DuPont de Nemours, Inc.

Good morning, everyone. Thank you for joining us for DuPont's first quarter 2021 earnings conference call. We're making this call available to investors and media via webcast. We 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 on the call today are Ed Green, Chief Executive Officer, and Lori Koch, our Chief Financial Officer.

Please read the forward-looking statement disclaimer contained in the slides. 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 2020 Form 10-K, as updated by our current and periodic reports, includes detailed discussion of principal risk and uncertainty may cause such differences. I'll otherwise specify all restorable financial measures presented today, excluding significant items. 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 posted to the investor page of our website. I'll now turn the call over to Ed. Thanks, Julian. Good morning, everyone, and thank you for joining us. I will provide comments on the strong start that we had to 2021, including the advancement of a number of strategic priorities to make DuPont a premier of multi-industrial companies, equipped for growth and value creation. But first, let me acknowledge the tremendous dedication and determination of our teams around the world as we continue to manage the extraordinary circumstances of this pandemic. The health and well-being of our people remains our top priority. The principles and protocols we've implemented globally and locally have helped to protect our people and ensure business continuity as countries face multiple waves of infection and lockdowns. As an innovation-led company, we believe in science, and we're encouraging all employees to get vaccinated. And where possible, we're working with public health authorities to facilitate access and distribution. Starting on slide two, I will note that one of our priorities for generating value is consistent operating performance and financial results. This morning we announced strong top line and earnings results for the first quarter, both above our expectations. Lori will take you through the details in a moment, but I'd like to highlight the 7% organic revenue growth that we reported reflecting broad and strong demand in key markets such as semiconductors, smartphones, water, residential construction, and a lot of moves. This revenue growth, along with continued cost discipline, led to strong operating leverage and even a margin expansion in the quarter. Our first quarter financial results reflect the agility of our teams to navigate through a challenging environment facing escalating raw material and logistics costs, as well as global supply constraints of key raw materials, most notably in our M&M segments. With strong order trends continuing and confidence in our team's ability to navigate the supply chain challenges, we are raising our four-year guidance for net sales, operating unit, and adjusted EPS. In addition to our financial results, we've advanced a number of our strategic priorities during the quarter. First, as previously announced, we completed the merger of our nutrition and bioscientist business with IFF, creating an industry-leading company in the food and beverage, home and personal care, and health and wellness markets. As you know, this transaction also unlocks significant As part of the transaction, we received $7.3 billion in cash from IFS and retired slightly more than 197 million coupon shares, or about 27% of our outstanding shares at the time, with no cash outlay. We strengthened our balance sheet during the quarter by paying down our $3 billion term loan, and we will redeem $2 billion of our long-term debt later this month. As a reminder, our next debt maturity will not be due until the fourth quarter of 2023. In line with our balanced approach, we returned about $660 million in capital to shareholders during the first quarter through share repurchases and dividends. Under our existing share buyback program, we executed $500 million in share repurchases during the first quarter. As a reminder, we have about $500 million of repurchase authorization remaining under that program, which we intend to utilize by June 1 of this year. Earlier this quarter, we also announced that our Board of Directors authorized a new $1.5 billion share buyback program, which expires on June 30, 2022. We plan to be opportunistic under the new program as we move throughout the With respect to dividends, we return about $160 million in cash to shareholders during the quarter. As we previously mentioned, going forward, we will target a payout ratio between 35% and 45%, and we intend to work with our board to increase our dividends annually as we grow our audience. In March, we announced a definitive agreement materials for $2.3 billion. When completed, a planned acquisition of Laird expands the coupon strategy of growing as a global innovation leader and strengthens our leadership position to advance electronic materials. The Laird business will complement our interconnect solutions business within E&I, and it will add critical capabilities and market-leading offerings to thermal management and electromagnetic which are essential to emerging electronic applications. Our E&I team, along with our customers, are excited for this opportunity. We recently received regulatory approval for the transaction in Germany and Brazil, and cleared HSR in the US last month. As previously indicated, we expect the transaction will close in the third quarter of this year. Finally, we announced previously that we sell our biomaterials, clean technologies, and solvent businesses. We anticipate receiving more than 900 million gross proceeds from those divestitures, and we expect those transactions to close in the second half of this year. Before turning it over to Lori to go through the details of the first quarter, I'd like to take a moment to provide some context regarding what we saw during the quarter. in our key end markets that we serve. Combined, the electronics and automotive markets account for nearly half of our revenues. Electronics continues to perform very well, and auto is recovering nicely from its 2020 lows. Within electronics, demand continues to be broad-based as the ramp-up of advanced technology knows, and a need for more memory to servers and data centers have accelerated. The solar market, which is a large consumer of semiconductor chips and circuit board chemistries, continues to show strength and is expected to remain robust as internet network traffic continues to grow. Furthermore, the deployment of 5G infrastructure by leading telecom companies to collaboration for the next generation of ultra-high speed data should help sustain demand for premium smartphones, which is further enhanced by our favorable content play. With respect to the automotive end market, demand is well above the lows of 2020, but not yet back to 2019 levels, which saw 22.9 million vehicles produced in the first quarter and nearly 9 million units per year. The lack of stable supply of critical components and the semiconductors impacted the ability of the oil OEMs to produce more vehicles and rebuild them towards the run core. Even where we participate in the value chain within M&M, I think it's important to note that our first quarter engineering polymer volumes were not materially affected by the chip shortages, as our demand from the Tier 1 and Tier 2 suppliers was not lessened. as a result of the chip shortage. However, our ability to supply customers was affected by supply constraints of key raw materials, predominantly in our nylon and polyester product lines. This supply situation is gradually improving, but we anticipate several critical products will continue to constrain our production through the end of the second quarter. We expect that any lost sales as a result of our raw material constraints will be captured in the second half of the year. Additionally, we believe that the automotive market will remain strong for the balance of the year, as OEMs look to meet robust demand, as well as pre-plunged global inventories, which are currently below historical averages. Moving on to the water and construction Collectively, these two markets account for approximately 20% of our total company sales. Versus first quarter of 2019, demand for advanced water filtration and purification has strengthened, led by solid growth in Asia Pacific. Strength in residential and commercial water markets, as well as industrial and desalination segments, has fueled growth. North America residential and do-it-yourself markets are up versus first quarter 2019. And while demand within the commercial construction segment has improved from the lows experienced in 2020, it is not back to 2019 levels. Lastly, demand within our industrial and markets versus 2019 levels is mixed. Within the electrical infrastructure and private protective garment market, demand is at or above 2019 levels. However, demand in end markets such as aerospace and oil and gas is still below 2019 levels, but has improved since the lows of the second and third quarter of last year. Sequentially, our sales into aero and oil and gas were up over 40%. Our diversifying portfolio serve us as the global economy continues to recover from the pandemic. We are continuing to invest at competitive levels in R&D and innovation to further solidify our strong market positions and maintain our position as the partner of choice for our customers in 2021 and beyond. With that, let me turn it over to Lori to walk through the details

Good morning, everyone. Let me cover our first quarter financial results on slide four. As I said earlier, I'd also like to acknowledge the commitment of our employees throughout the pandemic and our team in navigating through supply chain and logistics this quarter to deliver quality results. Debt sales of $4 billion were up 8% versus the first quarter of 2020, up 7% on our day basis. Overall sales growth was determined by strong volume, up 7% versus first quarter of last year, with volume increases in all three reporting segments. Currency provided a 3% tailwind in the quarter, led by the euro. Portfolio was a 2% headwind, primarily due to the sale of the trackball of Starling Business last year. Sales were up in all three segments with D&I, M&M, and W&P reflecting organic growth of 14%, 8%, and 9% respectively. On a regional basis, organic sales were up 20% in Asia Pacific, our largest region from a sales perspective, with strong results in all three reporting segments. Plus, the offsetting gains in Asia Pacific for organic sales declined in the U.S. and Canada in GMEA of 4% and 2%, respectively. The declines in U.S. and Canada in GMEA were driven by softness for aerobic fibers, specifically continuing softness in aerospace, and timing delays in events, as well as auto bills, which were down in these regions. I'll provide more color on our segment top line results on the next slide. From an earnings perspective, we delivered operating EBITDA of $1.05 billion and adjusted EPS of $0.91 per share of 15% and 90% respectively. Volume gains as well as benefits from prior year cost initiatives and currency drove 160 basis points for operating EBITDA margin expansion and 1.9 times operating leverage. Incremental margins for the quarter were 46%. I will walk you through the EPS monitor call in a moment. For total company, gross margin for the quarter was 36.8%, flat on a year-over-year basis. Gross margin improvement at ENI and M&M on higher volume and manufacturing productivity was offset by margin decline in W&P resulting from higher unit rates versus the prior year, driven primarily by lower production volumes of air and fiber. growth margin expanded about 280 basis points exponentially with margin improvement in all three segments. From a segment perspective, D&I delivered operating even a margin of 33.5% and 420 basis points of margin expansion versus the year-ago period on strong volume growth and a one-time discrete gain through the two-and-a-half best sales. Including the benefit of the asset sales, operating EBITDA margins would have been 31.7% year-to-year improvement of 245 points. M&M delivered operating EBITDA margins of 22.9% and 320 basis points of margin to season versus the year-to-period on higher volumes and savings from productivity actions. In W&P, operating EBITDA was flat versus year-to-period as sales gained to cost productivity actions. were offset by higher manufacturing costs, primarily higher attunement rates driven by lower production of air and fiber and increased supply chain costs. In the quarter, cash flow from operating activities has been cash flow for $378 million to $95 million respectively. These amounts include one month of cash flow from our energy business compared to three months of energy cash flow in the prior year. To this end, Cash flow and free cash flow conversion was negatively impacted by a monthly capital missing of about $300 million, led by higher accounts receivable balances, which were often lined with sales. For the year, we continue to target free cash flow conversions of greater than 90%. Five to five provides more detail on the year-to-year changes in net sales. Seeding the way for the quarter was D&I with 15% volume growth, which had a record quarter. Volume gains were met by double-digit growth on repressed demand for semiconductors across Asia. High fabrication utilization rates driven by demand for new technologies and advanced tools, along with the ongoing shift to digital transformation through strong offline growth. In addition, share gains from recent wins for CMP slurry and lithography materials to prove results. In interconnect solutions, double-digit growth was driven by higher material content and premium next-generation smartphones, partially resulting from timing shifts that select OEM finance shifted earlier into year this year, along with broader print-and-circuit board market recovery. In industrial solutions, double-digit volume change in display materials due to new type launches more than offset continued weakness in aerospace. The end markets within W&P were generally consistent with our expectations. Sales gains were led by water solutions, with double-digit volume growth reflecting strong demands for our reverse osmosis and ultra-filtration technology, led by EJEC. Shelter solutions had low single-digit organic growth versus the year-ago period, reflecting high single-digit organic growth in residential construction and retail channels for do-it-yourself applications, offset partially by profits in commercial construction markets. With this day-to-day solution, pricing gave favorable currency and strengthening demand for air and fibers in industrial and automotive end markets, with more than offset by continued weakness in air and space and year-over-year volume declines for Tribex. Lower Tyvek production volumes were a result of higher plant downtime in the quarter. Also contributing to strong first quarter health lane growth was continued recovery of the global automotive market, which represents about 60% of our M&M segment from the same market perspective. The most recent estimate of one cube global automobile were about 20.3 million units during the quarter, up approximately 14% versus the first quarter of last year. As a result, volume in our performance resin system was up over 20% versus the year-ago period. Another bright spot in M&M was improved demand for microcircuit materials, which we aligned to the M&M segment earlier this year. Decentralized materials, along with the even growth, helped drive over 20% organic growth in advanced solutions versus the year-ago period. Our teams are experienced in navigating 3D challenges and have worked diligently with our customers and suppliers to help mitigate the impact incurred by the results. Additionally, we expect to recover volume loss in the corridor due to these disruptions and raw material constraints are repeated. Turning to Prime 6, I mentioned that adjusted EPS for the quarter of $0.91 was up 90% versus the prior year. The largest driver of our year-over-year growth was a significantly lower share count, mainly resulting from the NB exchange offer. The lower share count provided a $0.16 benefit versus the prior year. Including the lower share count, adjusted EPS growth was still significant, up 56% versus the prior year. Higher segment earnings provided a 13 cent tailwind in the quarter versus the prior year, along with benefits issued with a lower base tax rate and reduced interest expense. Our base tax rate for the quarter of 19.4% was lower than forecasted as a result of a few discreet tax benefits in the quarter. Our tax rate in the quarter was significantly lower than last year, resulting from the absence of certain discreet tax headments incurred in the prior year. For the full year 2021, we now expect our base tax rate to be in the range of 21% to 22%. That might be from the 21% to 23% that we previously estimated at the beginning of the year. Turning to slide 7, I will provide some commentary on our balance sheet and cash efficiency. I mentioned earlier that Networking Capital provided headwinds in free cash flow in the course. out the Networking Capital Productivity Gain of about $600 million that we had made in the first quarter of last year, increasing Networking Capital from about $3.5 million at March of 2020 to $2.9 million at March of 2021. Those fees were driving down past new receivables and inventory. From a debt perspective, we have stated that we are committed to maintaining our current strong investment grade credit profile. we started the year with $15.6 billion in gross debt. And as Ed mentioned, we paid down our $3 billion term loan in February, and we will pay down $2 billion in debt later this month. Moving on to cash, our cash generated from operations last year put us in a strong cash position coming into this year, and that balance grew with a $7.3 billion special cash statement from the transactions with ISF. In addition, we expect to receive over 900 million in gross proceeds a year from the previously announced sales of the non-core business. Our current deployment plan for 2021 includes a balanced capital allocation approach. Along with our plan for internal investments this year, we plan to grow through targeted M&A in areas of secular growth and will fund a $2.3 billion planned acquisition of LARIC performance materials with cash on hand. We intend to continue to return county shareholders. Along with our dividend policy, we completed $500 million in share repurchases in the first quarter at an average price of about $73 per share. And we'll remain opportunistic with our renewed share repurchase authorization throughout the rest of the year. On the go-forward basis, our target revenue team cash balance is about $1.5 billion, and from those numbers perspective, our net net fee for the target would be at 2.75 tons. With that, I'll now turn it back over to Ed to talk about our financial outlook.

Thanks, Lori. Let me close with our financial outlook on slide 8, which includes our June 2nd quarter to full year 2021. We are raising our full year We expect net sales through the year to be about 15.8 billion, which reflects year-over-year growth of 10%. But from our previous estimate of 8% growth, we expect to improve leverage a year-over-year increase of 17%. These revised estimates reflect our solid starts of the year and confidence in our team's ability to continue to navigate through global supply chain challenges. We are also rating our adjusted EPS range for the full year by 30 cents per share and now expect adjusted EPS of $3.67 per share at the midpoint of the range In addition to the strong operating performance of our businesses, the share repurchases we are completing under our existing programs, and the narrowing of our estimated tax range is an orientation for our consumers, while contributing to the revival of the SSE. For the second quarter 2021, we expect net sales to be about $3.975 billion, and we expect operating both at the midpoints of the range provided, and both followed up with results on the second quarter of this year. At the midpoint of the range provided, we expect adjusted EPS for the second quarter of 2021 of $0.94 per share, which now reflects the full reduction in shares resulting from the NPHC draw in our weighted average. In the past, one term of our agreement has opened up for Q&A. Thank you, Ed. Before we move to the Q&A portion of our call, I would like to remind you that our forward-looking statements apply to both our prepared remarks and the following Q&A. We will allow for one question and one follow-up question per person. Operator, please provide the Q&A instructions.

Thank you. To ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. The first response is from Steve Tessa with J.P. Morgan. Please go ahead.

Hey, guys. Good morning. Good morning. Can you just maybe talk about the sequential kind of dynamics in your business into the second quarter and second half? I mean, on the one hand, you guys are having some supply constraints, which I guess has hurt volumes a bit. But then on the other hand, I'm sure that there's some kind of urgency around ordering and maybe the electronic side. I've seen some pretty big book to bills that guys like Tyco Electronics that are suggests that customers may be stocking up and kind of double ordering perhaps what they can. Everybody's kind of scrambling to get supply, I guess. It muddles the sequential. Maybe if you could just talk about what you see as kind of the sequential activity in those key stress areas heading into the second half.

Yeah, I'll start, and then maybe Lori wants to jump in. Finally, and I'll take part. this year because of what you just described, very different dynamics this year. I'd say one of the biggest issues is really the inflation cost on raw materials here and then the pricing actions that we can take. So that's a pretty big dynamic for all of us that you see reporting here. By the first quarter, the cost of inflation was very little. It was about 20 million dollars. $90 billion, and we expect the full year impact of raw material inflation to be about $300 billion. So it kind of goes up to kind of 90 to 100 a second quarter holds there for the year, which gets you kind of the $300 billion. So we've been... inflation, but maybe not all of it. We have some contracts that are 30, 60 days, but we're very confident that we'll be able to cover the walls. If you look at the year in total, we'll be able to make that up. So we're expecting for a total coupon for our pricing to be up low single digits per year, but clearly more so in the M&M division where a lot of the wall inflation is. No price increase in electronics, simply because you're And some parts increase in water and protections within water and safety business specifically. So I think that's the big dynamic there. And then from kind of a revenue standpoint, I'd say the other big dynamic is closing our own materials. in sales that we were expecting in the quarter. Then you had the freeze down in Texas. So we think it's, we missed out on about 100 million of sales in the quarter, which is 20, 25 million. We expect another 100 million in the second quarter, 100 to 120. Missed revenue, but like you're hearing from all the others, we're not going to lose the business. We will make it up as the constraints kind of work their way through. with the same issue here. So I'd say that's the large dynamic from sequentially and then going into the second half of the year. All the end markets played out the way we thought they would. The ones we thought would be hot were hot. The ones we thought we saw like commercial construction, residential, oil and gas are all lifting nicely off the lows of last year but not back to 19 levels. So we expect that to continue through the year also.

Okay, great. Thanks a lot for the call. I appreciate it. Thanks.

Thank you. Your next response is from John Inch of Warden Haskett. Please go ahead.

Good morning, everybody. Good morning.

I would like to just pick up on that theme.

So, Ed, when you're saying you missed 100 million of sales in the first quarter, roughly, 100 to 120 expected in the second quarter, does that imply then that the second half, is up 200 to 220 more than it would have been if you hadn't had these supply chain disruptions? Like, you're going to see that in terms of sequential growth, or I'm sorry, in terms of the year-over-year growth dynamic? And doesn't that create a bit of a tough compare, or is that not the way to think about it? Yeah, first of all, I'm not sure this will resolve itself in the year either. Quite a few suppliers talk about this going potentially in the next year, depending on what it is, so. You know, inventory levels in the auto chain are very, very low in the supply chain. So, finished goods are low. You still got the semiconductor issue that's going to do things, which I've heard most people think is going into 2022. So, I think you got that dynamic going on here. So, I wouldn't be just throwing it into the second half of the year at all.

Yeah, I think the guidance that we provided, essentially assumes a similar quarter for revenue as we saw in 1Q. So, you know, pushing $4 billion between around the 3.9 and $4 billion range in the second quarter. And then if you look at the full year outlook, you can back into a similar number in the back half of the year. So, whatever upside we may see from the M&M portfolio getting back that volume in the first half, there still does tend to be a little bit of seasonality in our results that would offset that. So, land isn't flat. number dollar wise from a revenue perspective.

Okay, so no, that makes sense. And then just as a follow up, how big can you remind us, how big is DuPont in India?

And I mean, India is obviously in the news as COVID sweeps that country.

I'm just wondering this, high back garments, do they have much of a presence there? And didn't really seem to hurt your Asia pack numbers this quarter. Does it break a little bit of the headwind in future quarters? No, India is not a big impact at all right now. One of the biggest upsides for us, though, is India's water business. It's not a big realty market for us, but it's not that big in the scheme of things yet. So, no, it did not have any significant impact for us. We had N&B in the portfolio, and China's been bigger, but that was really where our bigger presence was in our portfolio.

Yeah, makes sense. Thanks very much. Thank you.

Thank you. Your next response is from Scott Davis of Velia's Research. Please go ahead.

Hi. Good morning, Ed and Lori and Leland. Good morning, Scott. I wanted to follow up a little bit on comments that Steve made just about supply chain and and John as well, but are you seeing kind of any unusual purchasing patterns by, you know, your customers that, you know, your customers double ordering or any, you know, any kind of unusual inventory build?

We don't think much. I mean, we decided a couple customers we know that are building inventory at some age that we think pre-ordered, let's say $30 to $40 million of business So many force majeures out there across the supply chain, and mostly in the auto business I'm talking about, that I don't see inventory build in the channel. And, you know, historically, finished goods in autos is very low right now, globally. So we don't see a lot of that. Are people trying to double order? I think there's some of that going on, but everyone's getting allocated product at this point in time, so it's not like they're able to build an inventory base. I'm using DuPont as an example. Our inventory went up about $100 million, and it's moving. We're not double ordering. We just couldn't get it out the door to have it finished good. So, again, in the scheme of our numbers, that's not a big deal, but I'm sure there's a decent amount of that going on. But I wouldn't call it double ordering the stock file.

Okay. Good, helpful. And then just a different cleanup here is just what was the average price kind of of the asset sales that you had made? Just any valuation metric that we can think about?

Do you mean for the non-core businesses that we're digesting?

Yeah, for the non-core stuff.

We had mentioned somewhere in the range of a 6 to 8 pack for the multiple office.

Okay. Okay. Thank you. Good luck, guys.

Thank you. Your next response is from Jeff Frake of Vertical Research Partners. Please go ahead.

Thank you. Good morning, everyone.

Two from me, one just on this theme a little bit, one more item from me anyhow. On interconnect, Laurie, that sounded like maybe it wasn't full forward, but the demand pattern was different than what you would typically see.

Could you just elaborate on kind of what you said and meant there as you went through that segment?

Sure. I think you said it correctly. So we did see a little bit of acceleration from an order perspective in the first quarter, probably the first half versus what we normally see from some of the smart home providers. So from a side perspective, it's probably about a $10 million benefit to the quarter. They're not hugely material. in the interconnect solutions segment. If you look at the full year, we've got interconnect solutions we expect to be up kind of in the mid-single digits, so we don't wanna lie, but as the year goes on, part of that is due to a very strong hop from last year. So if you recall in the fourth quarter of last year, we posted very strong results in interconnect as some of those producers pulled some volume into 2020 as well.

And then secondly, Ed, just on the M&A front, You know, you were able to acquire Laird here at what looked like a pretty decent price. And I just – I've noticed there's been a few deals going on kind of in some of the spaces I travel that, you know, the valuations actually, all things considered, you know, are not off the charts. And I just wonder, you know, if you're seeing that kind of with your, you know, your confidence level on being able to do bolt-ons here at a reasonable valuation as we progress through the year. we've described the last couple quarters in the water space. I think what we're looking at is very similar to Laird where with synergies, high confidence and byway cost synergies, we can get it at a multiple that makes sense for two products or byway. We just won't buy it. We just don't know that final answer. some of those opportunities out there to do that in some of the spaces we really like. There's going to be some great secular growth areas for us in the future. But I'm not talking, you know, huge things at this point in time. You know, as I always say, we'll always look at transformative moves if it makes sense for the company. You know, if something comes along, these are truly a couple bold ones in the hundreds of millions, not billions that we're looking at. But similar dynamic, I would say, to Laird. So, yeah, maybe here for us. Great. Thank you for the call. Thank you.

Thank you. Your next response is from David Fitzrider with Deutsche Bank. Please go ahead.

Thank you. Good morning. I'd like to talk a little more about Tyvek. You mentioned the shift back to the more industrial business going forward, I guess, versus some tough consequences. Are you going to protect it?

Yeah, I think what we had mentioned about time at the end of the quarter was garment volume. As it went, we'll just take volume back up in some of the more medical or industrial end markets. So from a demand perspective, there's not a headwind overall. The headwind that we saw in the quarter was more so around production capabilities. And so we had pushed some of our planned maintenance activity that was planned for 2020 into 2021, just given the COVID response that was there. needed in last year, and so that tamped down the volume that we were able to produce and then sell in Q1. If I were to size it, I would probably size it around $20 million in the headwinds in general for Tyvek. And back on the comment on the garment demand potentially being picked up by other end markets, it's a similar margin profile, so there's no headwind there, perhaps, in fact.

And we're sold out on those assets. So as we move things around, it's not like we're picking up extra money right now. We're getting the same margin impact. And that's why our biggest CapEx program is a new line eight over in Europe that will come on in 2023. It's our single biggest CapEx program. And so we're flat out. Got it. And Lord, just on working capital for the full year, where do you think you'll end up when it is all done?

Yeah, I expect to drive improvement from where we were in the first quarter, and that also translates to improvement in free cash flow conversions. We will continue to target greater than 90% of the year, which implies a significant improvement from where we were in Q1. So Q1 was really a function of the higher sales. So we were up about 8% in sales. That translated to about a 7% increase in AR. And as I mentioned, we were opportunistic in buying laws, and we could get them. which really isn't totally increased. So I would expect on a full year basis, as I see it right now, for working capital to be abused, just given the top line growth that we're expecting, probably more so in the $200 billion range. So improvement coming out of G1. But I think more importantly, the measure that we pay attention to is that working capital term. And so we saw significant improvement last year. to the June of ending the year at about 5.2 turns. We'll look to target about 5.3 turns as we close the year.

Very helpful. Thank you.

Thank you. Your next response is from Steve Byrne, Bank of America. Please go ahead.

Yes, thank you. This water solution business of yours seems to be increasingly a growth engine for you Can you split that growth between municipalities that are using your technology to purify drinking water versus industrial applications? And on the industrial side, do you see any opportunity down the road, not so much on the purification side, but on the filtrate side, such as trying to extract particular materials like lithium.

Yeah, I think the growth, a lot of it is coming from the desalination side. Also, we have a largely growing, it's small today, but it's growing nicely, opportunity within the residential space. And so we've now got the leading technology from all three applications between reverse mud movements, ion exchange, and ultrafiltration in our acquisitions. So we feel comfortable, and as I had mentioned, continue to look at opportunities for us to expand our presence there. So I think, you know, filtration continues to be a large opportunity for us as well. So as you had mentioned, whether it's lithium or other types of filtration, we will continue to be a player in that space.

Yeah, I mean, with all of us with our ESG goals out there in the industrial world, I mean, the sector where it grows opportunity here looks like it's going to be pretty awesome for the next couple of decades. So, I mean, we all have metrics we're trying to hit on clean water and we all have these facilities around the world that are It should be a really nice opportunity. And one of the reasons we would like to grow this business organically and inorganically.

And I think another opportunity in addition to the ESG is the potential underneath the infrastructure plan. It's all targeted investments in the water filtration and water purification. Thank you.

And just to follow up on this layered acquisition, and as you mentioned, you know, some cost energies, but do you, how would you compare that opportunity versus your ability to maybe cross-sell, since that'll be a drop-in and it's in different technologies and chemistries that you'd don't seem to have.

So is it a cross-selling opportunity and or maybe an expansion of some of their technologies into new end markets? Do you see any opportunities to do that as well?

Oh, it's definitely, look, we want to close it to cross-selling. I mean, when you get right down to it, it broadens out the portfolio very significantly in a couple key technology areas that are decent. There's more advanced technologies coming here, especially thermo- A lot of applications this year are resulting customer issues. And with shrinkage in size of all these components, some of these technologies become more and more important. And so that's the reason we bought it strategically. We think it's a great fit. It's where the industry is headed. And, you know, it's for the really good growth reason in that business. But we'll get the cost synergy. So we bought it at a price number from a mobile standpoint.

Thank you.

Thank you. Your next response is from John Roberts. Yes, please go ahead.

Thank you. Ed, my understanding is ISF is recommended against you going on to the ISF board. Are there any remaining connections between DuPont and ISF that would create a conflict, or is that just a position they have against previous management being on the board of a new owner?

Yeah. So usually, John, it's an issue of the CTO I'm sitting on two boards, external boards, but I think in general, and they also have that issue you just raised, I find that it's in general our investors understand why I'm doing it. I don't need to do other things in my life, but I think they understand it. It's very important to me and to Tupac that, you know, this goes well with you all. So I think it's morally the right thing to do. But under the definition by the independent director, there's absolutely no doubt about that. And, you know, it's very similar to what I went on the board to help with the transition there. I don't see this as any different, but I think it's the right thing to do. Thank you. Thanks.

Thank you. Your next response is from Mike Sisson of Wells Fargo.

Hey, good morning. Nice start to the year. Just wanted to get a little better feel for the second half. EBITDA looks like it's going to go high single digits. And just curious, do you expect demand to improve in the second half as the pandemic sort of subsides, hopefully? And is the lower growth rate more maybe raw materials and other issues than... And then longer term, what do you think the e-stock growth potential for the nuclear plant is?

Yeah, I think the potential lower growth in the second half is really just a comparison. So, you know, obviously the second half, second quarter is going to be the largest year growth. driver for us, just given that was the weak point of last year, and then we improved as the year went on. So I don't see a material change in the actual EBITDA number, kind of similar to the revenue conversations we had earlier. So I think a similar environment, as I mentioned earlier, from an end market perspective, for generally back and even above 2019 in those cases, there's a full year guidance that we have out there. as our revenue lost 6% versus 2019. And the guy that we put, I think, would be the kind of low T. And so we're generally back. And then some in the markets that are weak are really just a handful, and they're more around the arrow space, which is up off the bottom. So off of 2019 and commercial construction, which in the aggregate don't make up a material portion of our portfolio.

Got it. Thank you.

Thank you. Your next response is from Arun. Next one, Arun. How do you see capital markets?

Hi, Arun.

Great. Hey, good morning. Thanks for taking my question. I'm just curious, you know, now that the portfolio, you've gone through health and nutrition, the separation there after you've made some acquisitions here to bulk up E&I, separated into these segments as well with water. What else are you guys thinking of as far as continued kind of portfolio management? Also, the non-core is mostly out. Is the business kind of operating at a level that you're comfortable with? I know you've also undertaken a lot of cost reductions, but maybe strategically you can just give us your thoughts on maybe some of the next steps as you see moving forward for the new department. Thanks.

Yeah, look, I would say short-term here, we're very focused operationally running the company. But remember, we just closed the N&P transaction two months ago. It seems like forever, and there's a lot of heavy lift there. We still have to finish cars and do the three non-core businesses, you know, which we'll get out, you know, after mid-year out of the portfolio. And that'll bring in $900 million of proceeds. So we still have a heavy lift there. going on there. And then remember, at the same time, we're going to be starting the integration of the Laird business into the portfolio. So we've got a lot of that simple work going on, in addition to looking at a couple of targeted M&A opportunities, as I had mentioned. But I think that has a lot going on portfolio-wise still this year, and with all of the issues we talked about, you know, marriage and it kind of increased the fund year. You know, we found our hands full. So I would say portfolio kind of getting to kind of where we wanted. Again, we would never take off the table looking at some transformative things, but, you know, generally cleaning up the knock or getting layered in and operationally, we're really just those are the grindstones here.

Great. Thanks a lot.

All right.

Thank you. Your next response is from Alex with KeyBank. Please go ahead.

Thank you. Good morning, everyone. Good morning. Could you elaborate on the share gains in the CNP series? Could you introduce new products there, and do you expect additional share gains in this product or maybe anywhere else in semiconductors in the coming quarters?

Yeah, it really comes from the new products we had mentioned within BMP, flurries, lithography, also within combination packaging space. So if you look at our revenue performance within Semi-Convector Technologies versus where the market's at, we were up about 18% in total. We estimate MSI, which is the market indicator that we look at, which is the amount of waivers produced, was probably up about 9% in the quarter. We think we got about 4% or so just from where we play. So some of the spaces within the 70% of your space grew higher than the market average. And then the remaining 4% would have been from that share gain perspective.

Thank you.

At this time, there are no further questions in the queue. Thank you.

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