DuPont Reports Second Quarter 2022 Results
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WILMINGTON, Del., Aug. 2, 2022 - DuPont (NYSE: DD) today announced financial results(1) for the second quarter of 2022.
“We delivered second quarter financial results ahead of expectations by maintaining a disciplined focus on pricing actions and operational excellence in the face of continued global supply chain and logistics challenges and ongoing inflationary pressure,” said Ed Breen, DuPont Executive Chairman and Chief Executive Officer. “Underlying demand during the quarter in our key end-markets remained strong. Year-over-year and sequential sales and earnings growth in a volatile macro environment demonstrated the strength of our portfolio, our deep customer relationships and the leading market positions we hold globally.”
“We continue to advance our previously announced portfolio actions of acquiring Rogers Corporation and divesting a substantial portion of the former Mobility & Materials segment,” Breen continued. “Regarding Rogers, we expect to close the acquisition during the third quarter of 2022, with China being the last remaining jurisdiction requiring regulatory approval. For the M&M transactions, we continue to expect the completion of the sale of portions of this business to Celanese to close around year-end.”
“As DuPont drives innovation investment to support long-term growth, we continue to introduce new products across our key growth pillars,” Breen said. “We are excited to have won four 2022 Edison Awards highlighting innovative technologies, while also progressing well with our broader new product pipeline to support growth over the coming years.”
Second Quarter 2022 Results(1)
Dollars in millions, unless noted |
2Q’22 |
2Q’21 |
Change vs. 2Q’21 |
Organic Sales (2) vs. 2Q’21 |
Net sales |
$3,322 |
$3,104 |
7% |
9% |
GAAP Income from continuing operations |
$365 |
$395 |
(8)% |
|
Operating EBITDA(2) |
$829 |
$780 |
6% |
|
Operating EBITDA(2) margin % |
25.0% |
25.1% |
(10) bps |
|
GAAP EPS from continuing operations |
$0.71 |
$0.73 |
(3)% |
|
Adjusted EPS(2) |
$0.88 |
$0.79 |
11% |
|
Net sales
GAAP Income/GAAP EPS from continuing operations
Operating EBITDA(2)
Adjusted EPS(2)
Operating cash flow
Second Quarter 2022 Segment Highlights
Electronics & Industrial
Dollars in millions, unless noted |
2Q’22 |
2Q’21 |
Change vs. 2Q’21 |
Organic Sales(2) vs. 2Q’21 |
Net sales |
$1,527 |
$1,320 |
16% |
8% |
Operating EBITDA |
$480 |
$424 |
13% |
|
Operating EBITDA margin % |
31.4% |
32.1% |
(70) bps |
|
Net sales
Operating EBITDA
Water & Protection
Dollars in millions, unless noted |
2Q’22 |
2Q’21 |
Change vs. 2Q’21 |
Organic Sales(2) vs. 2Q’21 |
Net sales |
$1,497 |
$1,412 |
6% |
9% |
Operating EBITDA |
348 |
352 |
(1)% |
|
Operating EBITDA margin % |
23.2% |
24.9% |
(170) bps |
|
Net sales
Operating EBITDA
Outlook
Dollars in millions, unless noted |
3Q’22E |
Full Year 2022E |
Net sales |
$3,170 - $3,370 |
$13,000 - $13,400 |
Operating EBITDA(2) |
Approx. $810 |
$3,250 - $3,350 |
Adjusted EPS(2) |
Approx. $0.81 |
$3.27 - $3.43 |
“Our strong first half 2022 results reflect positively on the secular end-markets in which we operate and highlight our team’s focus on execution,” said Lori Koch, Chief Financial Officer of DuPont. “As we look towards the second half, demand and overall order trends in our key end-markets remain solid, however, future uncertainties continue to exist including continued inflationary pressure, challenging supply chains, and U.S. dollar strength against global currencies.”
“We are narrowing our full year 2022 adjusted EPS guidance from $3.20-$3.50 to $3.27-$3.43 while maintaining the mid-point of our previous range.” Koch continued. “Our updated full year 2022 guidance ranges for net sales and operating EBITDA reflect incremental foreign currency headwinds and the removal of contribution from the Biomaterials business, which was divested on May 31, 2022.”
“We expect third quarter 2022 net sales and operating EBITDA to be slightly weaker than second quarter 2022 as sequential volume increases are expected to be offset by foreign currency headwinds and the absence of the Biomaterials net sales contribution,” Koch said. "We are also expecting a negative impact during the third quarter on operating EBITDA of approximately $15 million from unplanned downtime at our Spruance site in Virginia within the W&P segment resulting from an unforeseen utility disruption with a third-party supplier. On a year-over-year basis, we expect third quarter net sales to be up 2 percent at the mid-point of the range, or up high single-digits on an organic basis."
(1) During the first quarter of 2022, a substantial portion of the Company’s historic Mobility & Materials segment met the criteria to be classified as discontinued operations for current and historical periods. See page 5 for further information, including the basis of presentation included in this release.
(2) Adjusted EPS, operating EBITDA, organic sales and free cash flow are non-GAAP measures. See page 6 for further discussion, including a definition of significant items. Reconciliation to the most directly comparable GAAP measure, including details of significant items begins on page 11 of this communication.
Conference Call
The Company will host a live webcast of its second quarter earnings conference call with investors to discuss its results and business outlook beginning 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 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, healthcare 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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For further information contact:
DuPont Investors: Chris Mecray +1 302-999-2030 |
Media: Dan Turner +1 302-299-7628 |
DuPontTM and all products, unless otherwise noted, denoted with TM, SM or ® are trademarks, service marks or registered trademarks of affiliates of DuPont de Nemours, Inc.
Overview
On November 2, 2021, DuPont announced it has entered definitive agreements to acquire Rogers Corporation (“Rogers”), (the “Intended Rogers Acquisition”). On January 25, 2022, Rogers’s shareholders approved the transaction. Closing is expected in the third quarter 2022, subject to regulatory approvals and customary closing conditions.
On February 18, 2022, DuPont announced that it has entered into definitive agreements to divest a majority of its historic Mobility & Materials segment, excluding certain Advanced Solutions and Performance Resins businesses, to Celanese Corporation (“Celanese”), (the “M&M Divestiture”). Closing is expected around the end of 2022, subject to regulatory approvals and customary closing conditions. The Company also announced on February 18, 2022, that its Board of Directors has approved the divestiture of the Delrin® acetal homopolymer (H-POM) business. In addition to the entry into definitive agreements, the Company anticipates that the closing of the sale of Delrin® would be subject to regulatory approvals and other customary closing conditions, (the “Delrin® Divestiture” and together with the M&M Divestiture, the "M&M Divestitures”).
As of March 31, 2022, the results of operations and the assets and liabilities of the businesses in scope for the M&M Divestitures are presented as discontinued operations for all periods presented. The cash flows of these businesses have not been segregated and are included in the interim Consolidated Statement of Cash Flows. Unless otherwise indicated, the discussion of results, including the financial measures further discussed below, refer only to DuPont's Continuing Operations and do not include discussion of balances or activity of the businesses in scope for the M&M Divestitures. The Auto Adhesives & Fluids, MultibaseTM and Tedlar® product lines previously within the historic Mobility & Materials segment (the "Retained Businesses") are not included in the scope of the intended divestitures. The Retained Businesses are reported in Corporate & Other. The reporting changes have been retrospectively applied for all periods presented.
Cautionary Statement about Forward-looking Statements
This communication contains "forward-looking statements" within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," "target," and similar expressions and variations or negatives of these words.
Forward-looking statements address matters that are, to varying degrees, uncertain and subject to risks, uncertainties, and assumptions, many of which that are beyond DuPont's control, that could cause actual results to differ materially from those expressed in any forward-looking statements. Forward-looking statements are not guarantees of future results. Some of the important factors that could cause DuPont's actual results to differ materially from those projected in any such forward-looking statements include, but are not limited to: (i) the parties’ ability to meet expectations regarding the timing, completion and accounting and tax treatments of the M&M Divestiture to Celanese, including (x) any failure to obtain necessary regulatory approvals, anticipated tax treatment or to satisfy any of the other conditions to the proposed transaction, (y) the possibility that unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies could impact the value, timing or pursuit of the proposed transaction, and (z) risks and costs and pursuit and/or implementation, timing and impacts to business operations of the separation of business lines in scope for the M&M Divestiture to Celanese, (ii) the timing and outcome of the Delrin® Business Divestiture, including entry into definitive agreements, and the risks, costs and ability to realize benefits from the pursuit of the Delrin® Business Divestiture; (iii) ability to achieve anticipated tax treatments in connection with mergers, acquisitions, divestitures and other portfolio changes actions and impact of changes in relevant tax and other laws; (iv) indemnification of certain legacy liabilities; (v) risks and costs related to each of the parties respective performance under and the impact of the arrangement to share future eligible PFAS costs by and between DuPont, Corteva and Chemours; (vi) failure to timely close on anticipated terms (or at all), realize expected benefits and effectively manage and achieve anticipated synergies and operational efficiencies in connection with mergers, acquisitions, divestitures and other portfolio changes including the Intended Rogers Acquisition and the M&M Divestitures; (vii) risks and uncertainties, including increased costs and the ability to obtain raw materials and meet customer needs, related to operational and supply chain impacts or disruptions, which may result from, among other events, the COVID-19 pandemic and actions in response to it, and geo-political and weather related events; (viii) ability to offset increases in cost of inputs, including raw materials, energy and logistics; (ix) risks, including ability to achieve, and costs associated with DuPont’s sustainability strategy including the actual conduct of the company’s activities and results thereof, and the development, implementation, achievement or continuation of any goal, program, policy or initiative discussed or expected; and (x) other risks to DuPont's business, operations; each as further discussed in DuPont’s most recent annual report and subsequent current and periodic reports filed with the U.S. Securities and Exchange Commission. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business or supply chain disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on DuPont’s consolidated financial condition, results of operations, credit rating or liquidity. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. DuPont assumes no obligation to publicly provide revisions or updates to any forward-looking statements whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws.
This earnings release includes information that does not conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) and are considered non-GAAP measures. Management uses these measures internally for planning, forecasting and evaluating the performance of the Company, including allocating resources. DuPont’s management believes these non-GAAP financial measures are useful to investors because they provide additional information related to the ongoing performance of DuPont to offer a more meaningful comparison related to future results of operations. These non-GAAP financial measures supplement disclosures prepared in accordance with U.S. GAAP, and should not be viewed as an alternative to U.S. GAAP. Furthermore, such non-GAAP measures may not be consistent with similar measures provided or used by other companies. Reconciliations for these non-GAAP measures to U.S. GAAP are provided in the Selected Financial Information and Non-GAAP Measures starting on page 11 and in the Reconciliation to Non-GAAP Measures on the Investors section of the Company's website. Non-GAAP measures included in this release are defined below. The Company has not provided forward-looking U.S. GAAP financial measures or a reconciliation of forward-looking non-GAAP financial measures to the most comparable U.S. GAAP financial measures on a forward-looking basis because the Company is unable to predict with reasonable certainty the ultimate outcome of certain future events. These events include, among others, the impact of portfolio changes, including asset sales, mergers, acquisitions, and divestitures; contingent liabilities related to litigation, environmental and indemnifications matters; impairments and discrete tax items. These items are uncertain, depend on various factors, and could have a material impact on U.S. GAAP results for the guidance period.
The historic Mobility & Material segment costs that are classified as discontinued operations include only direct operating expenses incurred by the M&M Businesses which the Company will cease to incur upon the close of the M&M Divestitures. Indirect costs, such as those related to corporate and shared service functions previously allocated to the M&M Businesses, do not meet the criteria for discontinued operations and remain reported within continuing operations. A portion of these indirect costs include costs related to activities the Company will continue to undertake post-closing of the M&M Divestiture, and for which it will be reimbursed (“Future Reimbursable Indirect Costs”). Future Reimbursable Indirect Costs are reported within continuing operations but are excluded from operating EBITDA as defined below. The remaining portion of these indirect costs is not subject to future reimbursement (“Stranded Costs”). Stranded Costs are reported within continuing operations in Corporate & Other and are included within Operating EBITDA.
Adjusted earnings per common share from continuing operations - diluted ("Adjusted EPS"), is defined as earnings per common share from continuing operations - diluted, excluding the after-tax impact of significant items, after-tax impact of amortization expense of intangibles, the after-tax impact of non-operating pension / other post employment benefits (“OPEB”) credits / costs and Future Reimbursable Indirect Costs. Management estimates amortization expense in 2022 associated with intangibles to be approximately $600 million on a pre-tax basis, or approximately $0.93 per share.
The Company's measure of profit/loss for segment reporting purposes is Operating EBITDA as this is the manner in which the Company's chief operating decision maker ("CODM") assesses performance and allocates resources. The Company defines Operating EBITDA as earnings (i.e., “Income from continuing operations before income taxes") before interest, depreciation, amortization, non-operating pension / OPEB benefits / charges, and foreign exchange gains / losses, excluding Future Reimbursable Indirect Costs, and adjusted for significant items. Reconciliations of these measures are provided on the following pages.
Significant items are items that arise outside the ordinary course of the Company’s business that management believes may cause misinterpretation of underlying business performance, both historical and future, based on a combination of some or all of the item’s size, unusual nature and infrequent occurrence. Management classifies as significant items certain costs and expenses associated with integration and separation activities related to transformational acquisitions and divestitures as they are considered unrelated to ongoing business performance.
Organic Sales is defined as net sales excluding the impacts of currency and portfolio.
Free cash flow is defined as cash provided by/used for operating activities less capital expenditures. As a result, free cash flow represents cash that is available to the Company, after investing in its asset base, to fund obligations using the Company's primary source of liquidity, cash provided by operating activities. Management believes free cash flow, even though it may be defined differently from other companies, is useful to investors, analysts and others to evaluate the Company's cash flow and financial performance, and it is an integral measure used in the Company's financial planning process. Free cash flow conversion is defined as free cash flow divided by net income adjusted to exclude the after-tax impact of non-cash impairment charges, gains or losses on divestitures, and amortization expense of intangibles.
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