DuPont de Nemours, Inc.

Good morning, everyone. Thank you for joining us for DuPont's first quarter 2021 in our Indian 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 personal and industrial relations sections of DuPont's website and through the link to our webcast. Joining me on the call today are Ed Raine, Chief Executive Officer, and Lori Trotch, 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 critical risks and uncertainties which may cause such differences. On the other side of the line, all restorable financial measures presented today, exclusive Indian items. We will also refer to other non-GAAP measures. The 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, Leland. Good morning, everyone, and thank you for joining us. I will provide comments on the strong start that we had in 2021, including the advancement of a number of strategic priorities to make Dupont a premier multi-industrial company, equip 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 to help protect our people and ensure business continuity as countries face multiple wishes of protection 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 in the first quarter, both above our expectations. Laurie 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 automobiles. This revenue growth, along with continued cost discipline, led to strong operating leverage and even a larger expansion in the quarter. Our first quarter financial results reflect the agility of our teams to navigate through a challenging environment while facing escalating raw materials and logistics costs, as well as global supply constraints of key raw materials, most notably in our M&M segments. With strong order trends continually and confidence in our teams' ability to navigate the supply chain challenges, we are raising our full year guidance for net sales, operating unit, and adjusted EPS. I will provide more details regarding this increase shortly. 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 biosciences business with IFF, creating an industry-leading company that feeds on beverage, home and personal care, and health and wellness markets. As you know, this transaction also unlocks significant value for D-Mont and our shareholders. As part of the transaction, we received $7.3 billion in cash from IFF 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 majority will not be due until the fourth quarter of 2023. In line with our balance 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 planned an opportunistic fund of the new program as we move throughout the year. With respect to dividends, we returned 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 to acquire Laird performance materials for $2.3 billion. When completed, a planned acquisition of Laird advances to a much strategy of growing as a global innovation leader and strengthens our leadership position to advance electronic materials. The Laird business will complement our InterPAC solutions business with the E&I, and it will add critical capabilities and market-leading offerings, thermal management, and electromagnetic shielding, 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 Termini in Brazil and cleared HSR in the U.S. last month. As previously indicated, we expect the transaction will close to the third quarter of this year. Finally, we announced previously that we have signed definitive agreements to sell our bio materials, clean technologies, and solvent businesses. We anticipate receiving more than $900 million in 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 Q&A markets that we serve. Combine the electronics and automotive markets to account for nearly half of our revenues. Electronics continues to perform very well, and automotive 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 has accelerated. The server market, which is a large consumer semiconductor chips and service board chemistry, 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 preparation for the next generation of older high-speed data transmission 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. A lack of stable supply of critical components in these semiconductors impacted the ability of the RLLEMs to produce more vehicles and rebuild inventory stores at 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 cost-averse was affected by supply constraints of key role 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 annual sales as a result of our fall 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 replenish global inventories, which are currently below historical averages. Moving on to the water and construction end markets. Collectively, these two markets account for approximately 20% of our total company sales. First this first quarter of 2019, demand for advanced water filtration and purification has strengthened and by solid growth in the Asia Pacific. Extreme new residential and commercial water markets, as well as industrial and desalination segments, have huge growth. Core construction, North America residential, and New Year's health 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 end markets versus 2019 levels is next. Within the electrical infrastructure and private protective farming markets, 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 arrow and oil and gas were up over 40%. Our diversified portfolio of products and technologies will 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 a part of our choice for our customers in 2021 and beyond. With that, let me turn it over to Lori to walk through the details of our first quarter of last year's

performance. Thank you, and good morning everyone. Let me cover our first quarter financial results on my floor. 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 chains and logistics at this quarter to deliver quality results. Debt sales was $4 billion, we're up 8% versus the first quarter of 2020, up 7% on our organic 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, set by the euro. Propolio was a 2% headwind, primarily due to the sales of the track floor styling system last year. Sales were up in all three segments, with E&I, M&M, and W&T reflecting organic growth, a 14%, 8%, and 5% 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. Mostly off the east and Asia Pacific, more organic sales declined in the U.S. and Canada, and E&EA a 4% and 2% respectively. The declines in the U.S. and Canada, the E&EA were driven by softness for aerated fibers, specifically to keep softness in airspace and timing to lead to defense, as well as autobills, which were down in these regions. I'll provide more color on our segment health line results on the next slide. From an earnings perspective, we delivered operating units of $1.05 billion and adjusted EPS of 91 cents per share, up 15% and 90% respectively. Volume gains as well as benefits from prior year cost initiative and currency for up 160 basis points for operating unit and margin expansion, and 1.9 times operating operations. Incremental margins for the quarter for 46%, and we'll walk you through the EPS waterfalls in a moment. For total company, both margins for the quarter were 36.8%, flat on a -over-year basis. Both margin improvements at E&I and M&M on higher volume and manufacturing productivity was offset by margin decline in W&T regarding from higher unit rates versus the prior year, driven primarily by lower production volume of aerated fibers. Both margins expanded about 280 basis points especially with margin improvements in all three segments. From a segment perspective, E&I delivered operating unit margins of .5% and 428 basis points of margin expansion versus the year-go period on strong volume growth and a one-time discrete gain through the -a-half best sales. Including the benefit of the access sales, operating unit margin was up in .7% and a yearly improvement of 240 basis points. M&M delivered operating unit margins of .9% and 328 basis points of margin expansion versus the year-go period on higher volume and savings for productivity reduction. In W&T, operating unit was flat versus year-go period as sales gained through cost productivity reduction were offset by higher manufacturing costs, primarily higher unit rates driven by lower production of aerated fibers and increased supply chain costs. For the quarter, cash flow from operating activities and free cash flow were 378 million and 95 million respectively. Each amount includes one lot of cash flow from our M&P business compared to three months of energy cash flow through the prior year. In the next, cash flow and free cash flow conversion were offset by a working capital headway of about 300 million, set by higher account-receiptable balances, which were often mined with sales. For the year, we continue to target free cash flow conversions of greater than 90%. Slide five provides more detail on the -by-year changes in net sales. Seating the weight for the quarter was D&I with 15% volume growth to chat a record quarter. Volume gains were met by double digit growth on reprossed demand for semiconductors across Asia. High fabrication utilization rates driven by demand for new technologies and advanced skills, along with the ongoing shift to digital transformation through strong top line growth. In addition, share gains from recent wins for C&P flurries and lithography materials improved results. In interconnect solutions, double digit growth was driven by higher material content in premium next-generation smartphones, partly resulting from timing shifts that selects OEM demand shift in earlier engineer this year, along with broader printed circuit board market recovery. Within industrial solutions, double digit volume gain in display materials due to new twice launches more than offset and 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 demand for our reverse automotive and ultra filtration technology led by VHF. Shelter solutions had low single digit organic growth versus a year ago period, reflecting high single digit organic growth in residential construction and retail channels, but you yourself don't have to keep it. Offset partially by process in commercial construction markets. Within safety solutions, pricing gave favorable currency and strengthened demand for air and gas fibers in industrial and automotive end markets, with more than offset by continued weakness in air and space and -by-year volume declines for TriVac. Lower TriVac production volume were a result of higher planned downtime standards orders.

Also

contributing to strong first quarter top line growth continued recovery of the global automobile market, which represents about 50% of our M&M segments over 10 market perspectives. The most recent estimate of one huge global automobile were about 20.3 million units during the quarter, approximately 14% versus the first quarter of last year. As a result, volume in our performance residence business was up over 20% versus a year ago period. Another bright spot in M&M was improved demand for microcircuit materials, which we outlined in the M&M segment earlier this year. Seed-sensitized materials, along with the easy growth, helped drive over 20% organic growth and advanced solutions versus a year ago period. Demand in our engineering columnar business was strong. However, global supply constraints for key raw materials resulted in low single-vision volume decline. 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 quarter due to the destruction and raw material constraints that are located. Starting with slide six, I mentioned that adjusted TPS for the quarter of $0.91 was up 90% versus a prior year. Our best driver of our -over-year growth was a significantly lower share count, being the resulting from the M&B exchange offer. The lower share count provided a 16-cent benefit versus the prior year. Including the lower share count, adjusted TPS growth was still significant, up 56% versus the prior year. Higher segment earnings provided a 13-cent share benefit in the quarter versus the prior year, along with benefits associated with a lower base tax rate and re-use interest expense. Our base tax rate for the quarter of .4% was lower than 4% as a result of a few to three tax benefits in the quarter. Our tax rate in the quarter was significantly lower than last year, resulting from the absence of certain to three tax headwinds incurred in the prior year. For the full year of 2021, we now expect our base tax rate to be in the range from 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 positions. I mentioned earlier that Networking Capital provided headwinds to free cash flow in the quarter. However, I would like to point out that the Networking Capital productivity came at 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. Both of these were driving down past new receivables and inventory. From a debt perspective, we have stated that we are committed to maintaining our current strong and separate grade credit profile. We started the year with $15.6 billion in gross debt, and as I 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-in arrangement from operations last year put us in a strong cap position coming into this year, and that balance grew with a $7.3 billion special cash season from the transactions with ISF. In addition, we expect to receive over $900 million in gross proceeds this 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 investment this year, we plan to grow retargeted M&A in areas of sector-specific growth and will fund a $2.3 billion planned acquisition of narrow performance materials for cash on use. We intend to continue to return cash to year holders. Along with our dividend policy, we completed $500 million in share reproductions in the first quarter at an average price of about $73 per share, and we're ready to take opportunities with our renewed share reproductions after the resumption throughout the rest of the year. On a go-forward basis, our target of running the $2.75 billion cash out is about $1.5 billion in total numbers respective. Our net net keep of the project will 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 eight, which is new coverage in the second quarter to full year 2021. We're raising our full year guidance range for net sales, operating EPSA, and adjusted EPS. At the midpoint of the range provided, we now expect net sales for the year to be about $15.8 billion, which reflects -over-year growth of 10%, up from our previous estimate of 8% growth. We expect to improve leverage and now expect operating EPSA for the year to be about $4.03 billion. At the midpoint of the range provided, a -over-year increase of 17%. These revised estimates reflect our solid starts in the year and confidence in our team's ability to continue to navigate the global supply challenges. We're also raising our adjusted EPS range for the full year, like 30 cents per share, and now expect adjusted EPS of $3.67 per share at the midpoint of the range provided. 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 our orientation for our future and into the design of EPSA. For the second quarter 2021, we expect net sales to be about $3.975 billion, and we expect operating EPSA to be about $1 billion, both at the midpoint of the range provided and both following up on the results of the second quarter. At the midpoint of the range provided, we expect adjusted EPS for the second quarter 2021 of 94 cents per share, which now reflects the full reduction in shares resulting from the end of the exchange and the mutual money in our way to the end. That's the end of our agreement and we'll open it up for Q&A.

Thank

you,

Ed. Before we move to the Q&A portion of our call, I'd like to remind you that our forward-looking statements apply to both our care remarks and the following Q&A. You 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 JPMorgan. 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 electronics side. I've seen some pretty big -to-bills that guys like Tyco Electronics that are suggesting customers may be stocking up and kind of double ordering, perhaps, what they can. Everybody's kind of scrambling to get supply, I guess. In models, the sequential, maybe if you could just talk about what you see is kind of the sequential activity in those key stress areas heading into the second half.

Yeah, I'll start and maybe Lori wants to jump in. Finally, and I'll say to our normal speciality plays out this year because of what you just described, very different dynamics. I'd say one of the biggest news is really the inflation cost on all 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 low. It was about $20 million. We expect in the second quarter that lifts to about $90 million. We expect the full year impact of raw material inflation would be about $300 million. So it kind of goes up to kind of 90 to 100 in the second quarter. It holds there for the year, which gets you kind of the $300 million. So we've been at panic-struck at price markets. We think we'll catch most of the second quarter inflation, but maybe not all of it. As we have some contracts, there are 30, 60 days, but we're very confident that we'll be able to cover the walls if we look at the year in total, that we'll be able to make that up. So we're expecting total due bond for our pricing to be at low single digits for the 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 don't get it, there's a new product introduction that you see and some price increase in water and protections within water and the 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 total of all material constraints that we're seeing. When we did the fourth quarter, Coralory and I talked about a $60 to $80 million missing sales that we were expecting in the quarter. Then you had the freeze down in Texas. So we think we missed out on about $100 million of sales in the quarter, which is 20, 25 million feet at that. We expect another $100 million in the second quarter, $100 to $120 of missed revenue bought 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 because everyone's kind of dealing with the same issue here. So I'd say that's the large dynamics of sequentially and I know individuals sending out the gear. All the end markets, Steve played out the way before they would. The ones we thought would be hot were hot. The ones we thought we saw were 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, Oscar, for the call. I appreciate it. Thanks.

Thank you. Your next respond is from John Inch of Morning Hasket. 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 -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. You've heard quite a few suppliers talk about this going potentially in the next year depending on what it is. So inventory levels in the auto chain are very, very low in the supply chain. So finished goods are low. You've still got the semiconductor ratio that's going to do things which I've heard most people think is going into 2022. So I think you've got that dynamic going on here. So I wouldn't gauge you all 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 last year. So pushing $4 billion between around the $3.9 billion, actually $4 billion range in the second quarter. And if you look at the full year outlook, you can back into a similar number in the back-packer period. 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 going to resolve. So we'll get that still land in the flat. Summer 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 India is obviously in the news as COVID sweeps that country. I'm just wondering, the high-back garments, do they have much of a presence there? And it didn't really seem to hurt your Asia-Pac numbers this quarter. Does it quake a little bit 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 is a lot of business. It's a big, real key market for us, but it's not that big in the scheme of things yet. So no, it didn't have any significant impact for us. Thank you very much. If we had NMB in the portfolio, it would have been bigger, but that was really where our bigger presence was in our portfolio.

Yeah, makes sense. Thanks very much. Thanks,

John. Thank you. Your next response is from Scott Davis of Villias Research. Please go ahead.

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

We don't think much. I mean, we've sized a couple customers we know that are building inventory. It's from an agent that we think pre-ordered that was like 30 to 40 million dollars of business. We're not seeing it because people just can't get their hands on it right now. I mean, there's so many -de-sures out there across the supply chain. By the way, again, mostly any auto business I'm talking about, I don't see inventory build in the channel and historically finished goods and auto 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'll use DuPont as an example. Our inventory went up about $100 million and it's mostly in our M&M business, and we couldn't get it up on the other walls to get the product out the door. So we didn't plan on, we're not double ordering. We just couldn't get it out the door to have a 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. It's not a file.

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

You mean for the non-core businesses that were not testing?

Yeah, for the non-core stuff. We had mentioned somewhere

in the range of a 16-size even if all the store is a 16-size. Okay.

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

Thank you. Your next response is from Jeff Stray, 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, Lori, that sounded like maybe it wasn't full forward, but demand was, 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 for the quarter. There's not hugely materials that you thought, you know, there's more materials in the Interconnect solution segment. If you look at the full year, we've got Interconnect solutions we expect to be up kind of in the fixed single digits, so we don't want to lie. So as the year goes on, part of that is due to a very strong comp from last year. So if you recall in the fourth quarter, last year we put a very strong result in Interconnect as some of those producers pulled some volume into 2020 as well.

And then secondly, just on the M&A front, you know, you were able to acquire a layer here at what looked like a pretty decent price. And I just 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.

Yeah, so Jeff, we're looking at a couple bolt-ons. One of them is exactly what we described the last couple quarters in the water space. I think what we're looking at is very similar to layer where with synergies, high confidence and buy-way cost synergies, we get it at a multiple that makes sense for two products that are on buy-way. We just won't buy it. We just don't know that final answer yet. So yeah, I think there's some of those opportunities out there to do that in some of the spaces we really like. I think 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. There's something that comes along. These are truly a couple bolt-ons into hundreds of millions, not billions that we're looking at. But similar dynamic, I would say, to layer. So maybe to your question, yeah, those opportunities are there for us.

Great. Thanks for the call.

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

Thank you. Good morning. I want to talk a little more about Tyvek. You mentioned the shift back to the more industrial business going forward, I guess, versus some tough costs versus are you doing protective?

Yeah, I think what we had mentioned about Tyvek in the quarter was garment volume is as it lanes. We'll just take volume back up in some of the more medical or industrial 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 have pushed some of our planning and activity that's planned for 2020 into 2021, just given the COVID response that was needed in last year. And so that tamped down the volume that we were able to produce and that fell in Q1. If I were to size it, I would probably size it around $21 million in the headwind in general for Tyvek. Back on the comment on the garment demand, potentially may have been picked up by other end markets. It's a similar margin profile, so there's no headwind there. Perhaps there's fixes.

And we're sold out of those assets. So as we move things around, it's not like we're picking up extra volume right now. We'll get the same margin impact. And that's why our biggest CapEx program is a new line-eat 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, Laura, just on working capital for the full year, what 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 pre-Tesla conversions. So we'll continue to market greater than 90% of the year, which implies significant improvement from where we were in Q1. So Q1 was really a function of the higher sales. So we were up about 8% sales, that translated to about a 7% increase in AR. And as an intervention, we were opportunistic in buying loss, and we could get them for sure, the inventory increase. So I would expect on a full year basis, as I see it right now, for working capital to be used, just given the top line growth that we're expecting, probably more so in the $200 million range. So I'm pretty much coming out of Q1. But I think more importantly, the measure that we pay attention to is that working capital turn. And so we saw significant improvement last year, you know, ending the year at about 5.2 turns. We'll look to target at about 5.3 turns next 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 the 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 they close a lot of it coming from the desalination title. So we have a large growing exhaust today that is growing nicely, opportunities within the residential space. And so we now have the leading technology from all three applications between reverse blood movement, ion exchange, and also filtration in our acquisition. We feel comfortable, and as I had mentioned, continue to look at opportunities for us to expand our presence there. So I think filtration seems 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, we've already got two goals out there in the industrial world. I think that the sector where growth opportunity here looks like it's going to be pretty awesome for the next couple decades. So I think we all have metrics we're trying to hit on, clean water, and we all have these facilities around the world. So it's going to be a really nice opportunity. And by one of the reasons we would like to grow this business organically, and inorganically.

And I think another opportunity in addition to the EFG is the potential underneath the infrastructure plan and how it is invested in the water filtration, water terrific, and safe.

And just to follow up on this layered acquisition, and as you mentioned, some cost energies. But how would you compare that opportunity versus your ability to maybe cross-sell, and maybe a drop in in some different technologies and chemistries that you 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?

It's definitely it. But we want to close it to cross-selling. I mean, when you get right down to it, it broadens out the portfolio very significantly. We had a couple of key technology areas that are needed. There's more advanced technologies coming here, especially thermal management, we hit a key one. So I mean, once we're deep into the water, we're just going to go get it real quickly, just to get it out of the way. But we want it for the growth opportunity, the cross-sell opportunity, to be able to bring more solutions to our customers. Remember, in that business, we had a lot of application this year to resolve the customer issues. So it's shrinkage in size of all these components. Some of these technologies are 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 it's for the really good growth reason in that business. But we'll get the cost energy. So we bought it at a price number from a multiple

standpoint. Thank you.

Thank you. Your next response is from John Roberts of CBS. Please go ahead.

Thank you. Ed, my understanding is ISF has recommended that you go 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 CEO sitting on two boards, external boards. But I think in general, and I also have to have the issue used this way, I find that in general our investors understand why I'm doing it. I don't need to do other things in my life. I think they understand it. It's very important to me and to DuPont that this goes well. More than half the company is what we put into ISF. So it's extremely important to our shareholder base. So I think it's morally the right thing to do. But under the definition by the I&N independent director, there's absolutely no doubt about that. And it's very similar to what I went on the board of a board, the health and the transition there. I don't see this as any different, but I think it's the right thing to do. Thank you. Any questions?

Thank you. Your next response is from Mike Sisson, Rofardo.

Hey, good morning. Nice start to the year. I just want to get a little better feel for the second half. EBITDA does, 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? And then longer term, what do you think the EBITDA growth potential for DuPont is?

Yeah, I think the potential lower growth in the second half is really just a comparison. So obviously the second quarter is going to be the largest year of year growth driver for us, 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 conversation we had earlier. So I think a similar environment, as I mentioned earlier from an end market perspective, we're generally back in even about 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 slow G. And so we're generally back. And then the markets that are weak are really just a handful and they're more around the air of the sea. But just up off the bottom, it's off of 2019, then commercial construction, which then they aggregate to make up a material portion of our portfolio.

Got it. Thank you.

Thank you. Your next response is from Arou. Next one, I think. Capital markets.

Hi,

Aaron. 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 we made some acquisitions here to both of you and I, separated into these segments as well with water. What else are you guys thinking of as far as, you know, 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 we see moving forward for the music box. Thanks.

Yes, Aaron. Look, I would say short term here, we're already focused operationally running the company. But remember, we just closed the NMB 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 will get out, you know, we have to make a year out of the portfolio and not only bring in $900 million in proceeds, so we still have a heavy lift going on there. And then remember at the same time, we're going to be starting the integration of the layer business into the portfolio. So we've actually got a lot of that simple work going on, and 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, managing all material inputs and pricing and all that, and kind of a crazy but fun year. You know, we've got our hands full. So I would say portfolio kind of getting to kind of where we want it. Again, we would never take off the table looking at some transformative things, but you know, generally cleaning up the non-core, getting layered in and operationally, we're really just those as a grindstone here.

Great. Thanks a lot.

All right.

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

Thank you. Good morning, everyone. Good morning. Could you elaborate on the share gains in the CNP flurries? 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 CNP flurries, the property, also within combination of the space. If you look at our residue performance within semiconductor technology 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 waste 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 semiconductor space grew higher than the market average. And then the remaining 4% would have been from that share gain perspective.

Thank

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