DuPont de Nemours, Inc.

Good day and welcome to the DuPont Third Quarter 2019 Earnings Call. Today's conference is being recorded, and at this time, I would like to turn the conference over to Lori Koch. Please go ahead.

Good morning, everyone. Thank you for joining us for DuPont's Third Quarter 2019 Earnings Conference Call. We are making this call available to investors and media via webcast. We have prepared slides to supplement our comments during this conference call. These slides are posted to the investor section of DuPont's website and through the link to our webcast. Joining me on the call today are Mark Doyle, Chief Executive Officer, Gene Desmond, our Chief Financial Officer, and Ed Breen, Executive Chair. Please read the forward-looking statement disclaimer contained in the slide. During our call, we will make forward-looking statements regarding our expectations or predictions about the future. Because these statements are based on current assumptions and factors that involve risk and uncertainty, our actual performance and results may differ materially from our forward-looking statements. Our second quarter Form 10-Q, as may be modified by our subsequent periodic and current reports, includes a detailed discussion of principal risks and uncertainties which may cause such differences. We will also refer to non-GAAP measures, a reconciliation to the most directly comparable GAAP financial measure and other associated disclosures are contained in our press release and posted on the investor section of our website. I'll now turn the call over to Mark.

Thanks, Lori, and good morning, everyone. Starting on slide two, we delivered organic sales and adjusted EPS in line with our expectations by staying focused on our competitive strength and the earnings drivers within our control. Although our operating EBITDA was slightly below our forecast, primarily due to unanticipated currency headwinds, we were able to maintain gross margins and continue to expand our EBITDA margins, even as the U.S. dollar strengthened and several of our key end markets remained challenged. We enabled this performance through continued price improvement, driving our synergy savings, and advancing our restructuring program. Combined, these actions delivered an additional $145 million of savings this quarter, and we are on track to deliver greater than $500 million for the full year. Our team is laser-focused on these priority initiatives as we continue to navigate the macro uncertainties. Turning to slide three, our volumes continue to be impacted by the slowdown in both the automotive and semiconductor end markets. that is also affecting many of our peers. However, there are still many exciting areas within our portfolio, such as water and pharma, that continue to post strong results. All-in global sales of $5.4 billion were in line with expectations at down about 2% on an organic basis. Organic sales in our core segments were down about 1.5%. As noted, while we are seeing continued weakness in a few end markets, There are many bright spots in our portfolio that are performing very well. Highlights here are aerospace and T&I and S&C, pharma and plant-based foods and N&B, water and S&C, and premium smartphones and E&I, which in total account for approximately 15% of our sales, and we're up 7% in aggregate versus the prior year. In smartphones, a market that continues to face challenges, Our ability to deliver higher content in the newer models enabled our interconnect solutions business to deliver 8% higher revenue in the quarter versus prior year, a marked improvement from the first half when sales were down 10%. This outcome demonstrates the value of our innovation engine and the power of our close customer relationships. Our reputation for working closely with our customers to deliver the technology they require sets us apart and enables us to drive pricing and demand in a rapidly changing market like smartphones. Our more sluggish markets of automotive and semiconductor are experiencing negative growth year over year. These areas, which account for a little more than 20% of our portfolio, were down 11% and 3% respectively. We believe destocking in semiconductors is now behind us, and we're starting to see indications of stabilization in automotive channel inventories. I am confident our businesses will ultimately outperform driven by their strong position and broad technology portfolios to address key trends such as hybrid and electric vehicles and the transition to 5G and enabling the Internet of Things. Regionally, organic sales were flat in the U.S. and Canada, down 3% in EMEA, down 4% in Asia Pacific, and down 4% in Latin America. Weakened automotive end markets continue to drive the declines in both Asia Pacific and EMEA. However, total sales in China, the market which turned down sharply for us last December, posted its strongest results this year and were down year-over-year in the quarter by 2% versus down 10% in Q1 and 3% in Q2, each versus the same period last year. Definitely an improving trend for us. Turning to slide four, adjusted EPS was up 2% on a pro forma basis versus the prior year. As noted, currency was a headwind in the quarter, reducing EPS by 3%. Our segment results, excluding the impact of currency, were a net two-cent headwind to adjusted EPS, while depreciation and amortization and a lower share count both contributed to our EPS growth. To provide a little more color on our segment results, I'll cover some of the key operating EBITDA drivers. Operating EBITDA of $1.4 billion was down 4% versus the prior year period. We again delivered operating leverage, further demonstrating our ability to drive price and operating efficiencies amid challenging market conditions. We delivered operating EBITDA margin improvement of 20 basis points versus the prior year. Our strong price and cost discipline was partially offset by a weaker mix, with volumes in our higher margin businesses, primarily semiconductor technologies, posting softer results in the quarter. We also experienced higher manufacturing costs, driven by planned maintenance activity, primarily in the safety and construction segment, as well as lower production rates driven by weakened volumes in our T&I and non-core segments. Before I turn the call over to Jean to discuss the quarter in further detail, I'll cover our full year guidance on slide five. For the full year, our expectation for organic sales remains unchanged at slightly down. Our forecast for total annual sales including the impact of currency and portfolio, is about $21.5 billion. We are narrowing our adjusted EPS range of $375 to $385 per share to $377 to $382 per share, maintaining the midpoint of the prior guidance. This adjustment reflects second-half currency headwinds of approximately $45 million versus our original expectations. In the appendix, we provide segment-level commentary as well as some additional modeling guidance. Overall, I am confident in our ability to adapt as market conditions evolve while continuing to make smart, high-return investments to enhance our portfolio. A relentless attention to cost and pricing discipline, coupled with the benefits of our ongoing investments and innovation, will deliver bottom-line growth when market conditions improve. Our focus on driving improvements in ROIC is the right mindset for the long-term strength of the company, and every part of the organization is committed. We are working all the levers in our control to deliver on our earnings commitments and drive shareholder value. I'll now turn the call over to Jean to discuss the segment results.