DuPont Reports Second Quarter 2020 Results

• 2Q20 GAAP EPS from continuing operations of $(3.37); adjusted EPS of $0.70
• 2Q20 Net Sales of $4.8 billion, down 12 percent; organic sales down 10 percent
• 2Q20 GAAP Income (Loss) from continuing operations of $(2.5) billion and Operating EBITDA of $1.1 billion
• Operating cash flow of $802 million; $564 million free cash flow in the quarter
• Global slowdown in automotive industry from the impact of COVID-19 resulted in $2.5 billion non-cash impairment charge in Transportation & Industrial segment in the quarter
• Advanced intended separation of Nutrition & Biosciences business in preparation for intended merger with IFF in 1Q 2021; IFF shareholder vote set for August 27, 2020

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WILMINGTON, Del., July 30, 2020 - DuPont (NYSE: DD) today announced financial results for the second quarter 2020.

“In the midst of the ongoing pandemic we delivered results ahead of expectations, while also continuing our emphasis on the safety and well-being of our employees and the needs of our customers,” said Ed Breen, DuPont Executive Chairman and Chief Executive Officer. “We delivered on our structural cost commitments and generated organic revenue growth in the Electronics & Imaging and Nutrition & Biosciences segments despite significant declines in global economic activity. Additionally, we saw continued strength in Tyvek® protective garment and water end markets, achieving double digit revenue growth for the second consecutive quarter. I am proud of our team’s focus on execution, and I am confident in the actions we have taken to mitigate the impact of this pandemic. I believe we are well-positioned to emerge from this as an even stronger company.”

DuPont N&B and IFF Update⁽¹⁾

DuPont continued to advance its objective of creating significant value for its shareholders through the completion of a number of critical milestones in the intended merger between DuPont Nutrition & Biosciences and IFF. Recently completed milestones include:

•       Filings with the SEC - DuPont Nutrition & Biosciences and IFF filed their respective initial registration statements in May and are advancing the review process with the SEC. On July 27, IFF filed its definitive proxy relating to IFF shareholder approval of the transaction. The IFF shareholder meeting is set to take place on August 27, 2020.

•       Executive committee named - Also in May, DuPont and IFF announced the executive committee of the future combined company, which will include key senior leaders from DuPont Nutrition & Biosciences and IFF. Additionally, DuPont and IFF announced two DuPont appointees who will serve as independent directors on the board of directors of the future combined company: Matthias Heinzel, President of Nutrition & Biosciences and John Davidson, director of Legg Mason, FMC, and TE Connectivity.

•       Additional regulatory clearances - DuPont and IFF previously announced that the intended merger cleared the U.S. regulatory process. The transaction subsequently received clearance from China, Serbia, and Colombia. Clearance processes in the remaining required jurisdictions are well underway.

“Each of these accomplishments represents critical milestones to create a market-leading company and to generate significant value for our shareholders,” Breen continued. “Our business teams, customers, and partners see tremendous opportunity for growth and greater innovation as the businesses come together.  Over the next six months, we will continue our integration planning work with IFF to enable a smooth, successful launch and position the future combined company to achieve its committed cost and revenue synergies.”

Second Quarter 2020 Results

"The quick and decisive actions we took in the early days of the pandemic to strengthen our balance sheet, increase our cost savings initiatives, and differentially manage our portfolio enabled us to deliver a solid quarter,” said Lori Koch, DuPont Chief Financial Officer. “Our businesses are well-equipped to build upon their leading market positions and outperform when markets fully recover.”

Net sales totaled $4.8 billion, down 12 percent versus the year-ago period. On an organic basis, net sales were down 10 percent as organic growth of 7 percent in Electronics & Imaging and 1 percent in Nutrition & Biosciences was more than offset by organic sales declines in the other segments.

On a regional basis, organic sales increased 1 percent in Asia Pacific versus the year-ago period while the U.S. and Canada, EMEA, and Latin America each declined mid-to-high teens percent. China sales in our core segments improved 6 percent versus the second quarter 2019 and 20 percent sequentially from first quarter 2020.

GAAP loss from continuing operations totaled $(2.5) billion, versus GAAP loss from continuing operations of $(1.1 billion) in the year-ago period; the decline mostly attributable to a non-cash impairment charge in the Transportation & Industrial segment resulting from significant near-term demand weakness in the automotive industry due to COVID-19 as well as revised views of market recovery based on third-party estimates. Operating EBITDA⁽²⁾ was $1.1 billion, down 20 percent versus operating EBITDA⁽²⁾ in the prior year. Strength in semiconductor, water, Tyvek® protective garment, and health & wellness markets coupled with approximately $130 million of cost savings was more than offset by volume declines and charges of $160 million associated with temporarily idling certain facilities primarily in the Transportation & Industrial segment.

GAAP EPS from continuing operations totaled $(3.37) versus GAAP EPS from continuing operations in the year-ago period of $(1.48); the decline is mostly attributable to the non-cash impairment charge in Transportation & Industrial, incremental merger-related amortization expense, and lower segment results, partially offset by the absence of a prior year tax charge, lower integration and separation costs, lower restructuring charges, and a lower tax rate. Adjusted EPS⁽²⁾ decreased 28 percent to $0.70, compared with adjusted EPS⁽²⁾ in the year-ago period of $0.97, primarily driven by volume declines and charges associated with temporarily idled facilities partially offset by cost savings and a lower base tax rate.

Operating cash flow of $802 million included reductions in working capital of more than $160 million in the quarter. Capital expenditures of approximately $240 million resulted in free cash flow⁽²⁾ of $564 million.

Second Quarter 2020 Segment Highlights

Electronics & Imaging

Electronics & Imaging reported net sales of $905 million, up 5 percent from the year-ago period. Organic sales were up 7 percent with volume up 7 percent and price flat. Currency and portfolio were each a 1 percent headwind.

Strong volume gains in Semiconductor Technologies more than offset weaker demand in Interconnect Solutions and Image Solutions. Double-digit gains in Semiconductor Technologies were led by continued strength within logic and foundry, driven by the ramp-up of advanced technology nodes, as well as robust demand for memory in servers and data centers. Volume declines within Interconnect Solutions were primarily due to softness in smartphones and select industrial markets. Within Image Solutions, strength in ink for the consumer segment was more than offset by weakness in flexographic plates, textile inks, and OLEDs.

Operating EBITDA for the segment was $277 million, an increase of 13 percent from operating EBITDA of $246 million in the year-ago period, driven primarily by volume gains in Semiconductor Technologies and cost productivity actions. Operating EBITDA margins improved 190 basis points versus the year-ago period.

Nutrition & Biosciences

Nutrition & Biosciences reported net sales of $1.5 billion, down 1 percent from the year-ago period. Organic sales were up 1 percent with volume up 1 percent; price was flat. Currency was a 2 percent headwind.

Mid-single digit growth across 85 percent of the Nutrition & Biosciences segment driven by strength in food & beverage and health & wellness end markets was partially offset by declines in businesses exposed to energy and industrial markets. Sales gains were led by Food & Beverage on volume gains in the plant-based meat category and price improvements across the F&B portfolio, as well as Pharma Solutions which recorded its strongest sales quarter ever on increased demand in over-the-counter and prescription pharma applications. Within Health & Biosciences, the probiotics business recorded another record quarter with over 30 percent organic growth. Additionally, sustained consumer demand drove growth in animal nutrition and home & personal care applications. These areas of strength within Health & Biosciences were more than offset by significant demand weakness in biorefinery and microbial control. In 2019, these two businesses accounted for approximately 15 percent of the Nutrition & Biosciences segment.

Operating EBITDA for the segment was $418 million, an increase of 8 percent from operating EBITDA of $386 million in the year-ago period. Favorable product mix led by gains in probiotics and animal nutrition as well as cost productivity actions generated a 240 basis point improvement in operating EBITDA margins.

Transportation & Industrial

Transportation & Industrial reported net sales of $832 million, down 34 percent from the year-ago period. Organic sales were down 33 percent with volume down 28 percent and price lower by 5 percent. Currency was a 1 percent headwind.

Volume declined 28 percent due to lower auto builds, as global automotive production was down approximately 45 percent versus the year-ago period. The impact of COVID-19 on other key industrial markets, in addition to automotive, contributed to the double-digit volume declines.

Operating EBITDA for the segment was $49 million, a decrease of 86 percent from operating EBITDA of $357 million in the year-ago period, driven primarily by charges of approximately $130 million associated with temporarily idling approximately 50 percent of our polymer capacity to align supply with demand.

Safety & Construction

Safety & Construction reported net sales of $1.2 billion, down 7 percent from the year-ago period. Organic sales were down 8 percent with a 2 percent price improvement offset by a 10 percent decline in volume. Recent acquisitions in the Water Solutions business increased reported sales by 2 percent. Currency was a 1 percent headwind.

Demand for Tyvek® protective garments continued to be robust, leading to a greater than 60 percent increase in garment sales versus last year which was enabled by efforts to increase capacity and redirect supply from non-personal protection markets. Despite the strength in Tyvek® protective garments, sales in the Safety Solutions business declined as demand weakened across industrial, aerospace, and oil & gas markets as a result of COVID-19. Similarly, Shelter Solutions sales declined as construction activity was impacted by stay-at-home orders issued across the globe. Water Solutions continued to see broad-based demand strength across desalination, wastewater, and specialty markets leading to double-digit organic growth.

Operating EBITDA for the segment totaled $349 million, a decrease of 9 percent from operating EBITDA of $382 million in the year-ago period, primarily from lower volumes partially offset by cost productivity actions and favorable product mix.

Non-Core

Non-Core reported net sales of $308 million, down 30 percent from the year-ago period. Organic sales were down 20 percent driven by 22 percent volume declines and offset by 2 percent pricing gains. The September 2019 divestiture of the DuPont Sustainable Solutions business reduced sales by 9 percent. Currency was a 1 percent headwind.

Soft volume in trichlorosilane, Tedlar® aircraft films, photovoltaic metallization pastes, and Sorona® materials for carpet and apparel applications were partially offset by volume gains in microcircuit paste materials.

Operating EBITDA for the segment was $93 million, a decrease of 11 percent from operating EBITDA of $104 million in the year-ago period with a $64 million gain associated with a customer settlement more than offset by lower volumes and the absence of earnings from the DuPont Sustainable Solutions divestiture.

Outlook

“For third quarter, we expect sales to be slightly up sequentially with improvement in automotive and residential construction mostly offset by seasonal patterns in Nutrition & Biosciences as well as the impact of supply constraints across our Tyvek® enterprise as we perform routine maintenance on the assets. Oil & gas, aerospace, industrial, and commercial construction markets will remain challenged,” said Lori Koch, Chief Financial Officer of DuPont. “We expect third quarter adjusted EPS in the range of $0.71 - $0.73."

Conference Call

The Company will host a live webcast of its first quarter earnings conference call with investors to discuss its results and business outlook today at 8:00 a.m. ET. The slide presentation that accompanies the conference call will be posted on the DuPont’s Investor Relations Events and Presentations page. A replay of the webcast also will be available on the DuPont’s Investor Relations Events and Presentations page following the live event.

About DuPont

DuPont (NYSE: DD) is a global innovation leader with technology-based materials, ingredients and solutions that help transform industries and everyday life. Our employees apply diverse science and expertise to help customers advance their best ideas and deliver essential innovations in key markets including electronics, transportation, construction, water, health and wellness, food and worker safety. More information about the company, its businesses and solutions can be found at www.dupont.com. Investors can access information included on the Investor Relations section of the website at investors.dupont.com.

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