anything else you'd call out there as to why you're not raising guidance maybe by a little bit more? Actually, I would say our raise in our guidance, when you kind of take a look at it, is not only adding in the Q2 beat but actually a bit more than that as well. So kind of the way to look at it is if you look where our previous guidance was, and to your point, kind of add the beat that we had in the second quarter of around 150 million on the top and 90 on the bottom.

Speaker Change #122: Actually, I would say, you know, our raise in our guidance, when you kind of take a look at it, is not only adding in the Q2B, but actually a bit more than that as well. So, kind of the way to look at it is, if you look where our previous guidance was,

Speaker Change #122: And to your point, kind of add the beat that we had in the second quarter of around $150 million on the top.

Arun Shankar Viswanathan: I think you need to keep in mind that FX is an incremental headwind from when we previously gave guidance to the tune of 75 million. And clearly, there's an EBITDA impact associated with that as well. That is only partially offset by the Donatell acquisition that's going in. So, on a true underlying basis, if you put FX and acquisitions aside, in addition to the Q2 beat, we are raising the top line close to 100 million and the bottom line, you know, around 30 million or so. Okay, perfect. Thanks for that clarification.

Speaker Change #122: And 90 on the bottom, I think you need to keep in mind that.

Speaker Change #121: Fx is an incremental headwind from when we previously gave guidance to the tune of $75 million and clearly there's an EBITDA impact.

Speaker Change #121: Associated with that as well, that is only partially offset by the Donatell acquisition that's going in. So, on a true underlying basis, if you put, you know, FX and acquisitions aside, in addition to the Q2 beat, we are raising the top line close to $100 million and the bottom line, you know, around $30 million or so.

Unknown Executive: And then I guess just as a quick follow-up, as you look into 2025, where are you kind of in that recovery, maybe on E&I, you know? Would you say, like, where do you expect FAB rates to kind of utilization rates to end the year? And do you see those kind of continuing to move up as you move into 2025? Yeah, I think we'll end the year overall in utilization in the high 70s. It'll be different between advanced nodes and more legacy nodes. So the advanced nodes should be in the, you know, in the low 80s, and the more mature nodes would not quite be on average.

Speaker Change #134: Okay, perfect. Thanks for that clarification.

Speaker Change #126: And then I guess just as a quick follow-up, as you look into 2025, where are you kind of in that recovery, maybe on E&I, you know, would you say, like, where do you expect FAB rates to kind of, utilization rates to end the year, and do you see those kind of continuing to move up as you move into 2025? Thanks.

Speaker Change #131: Yeah, I think we'll end the year overall in utilization in the high 70s, it'll be different between advanced nodes and more legacy nodes, so the advanced nodes should be in the, you know, in the low 80s, and the more mature nodes would not quite be at the average. So it sets up well for.

Arun Shankar Viswanathan: So it sets up well for 2025 to get back to the more normal utilization patterns that exist in the FEMI space. As I had noted earlier, we should see high single-digit growth in E&I in total in 2025, with a lot of growth coming from continued acceleration with AI on both the data center side as well as on the ICS side. Thanks. Your next question comes from Aleksey Yefremov. Please go ahead. Mr. Yefremov.

Speaker Change #126: 2025 to get back to the more normal utilization patterns that exist in the FEMI space. As I had noted earlier, we overall probably see high single-digit growth in E&I in total in 2025 with a lot of growth coming from continued acceleration with AI.

Speaker Change #126: on both the data center side as well as on the ICS side.

Speaker Change #121: Thanks.

Speaker Change #118: Mm-hmm.

Speaker Change #157: Your next question comes from Aleksey Yefremov. Please go ahead.

Aleksey V. Yefremov: Mr. Yefremov?

Aleksey V. Yefremov: Okay, I'll. The next question comes from the line of Patrick Cunningham of CTO. Please go ahead. Hi, good morning.

Aleksey V. Yefremov: Okay, I will.

Speaker Change #143: Okay, next question comes from the line of Patrick Cunningham of Citi.

Speaker Change #118: Please go ahead.

Patrick David Cunningham: Hi, good morning.

Patrick David Cunningham: Just only. On the Donatel acquisition, you know, first, maybe talk about the strategic fit there and, you know, even potential cross-selling opportunities where it's complementary in the portfolio. And then can you also help us size the transaction and how much earnings contribution we should expect? Yeah, so we closed Spectrum earlier this week or DynaTel earlier this week. It'll dovetail really nicely with our Spectrum acquisition that we're actually staying on for a year on here, August 1st. And so they've got nice exposure to some of the large medical device OEMs that Spectrum did not have.

Patrick David Cunningham: Just on the Donatel acquisition, first maybe talk about the strategic fit there and even potential cross-selling opportunities where it's complementary in the portfolio. And then can you also help us size the transaction and how much earnings contribution we should expect in the second half?

Speaker Change #139: Yeah, so we closed Spectrum earlier this week, or Donatella earlier this week, it'll dovetail really nicely with our Spectrum acquisition that we're actually lasting a year on here, August 1st, and so they've got nice exposure.

Unknown Executive: So there's a lot of cross-selling opportunity to come in there. They've also got some really nice machining and tooling competencies that we'll add to the portfolio. In total, the revenue is about $75 million from DynaTel.

Patrick David Cunningham: To some of the large medical device OEMs that Spectrum did not have, so there's a lot of a cross-selling opportunity to come in there. They've also got some really nice machining and tooling

Patrick David Cunningham: competencies that we'll add to the portfolio. In total, the revenue is about $75 million from Donatel. It's got slightly better margins than what the Spectrum acquisition did, so a nice addition there.

Unknown Executive: It's got slightly better margins than what the Spectrum acquisition did, so a nice addition there. The only thing I would add is the $75 million is a full-year number, just to clarify. Yes, thank you.

Speaker Change #127: The only thing I would add is the $75 million is a full year number, just to clarify.

Patrick David Cunningham: And then maybe just a clarification on corporate earnings. I think there was a sizable step up into 2Q. I know you mentioned there were some expenses that moved around, but were there any areas of strength in the underlying retained businesses that helped 2Q? And, you know, how much lower should back half earnings be on? Yeah, so I would say in the second quarter, in addition to the timing of expenses, we did have, you know, a good, strong margin performance in terms of the retained businesses as well.

Speaker Change #150: Yep, thank you. And then maybe just a clarification on corporate earnings. I think there was a sizable step up into 2Q. I know you mentioned there were some expenses that moved around, but were there any areas of strength on the underlying retained businesses, you know, that helped 2Q? And, you know, how much lower should back half earnings be on the corporate line?

Speaker Change #145: Yeah, so I would say in the second quarter, in addition to the timing of expenses, we did have...

Speaker Change #127: You know, a good strong margin performance in terms of the retained businesses as well. As we shift into the second half of the year, as I mentioned earlier, we do expect the overall earnings in corporate to come down. There is a little bit of pressure that we have in terms of our solar business that we have within the retained businesses. So we'll have a little bit of earnings headwind related to there. And as I mentioned earlier, a little bit of timing related to actual corporate expense.

Patrick David Cunningham: As we shift into the second half of the year, as I mentioned earlier, we do expect the overall earnings in corporate to come down. There is a little bit of pressure that we have in terms of our solar business that we have within the retained businesses. So a little bit of earnings headwind related to there, and as I mentioned earlier, a little bit of timing related to actual corporate expenses. Great, thank you so much.

Vincent Stephen Andrews: Your next question comes from the line of Vincent Andrews of Morgan Stanley. Thank you. Could I ask quickly on electronics, the timing differences that you called out in the quarter that were favorable to the quarter, are you seeing in your 3Q order book that those are indeed shifted to 2Q, or are you just assuming that, and then, you know, we'll see how the quarter plays out. And then, separately, Ed, if I could ask you on the PFAS, on the personal injury cases, just a little bit of clarification in terms of, sounds like we'll go from 6,000 to 3,000 cases, but has that case count been increasing, or has it been static around those levels, firstly?

Speaker Change #136: Great. Thank you so much.

Speaker Change #133: Your next question comes from the line of Vincent Andrews of Morgan Stanley .

Speaker Change #130: Thank you. Could I ask quickly on electronics, the timing differences that you called out in the quarter that were favorable to the quarter, are you seeing in your 3Q order book that those are indeed shifted to 2Q, or are you just assuming that, and then we'll see how the quarter plays out?

Speaker Change #130: And then separately, Ed, if I could ask you on the PFAS on the personal injury cases, just a little bit of clarification in terms of, sounds like we'll go from 6,000 to 3,000 cases, but has that case count been increasing or has it been static around those levels firstly? And then secondly, on your comments.

Speaker Change #137: That DuPont is sort of I think you said three to six or three to seven percent sort of the assumed liability is that is that to mean that

Speaker Change #137: That would be your sort of exposure to any payout, should there be any, or is that your exposure to the amount of cases?

Vincent Stephen Andrews: And lastly, on that, how do you expect this to proceed in terms of, will something actually go to trial, will it be the typical MDL where you pick one and they pick one, and, you know, you see what the outcomes are, and then maybe you try to settle, or is there a path to settling ahead of time, or just sort of what you think the process is going to be?

Speaker Change #132: And lastly on that, how do you expect this to proceed in terms of, will something actually go to trial, will it be the typical MDL, where

Speaker Change #132: You pick one, and they pick one, and you see what the outcomes are, and then maybe you try to settle, or is there a path to settling ahead of time, or just sort of what you think the process is going to be?

Edward D. Breen: Yeah, so the cases have crept up over time, but the slope has obviously changed, you know, gone down. And remember, it's predominantly firefighters, it's, you know, not other individuals. So, the drop will be at least down to 3000 cases. And I just say overall, because it's firefighting foam, it goes back to the last settlement we did, where we never made the firefighting foam, but we had one surfactant that went in for 10 or 11 years.

Speaker Change #149: Yeah, so the cases have crept up over time, but the slope has obviously changed, you know, come down.

Speaker Change #135: And remember, it's predominantly firefighters, it's, you know, not other individuals, so.

Speaker Change #135: So, the drop will be at least down to 3,000 cases, and I just say, overall,

Speaker Change #138: Because it's firefighting foam, it goes back to the last settlement we did, where we never made the firefighting foam, but we had one surfactant that went in for 10 or 11 years, so net-net, you know, it was determined that the exposure of Corteva, Chemours, and us was in the 3-7% range.

Unknown Executive: So net net, you know, it was determined that the exposure of Corteva Camores and us was in the three to 7% range. And so, yeah, I think you can do the math like we were able to do when we settled the water cases and kind of get this into a certain box. And remember, we're only a third of three to seven, as I mentioned earlier. So, and just to your kind of one of your last points, obviously, we always try to settle these as a class, like we did with the water cases, and, you know, we'll work hard to do that. And I said, we would love to clean a lot of this up before the actual separations occur. Yeah, maybe on your order question.

Speaker Change #138: And so I think you can do the math like we were able to do when we settled the water cases and kind of get this into a certain box. And remember we're only a third of three to seven as I mentioned earlier.

Speaker Change #138: And just one of your last points, obviously we always try to settle these as a class, like we did the water cases, and we'll work hard to do that, and I said we would love to clean a lot of this up before the actual separations occur.

Vincent Stephen Andrews: So our order book is trending alongside the guide that we had given, so we feel like we're in good shape there. And our last question comes from the line of Steve Byrne of Bank of America. Please go ahead.

Speaker Change #144: Yeah, maybe on your order question. So our order book is trending alongside the guide that we had given. So we feel like we're in good shape there.

Speaker Change #142: And our last question comes from the line of Steve Byrne of Bank of America. Please go ahead.

Stephen V. Byrne: It's your cost of goods. We're down 2% in the quarter. Can you provide a little more detail on that? Such as, were ROS down more than that? Your volumes being a little higher might suggest that ROS was down more than that.

Speaker Change #151: Yes, your cost of goods were down 2% in the quarter. Can you provide a little more detail on that?

Speaker Change #148: Such as, were RAWs down more than that? Your volumes being a little higher might suggest that RAWs were down more than that. But more importantly, where do you think that cost of goods year over year is likely to go as we move forward?

Unknown Executive: But more importantly, where do you think that the cost of goods year over year is likely to go as we move forward? Yeah, hi, so a couple things that I would mention there to keep in mind. So one, obviously, we are seeing a bit of an impact from the deflation of costs that's in there. Secondly, I would also mention, in terms of restructuring, we took a lot of actions as we announced the program last year in late November. Some of those actions have actually been accelerated.

Speaker Change #141: Yeah, hi, so a couple things that I would mention there to keep in mind. So one, obviously, we are seeing a bit of an impact from the deflation of costs.

Speaker Change #147: That's in there. Secondly, I would also mention in terms of restructuring, we took a lot of actions as we announced the program last year towards the late November . Some of those actions have actually been accelerated. So we are seeing even more of a benefit this year than we were originally anticipating. So as you may recall, we were first

Unknown Executive: So we are seeing even more of a benefit this year than we were originally anticipating. As you may recall, we first expected we'd have about $100 million of restructuring savings in 2024. We now expect that to be closer to $115 million or so for the year.

Speaker Change #147: Expected, we'd have about $100 million of restructuring savings in 2024. We now expect that to be closer to $115 million or so for the year, so that's also helping from ACOG's perspective in kind of bringing our costs down.

Unknown Executive: So that's also helping from ACOG's perspective and kind of bringing our costs down. And then you mentioned on slide 14 a lot of products and developments. And you mentioned your water business has some DLE opportunities. Just a question on that. Is this, you know, one lithium project at a temperate latitude that could be many, many years from now? Or is there some breadth to this opportunity that you see in lithium?

Speaker Change #156: And then you mentioned on...

Speaker Change #158: Slide 14, a lot of products and developments, and you mentioned...

Speaker Change #140: Your water business has some DLE opportunity, just a question on that, is this...

Speaker Change #146: You know, one lithium project at a temperate latitude that could be many, many years from now, or is there some breadth to this opportunity that you see in lithium?

Unknown Executive: And we continue to see a nice opportunity. We're actually investing in a facility in Europe to be able to take advantage of it as well from a production perspective. So it's still a little early. I mean, the potential market opportunity, you know, on the low end is probably in the 250 million dollar range as we position ourselves as a component supplier in the space.

Speaker Change #153: And we continue to see a nice opportunity. We're actually investing in a facility in Europe to be able to take advantage of it as well from a production perspective. So it's still a little early. I mean, the potential market opportunity, you know, on the low end is probably in the $250 million range as we position ourselves as a component supplier into the space.

Chris Mecray: Thank you. I will now turn the call back over to Chris for closing remarks. Thank you for joining the call today. As a reminder, our materials are posted on the website, including the transcript from today's call. Thank you for joining. Good day. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Speaker Change #155: Thank you.

Speaker Change #155: I will now turn the call back over to Chris for closing remarks.

Chris: Thank you for joining the call today. As a reminder, our materials are posted on the website, including the transcript from today's call. Thank you for joining. Good day.

Speaker Change #152: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Speaker Change #154: ?? ?? ?? ?? ??

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