DuPont de Nemours, Inc.

Good day and welcome to the DuPont First Quarter 2020 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the call over to Leland Weaver. Please go ahead.

Good morning, everyone. Thank you for joining us for DuPont's First Quarter 2020 Earnings Conference Call. We're 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 on the industrial relations section of DuPont's website and through the link to our webcast. Joining me today on the call are S. Rain, Chief Executive Officer, and Lori Koch, our Chief Financial Officer. 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 2019 Form 10-K, as updated by our current and periodic reports, includes detailed discussion of principal risk and uncertainties which may cause such differences. And like otherwise specified, all historical financial measures presented today exclude significant items. We will also refer to non-GAAP measures, A reconciliation to the most directly comparable GAAP financial measure is included in our press release. I'll now turn the call over to Ed.

Thanks, Leland, and good morning, everyone, and thank you for joining us. This is obviously an unprecedented time, and I hope you are all safe and well. Today, we will walk through the discipline plan we are executing as we navigate the current environment, including our overall approach to protecting the health and safety of our employees and maintaining our supply chains and operations. We will also detail a number of actions we quickly implemented to strengthen our liquidity, protect our balance sheet, and generate cash. Because of these swift actions, we are on solid footing and are well prepared to handle the uncertain times ahead. We will also provide comments on the first four results, follow on market dynamics in April, as well as our current assumptions for the next few months. Since the outset of this pandemic, our priorities have been clear, beginning with the safety and well-being of our employees. We have taken aggressive steps to protect our employees by restricting access to our sites, implementing enhanced cleaning protocols, performing contact tracing among our employees, administering quarantines where needed, and implementing work from home protocols where possible. I want to acknowledge the tremendous efforts across our organization in overcoming the challenges created by the pandemic. The determination of our employees from across the globe to maintain business continuity has enabled us to continue to be a reliable supplier for our customers, and the vast majority of our plant sites have been deemed essential in their local jurisdictions and have continued to operate. As a result, many of our manufacturing and other necessary personnel deserve particular recognition. Their extraordinary dedication in this incredibly challenging environment has enabled us to keep our sites and supply chains operating, our second priority for managing in these difficult times. In fact, we have been successful in maintaining our operating base during the global pandemic with only a handful of our manufacturing locations shut down the manufacturing site. We have begun longer-term planning for an eventual return to the work for non-manufacturing employees, which will be done in accordance with all relevant government requirements and continued emphasis on health, safety, and the overall well-being of our employees, customers, and communities. Our third area of focus has been bolstering our already strong balance sheet by enhancing our liquidity position and implementing plans to generate and preserve cash. We will provide more detail on these actions in a moment. Lastly, we continue to do our part to help combat this pandemic. We have donated over 140,000 Tyvek garments and thousands of gallons of hand sanitizer to healthcare and other frontline workers. We have also used our 3D printing capabilities to make face shields and partnered with Cummins to use Dupont filtration technology to help augment the supply of N95 respirator masks. We have also announced a number of initiatives to increase the supply of protective garments by more than 15 million per month since the start of the pandemic, including the increased production of Tyvek garments by more than 9 million per month, primarily by shifting production away from non-healthcare markets, and launching the Tyvek Together campaign through the rapid development of a safe, easy-to-use version of Tyvek, and by empowering others to join DuPont in protecting frontline responders with free access to our designs and usage instructions. These are unprecedented times, and I am personally engaged in the day-to-day work to respond quickly to the changing environment. We take our designation as an essential business very seriously and are committed to doing all we can to support our employees, our customers, our partners, our shareholders, and the communities in which we operate. Slide three details the series of actions we have been operating against since the pandemic spiked in mid-March. The senior leadership team and I are on top of these items daily to ensure we remain well positioned. We have analyzed a number of stress case scenarios. We are favorably positioned to weather an unlikely steep and prolonged downturn while also being equipped to return to growth when the market recovers. Our playbook for this environment is straightforward. Improve cash generation through working capital improvement and deferral of certain capital expenditures. Strengthen our liquidity position and optimize the cost structure of the company. We will provide more color on how we are driving success in each of these areas. Our scenario planning was broad and simulated severe downturn cases to ensure we could protect the company. We are also staying keenly focused on the downside risk in automotive, aerospace, oil and gas, and other industrial markets. With nearly 15% of our sales connected to the automotive industry, This is the largest area of exposure for us, particularly within our transportation and industrial segment. The numbers are unprecedented, with global auto bills down 24% in the first quarter, and the latest estimates suggest that global auto bills will be down more than 40% in the second quarter. In light of this, we developed a plan in the first quarter to begin slowing and idling certain facilities in our network. to align our supply with market demand. Taking these actions will provide significant working capital improvement for inventory reductions over the course of the year, but will translate into near-term earnings headwinds as fixed costs that would otherwise be absorbed in inventory will now flow directly to earnings. For T&I, a very weak top line, driven by the expected decline in auto bills, as well as year-over-year price decline, coupled with the charges associated with these plant shutdowns, is expected to result in detrimental margin in T&I of approximately 55 to 65% in the second quarter. These are not easy decisions, but the confidence to react quickly and decisively is critical, and we will continue this mindset as we move forward. Let me turn it over to Lourdes for additional color on the other actions. a few comments on the first quarter.