DuPont de Nemours, Inc.

Good day and welcome to the DuPont first quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. We ask that you please keep it to one question and one follow-up per person. For operative assistance throughout the call, please press star zero. And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Chris McRae to begin the conference. Chris, over to you.

Good morning, and thank you for joining us for DuPont's first quarter of 2024 financial results conference call. Joining me today are Ed Breen, Chief Executive Officer, and Laurie Tosh, Chief Financial Officer. We've prepared slides to supplement our remarks, which are posted on DuPont's website under the Investor Relations tab and through the webcast link. Please read the forward-looking statement disclaimer contained in the slides. During this call, we'll make forward-looking statements regarding our expectations or predictions about the future. Because these statements are based on current assumptions and factors that involve risks and uncertainties, our actual performance and results may differ materially from our forward-looking statements. Our Form 10-K, as updated by our current periodic reports, includes detailed discussion of principal risks and uncertainties which may cause such differences. Unless otherwise specified, all historical financial measures presented today are on a continuing operations basis and exclude significant items. We will also refer to other non-GAAP measures. A reconciliation to the most directly comparable GAAP financial measures is included in our press release and presentation materials that have been posted to DuPont's Investor Relations website. I'll now turn the call over to Ed.

Good morning and thank you for joining our first quarter 2024 financial review. Our results for the period exceeded our expectations, driven by better than expected volumes in all segments. Broadly, the first quarter confirmed that we are past the bottom in electronics and on the road to recovery. Our semiconductor technologies business reported sequential sales growth of 8% in the first quarter and 10% year over year. driven by a pickup and underlying chip demand and normalization of customer inventory levels, both slightly earlier than expected. In InterConnect Solutions, we saw a second straight quarter of year-over-year volume growth, with volumes up 4%. We did, however, continue to see channel inventory destocking as expected, resulting in year-over-year revenue declines in certain industrial-based businesses But we believe those conditions have bottomed, and our assumed recovery timing is also consistent with our previous expectations. That said, and given first quarter performance, we are raising our full year 2024 guidance for net sales, operating EBITDA, and adjusted EPS. Lori will further detail the outlook shortly. Compared to a year ago period, first quarter reported sales at $2.9 billion declined 3%. Operating EBITDA 682 million declined 4%, and adjusted EPS of 79 cents per share declined 6%. We continue to prioritize working capital and delivered significant year-over-year improvement in cash flow during the quarter. In late April, we completed the 500 million accelerated share repurchase transaction launched in February, retiring a total of 6.9 million shares in this tranche. and bringing total share repurchases to over 15% of our outstanding shares since November 2022. Turning to slide four, I want to reiterate that we remain excited about the growth potential of our businesses centered around five secular high growth areas. We are excited about the three cycle strength of our portfolio as end markets recover from recent destocking headwinds and our teams continue to focus on operational excellence. Almost one-third of sales exposure for our portfolio today is focused on electronics, including leadership positions and strong customer relationships serving semiconductor manufacturing, primarily via consumables used in the chip manufacturing process, as well as serving broader consumer-based electronics markets with films, displays, and printed circuit board materials used in smartphones pcs and tablets we are very pleased to participate in the ai driven growth acceleration within electronics we are semi-related products geared towards advanced node chips for data centers and other key ai applications such as mobile products electronics and markets have positively inflected and we expect continued volume pickup in both SEMI and ICS over the course of 2024. Our water business at 12% of our portfolio constitutes a broad range of filtration technologies and operates in markets expected to generate strong growth driven by evolving wastewater regulation and the global response to concerns around water scarcity and circularity. We believe demand for filtration products, which have been impacted by slower project work in China in the last year, and associated distributor destocking, has bottomed and will begin to recover later in the second quarter. We have excellent leadership positions in various end markets within protection and industrial technologies. Within industrial technologies, about 10% of the DuPont portfolio is geared to growing healthcare markets, including Spectrum Medical Devices, Tyvek Medical Packaging, and Livio Biopharma consumables. We have seen ongoing solid demand for devices and expect to see recovery in medical packaging beginning later in the second quarter. Biopharma product demand is expected to recover beginning later in the year. after bottoming in recent periods dupont's next generation auto market participation constitutes about 10 percent of total sales and is geared to advanced technologies enabling secular demand trends for hybrid and electric vehicles within battery motor and other applications demand for our advanced auto related products has remained healthy and we have a global customer base that includes ev customers in each region we see excellent longer-term opportunity across our auto-related portfolio. With that, let me turn it over to Lori to review our financial performance and outlook.

Thanks, Ed, and good morning. Our first quarter results were clearly encouraging with further signs of electronics recovery, matched with bottoming across our industrial base and markets. Additionally, a commitment to drive productivity and operational excellence has minimized incremental margins and have helped to produce significant cash flow improvement in recent quarters. Our results have and will continue to benefit from the restructuring actions announced last November. Turning to slide five, I'll cover our first quarter financial highlights. Net sales of $2.9 billion decreased 3% versus the year-ago period as a 6% organic sales decline and a 1% currency headwind was partially offset by a favorable portfolio benefit of 4%, primarily from the Spectrum acquisition. The organic sales decline reflects a 5% decrease in volume and a 1% decrease in price. Lower volume was driven by the impact of continued channel inventory destocking in water solutions, mainly in China, and safety solutions, most notably for Tyvek medical packaging, and industrial solutions for cow rice parts and Livio biopharma products. These declines were partially offset by strong growth in electronics, where semi and interconnect solutions volumes increased 8% in aggregate versus the prior year period. On a segment view, W&P and E&I organic sales declined 10% and 2% respectively, while organic sales and corporate increased 1%. From a regional perspective, sales decreased on an organic basis globally versus the year ago period, with Europe, North America, and Asia Pacific down 8%, 7%, and 4% respectively. In China, sales volumes were up 3% year-over-year as growth in E&I more than offset declines in W&P due to continued pressure in water markets. First quarter operating EBITDA of 682 million decreased 4% as volume declines were partially offset by the impact of lower product costs and spectrum earnings contribution. Operating EBITDA during the quarter of 23.3% was down 40 basis points versus the year-ago period. I am pleased with our cash flow improvement as we focus our efforts on optimizing working capital performance. On a continuing operations basis, cash flow from operations of $493 million plus capital expenditures of $207 million resulted in adjusted free cash flow of $286 million in the first quarter a significant increase versus 173 million in the year-ago period. Adjusted free cash flow conversion during the quarter was 86%, significantly ahead of last year. Turning to slide 6, adjusted EPS for the quarter of 79 cents per share decreased from 84 cents in the year-ago period. Lower segment earnings, higher net interest expense, and higher depreciation more than offset a 6-cent benefit from a lower share count. Our tax rate for the quarter was 24.6%, up from 23.4% in the year-ago period, driven by geographic mix in earnings. Our full-year 2024 base tax rate outlook of 23 to 24% remains unchanged. Turning to segment results, beginning with E&I on slide 7. E&I first quarter net sales of $1.4 billion increased 5% as a spectrum sales contribution of 8%, but partially offset by an organic sales decline of 2% and a 1% currency headwind. The organic sales decline reflects a 1% decrease in volume and a 1% decrease in price due to the pass-through of lower metal prices. Effective with our first quarter reporting, I will highlight that we've realigned certain product lines within our three E&I lines of business. The changes streamline our cost structure while also optimizing certain product offerings to better focus on our customers. Additional detail has been provided on slide 15 in the appendix. For the first quarter of 2024, organic sales for semiconductor technologies were up 10% versus the year-ago period due to the start of overall semiconductor market demand recovery, along with normalization of customer inventory levels and continued strong demand for OLED display materials. We expect underlying semidemand to continue to improve throughout the year, and note that our forecast continues to call for semifab utilization rates to increase from the low 70s percent that we saw in the first quarter to a fourth quarter exit rate in the low 80s. Within interconnect solutions, organic sales were up slightly as mid-single-digit volume gains were mostly offset by the impact of lower metals prices. This was the second consecutive quarter of year-over-year volume growth for ICS as broad electronic markets continued to recover. Organic sales for industrial solutions were down about 20% due primarily to ongoing channel inventory destocking for CalRES O-rings, and for our Livio product lines within biopharma markets. We continue to expect to see order improvement over the next several quarters in our cow risk business, and our Livio biopharma business is also still expected to recover later in the second half. Operating EBITDA from E&I at $374 million was up 3% versus the year-ago period, driven by strength in semi-interconnect solutions and the earnings contribution from Spectrum. partially offset by the impact of lower volumes in industrial solutions. Turning to slide 8, W&P first quarter net sales of $1.3 billion declined 11% versus the year-ago period due to a 10% decrease in volume and a 1% currency headwind. Within safety solutions, organic sales were down low teens on lower volumes driven mainly by channel inventory destocking, most notably for Tyvek medical packaging products. We believe our customers' inventory is close to normal at this point for Tyvek medical packaging. Within water, organic sales were down mid-teen, driven by distributor inventory destocking and lower industrial demand in China. We continue to have active communication with our distributors and believe orders will pick up towards the end of the second quarter. Shelter solutions were flat on an organic basis compared to the year-go period, and we expect sequential lift in the second quarter. Operating EBITDA for WMP during the quarter of 295 million decreased 14% due to lower volumes, partially offset by the impact of lower product costs. Turning to slide nine, I'll provide an update on our full year 2024 guidance, as well as our expectations for the second quarter. We are raising our full year guidance for net sales, operating EBITDA, and adjusted APS. At the midpoint of the revised ranges provided, we now expect full year net sales of about $12.25 billion, operating EBITDA of about $2.975 billion, and adjusted EPS of $3.60 a share, which now indicates expected year-over-year earnings growth. For the second quarter of 2024, we expect net sales of about $3.025 billion, operating EBITDA of about $710 million, and adjusted EPS of 84 cents per share. The sequential sales and earnings lift in the second quarter assumes volume improvement driven by favorable seasonality in both ICS and shelter, continued electronics recovery, and reduced destocking impacts in water and medical packaging. Year-over-year sales and earnings growth in the second half embedded within our four-year guidance is expected to be driven by further electronics market recovery. including continued improvement in semiconductor fab and PCV utilization rates, along with their return to volume growth in WMP. Second half earnings drivers include both volume improvement as well as expected mixed benefits. With that, I'll turn it back to Ed.

Thanks, Lori. I'd like to note that we published our annual sustainability report earlier this week, highlighting the work of our global team to meet our commitments across all aspects of ESG. And I'm pleased with the progress and speed with which we are advancing our 2030 goals. There are three dimensions to our sustainability strategy. Innovation, protecting people on the planet, and empowering employees and communities. I'd like to mention just a few recent accomplishments. More than 80% of our innovation portfolio is expected to advance our customer sustainability roadmaps. This is a critical metric that aligns our product development with customers' expectations for both performance and sustainability. We were pleased to be recognized for this commitment by Samsung Electronics, which awarded us as a best ESG partner this past year. On climate, we delivered another year of strong performance, surpassing our 2030 goals, which are aligned with the ambition of the Paris Accord. This past year, we achieved a 58% reduction in Scope 1 and Scope 2 greenhouse gas emissions from a 2019 baseline, exceeding our 2030 goal of 50%. And we achieved a 39% reduction from the 2020 baseline in Scope 3 emissions, also ahead of our 2030 goal. This past year, we made strong progress in the continued deployment of a company-wide operational excellence framework designed to drive continuous improvement and productivity, including deployment of standardized tools, best in class technologies, and practices that enhance workflows, reduce errors, minimize waste, and improve safety. Related to this, 2023 was our safest year on record for employees and contractors. Finally, our strong governance practices underpin our sustainability strategy as we remain committed to transparent reporting on our policies and performance with oversight from our board. A key focus in 2023 was strengthening the DuPont supplier code of conduct with our new responsible supplier program. These are just a few of the many great examples in the report of how our teams are delivering on our purpose and driving sustainability. With that, we are pleased to take your questions and let me turn it back to the operator to open the Q&A.

As a reminder, if you wish to ask a question, please press star followed by number one on your telephone keypad. That is star one to ask a question. We ask that you please keep it to one question and one follow-up question. Your first question comes to the line of Jeff Sprague from Vertical Research Partners. Your line is open.

Thank you. Good morning, Ed and Lori. I hope everybody's well. Good morning, Jeff. Hey, good morning. Hey, Ed, good to see the bottom is apparently in here. And really, the nature of my question is, you know, you did a lot of hard work trying to protect margins and minimize decrementals through this protracted period of, you know, volume declines. Now that we're heading the other way, I just wonder if you could give us any, you know, any perspective on I don't know, costs that need to come back or how you feel about structural costs. And maybe the punchline is just a little bit of guidance on your incrementals as we think about volumes going the other way in E&I.

Yeah, Jeff. So the cost actions we took, the bulk of them will stay in place. I would say out of the $150 million we did, we announced in November that We'll get about 100 of that cost savings this year. And I would say out of the 150, though, if you get into 2025 and we're really cranking along in all our end markets, we probably bring back about 30 or 40 million of cost, which is kind of on the factory footprint side where we'll need to add a little bit of cost there. So that would be it. um a little bit probably in 2025 on comp because we didn't pay out at 100 on our bonus plans uh and probably won't be it could be 100 this year so maybe that comp year over year won't be that different but certainly from last year 2023 uh a little bit of that headwind there in 24 potentially not in 25. um incrementals um In the second half of the year, maybe just give you that for us as we start bouncing back here. Remember, we get some absorption benefit, obviously, because of the improvement in our sales rate. Our incrementals are planned to be around 56% in the second half of the year. And I also think, Jeff, we've de-risked the second half of the year now with the baseline we're working off of now. We only have to ramp $340 million in sales first half to second half, which is 6%. And our EBITDA is planned in our guidance to ramp about 14%. That gets you the 56% incremental. So I think it's significantly de-risked from potentially where we were.

Yeah, and the 56% is first half, second half. If you look at our margin profile in the second half versus the first half in the applied guide, it is up almost 200 basis points below 25% range, which is a nice tailwind as we head into 2025.

Yeah, and Jeff, maybe just one other, because the electronics is bouncing back nice. You know, we've always consistently quarter in, quarter out, ran that business at like 31% to 32% EBITDA margins. Going forward, remember with Spectrum in there, we depressed the EBITDA margins just because it's a great business, but they're a little bit lower than the average. So it brings it down to like 100 basis points. But having said that, we should be able to run that business as we're cranking back at like 32% EBITDA margin.

um as we get into 2025. great and uh actually the follow-up question that's going to play into the to the margin calculus also you know you just think about kind of electronics over time you know parts of it sort of being a you know price down market naturally nature of the business but you know when we think of some of the more uh sophisticated things going on in semi and the like and maybe other places in the e and i portfolio How do you feel about your ability to get price or to avoid price down over time in these businesses?

Yeah, well, Jeff, usually the price down is a 1%. That's kind of what we've averaged, so it's not really significant. having said that more and more of this portfolio over the next set of years is going to be advanced nodes with all the ai coming and by the way the ai then moving down into mobile devices so and as you know we're advantaged there that's how we always outgrow msi by two to three hundred basis points so it's more of the business skews there a that helps our margins just from a mixed perspective but we also get price on the more advanced you know, platforms that we have in electronics. So ICS will probably still lose price. You know, that's more PCB stuff, the laminates and displays and all that. We'll lose a little bit of price, but I got to think we'll do a little better on the chip side. Great.

Thanks for the color. Thanks, Jeff.

Your next question comes from Steve Tulsa of JP Morgan. Your line is open.

Hi, good morning.

Hey, good morning, Steve.

I think you guys had said you expected like a 10% sequential bounce off the first quarter. This is a little – I mean, good first quarter, but the EBITDA in quarter over quarter is a little bit lower than that, more like 4% or 5%, I guess, on your guide. And anything that changed that view? Was there anything pulled forward in the first quarter that kind of takes out of the second quarter or just conservatism?

No. Yeah, no, I think it was more of a reflection of the over-delivery of Q1. So originally when we said a 10% sequential lift, we were guiding to Q1 of 610. So it would have got you roughly to 670. So delivering the 682 mutes the ramp a little bit, but we still are now at 710 versus the original 670. So no, actually some upside to the expectations that we had back in February when we gave that number.

Okay, that makes sense. And is there anything that is, you know, a little worse than you would have expected? It seems like obviously electronics is coming along really nicely. The other stuff may be a little more sticky on the industrial side. And anything that, you know, is kind of standing out is just not coming along as you would have expected on the industrial basis?

No, Steve, it's pretty much as we said last quarter. Shelter will be up. sequentially first to second, mostly because of seasonality, but that clearly had bottomed out already. The water, by the way, we just had our manager of our water business over in China the last two weeks, and they're saying they're going to start placing more orders towards the back end of this quarter, so that feels the same. Same with the healthcare medical packaging business towards the end of this quarter, beginning of next quarter, and the only two that are delayed on They're bottom, by the way, but they haven't recovered yet. But this is no change from what we said before is our biopharmac business looks more like the back half of the calendar year and our CalRes business looks like a second half recovery. So pretty much in line. By the way, the one other bright spot I liked, we had been negative on growth in China through last year, and we had 3% growth. in china so that market has been slowly turning back up for us and by that three percent was predominantly because the electronics business turned we were up 15 percent in e and i in china in the first quarter so that's turned nicely for us and our semi customers in china were ordering it about that was about that same rate sales rate about 15 growth and including the local china semi customers not the multinational so that was good to see

Okay, and then just to last quickly, any updates on Price Raw's spread for you guys? I know it's less important these days, but any update there? Thanks.

Yeah, we did have a little more favorability than what we thought in Q1 that we believe will hold for the year that contributed partially to the Q1 beat. So if you look at the Q1 beat, it was about $110 million or so on revenue and then about $70 million on earnings. So obviously we got some upside there, outside of volume, and that was primarily better price-cost spread.

Great. Thanks a lot. Thanks, Steve.

Your next question comes from the line of Scott Davies of Milius Research. Your line is open.

Hey, good morning, Ed and Laurie and Chris.

Good morning, Scott.

This may be hard to define explicitly, Ed, but you've mentioned a couple quarters in a row the AI chip and data center benefit in E&I. Help us understand materiality when you think about new chip designs and such and the content of your product that's going to be needed. Does it structurally raise the growth rate, do you think, over, call it a five-year period, or is there enough stuff to get cannibalized and it kind of nets out to a slight positive, but perhaps, I don't know, I just have no idea. So I'll ask you.

Yeah, so the AI, so the data center size for us is about 700 million of our revenue and 250 of that, a ballpark. It's kind of hard to tell exactly, Scott, but about 250 million of that is AI specific. And that is growing north of 20% right now, that base rate. And I do think it's skewed. Look, I think we're going into a super cycle in semiconductor here over the next decade because of all this AI. And remember the AI now, everyone's going to push it down into your devices. So it's going to be a pretty broad-based growth market. My gut is in next year, I don't want to get into forecast yet for 2025, but I got to imagine the E&I business is going to grow high single digits in 2025. And You know, we're expecting fab utilization to exit starting the year in the low 70s, exiting the year in the low 80s. And I would think we're probably in the low 90s by, you know, the middle of next year. And that would give us that high single digit growth rate. And then the AI chips, by the way, really help us because it's our it's a higher margin business in our mix. So it should be up for a really nice 2025. But that market's going to continue to grow north of 20% here, and it's got a long cycle coming up.

Okay, so material for sure. So just to back up a little bit, water solutions in China, I know it's a little minutiae, but was there a pre-buy or some sort of, you know, I don't want to call channel stuffing because that's not what I mean, but Was there some sort of weird behaviors that that customer ended up with so much excess inventory? Is it purely just the macro turned a little sideways or down on the folks and they were caught with extra inventory?

Yeah, so it wasn't one customer, Scott, just to clarify. I don't know if you meant it that way. We have many distributors, but four main distributors in China that do the bulk of our business that we don't do direct, by the way. We do a lot of direct business, too. And I think what I mean, what they verbalized us, obviously, and again, our team was just there with them this past week is, you know, industrial production slowed down. they were ordering at a higher rate and they had to go through a D-stock. And the D-stock, by the way, is not as long as some of the other D-stocks. It looks like if it's ending here at the end of this quarter, it was about five, six months of kind of working their inventories back down. So we think we're in pretty good shape going into the third quarter here. And again, we expect orders to start coming in kind of in the June timeframe to start picking up there. So it was more of the macro, I guess I would say, Scott. Okay.

Fair enough. Thank you, Ed and Laurie. Chris, appreciate it. Good luck this year. Thank you. Next quarter. All right.

See you.

Thanks.

Your next question comes from John Roberts of Mizzou. Your line is open.

Thank you. Just one from me. Maybe, Laurie, you could give us an update on adhesives, multibase, and TEDLAR. I would have thought they'd be down like your industrial segment, and they've got some auto exposure there, which was probably weak. but actually corporate sales were up 1% year over year. What's going on there?

Yeah, so we continue to see strength on the EV side of auto. So as you had mentioned, overall auto bills are weaker right now, but there's still a lot of upside within the EV side. So that was up several digits in the quarter, and we expect that to stay for the year. A lot of the upside in the volume in the quarter came from Tedlar, which is in the photovoltaic space. So we had really nice volumes within Tedlar. that gave us the 1% organic for the quarter.

Thank you.

Your next question comes from Chris Parkinson of Wolf Research. Your line is open.

Great. Thank you so much. I just want to turn on the ICS side. You've seen a bit of a market share shift between Chinese OEs versus the Americans and the Northeast Asians. And I know you have exposure everywhere. And at the same time, you've also seen an increase in the sophistication of Chinese handsets. So can you just kind of parse through that in terms of where the market is right here, right now, and how the street should be thinking about your relative content exposures and how we should think about that business recovering throughout 24 and perhaps 25? Thank you so much.

Chris, maybe just high level. If you go back to the middle of last year, the PCB utilization rates were kind of all the way down in the mid-40s. In the first quarter, they're kind of in the mid-50s. We think we exit the year in the low 60s, and the second half of the year will kind of be in the low 60s. And normal, by the way, for PCB utilization rates is kind of low 70s. They never run in the 90s like, you know, the semis do. So you can kind of see the progression of that plan out here kind of over the next year.

Yeah, we continue to see wind within the metallization space more on the circuitry side. So we've seen a nice volume lift in the first quarter, and we expect that to be maintained for the rest of the year. And we have had some share gains outside of that in the premium smartphone space on both the phone side and then the other device side as well with PCs and others.

Okay. And Laurie, you know, my favorite question as a follow-up is on W&P margins. I mean, obviously, over the last few quarters, there have been a bunch of put and takes, inclusive of the destocking. But with that progressively improving throughout 24, you know, can you help us just give us the latest and greatest on how you're thinking about the long-term margin optionality in terms of op efficiencies, leverage, mix, so on and so forth? Thank you so much.

Yeah, we still see the entitlement for W&P margins in that 27% range. And so, you know, as you know, they've been challenged in the first quarter, really a function of the lower volumes. You know, there's a lot of heavy assets in that business that take a hit when the volumes are down. We've done a nice job controlling costs to minimize the decrementals to low levels, but that is impacting it. And then the larger impact comes from just the mixed side. So the Tyvek business is down primarily because of the medical packaging desock that's going on that we expect to start to see resolution here at the end of this quarter and then improvement as we head into the back half. And so when you start to see those two items wane, we do see nice margin improvement first half, second half. So, you know, the first half margins will probably stay at that 23% level. And then we see them taking up about 100 basis points as we get to the back half of the year.

Thank you so much.

Thanks, Chris. Your next question comes from David Bigletter of Deutsche Bank. Your line is open.

Ed, you only raised the full year guidance by the amount of the Q1 beat. Is that because it's still early in the year or are you a little more cautious on the back half demand environment?

Yeah, David, no change on our thinking on the back half. It's just, as I said earlier, I feel good. We've de-risked the ramp in the year, so I don't feel any different about it. And, you know, hopefully it ends up being a little bit conservative.

Very good. And can you provide us another update on PFAS right now? Thank you.

Yeah, nothing significantly new there, David. You know, the next thing coming up that we would want to settle is the state AG cases. I don't think that'll be a 2024 event. I think it's more of a 2025 event. And then there's probably a couple states that we will settle separately from the class action. It's where we had locations set. So I think you might potentially see one or two of those get settled maybe during this calendar year. So that's where it's at. I think, David, the good news with the settlement, by the way, the other settlement is done now. The water districts is totally done, signed off by the judge. And I think the nice thing about that when it comes to all the firefighting foam is that it became very clear in that litigation and in what was written about it that the exposure of the consortium of Corteva, DuPont, and Chemours is 3% to 7% of the total exposure. And then remember, DuPont's a third of the 3% to 7%. So I think that helps box in what these numbers are going to be as we settle the other cases.

Very good. Thank you.

Thank you.

Your next question comes from the line of Mark of Barclays. Your line is open. Great. Thank you. Good morning, guys.

Good morning. Good morning. First question I wanted to ask on W&P, I wanted to ask about price. It seems like it's holding in, I'd say, fairly well despite double-digit volume declines the past few quarters. What's your expectation for price? Should we expect this to stay relatively flat as we move through the year?

Yeah, so we delivered flat price overall in W&P in the quarter. We still have some expectation to give back 1% or 2% primarily in the shelter business as we go throughout the year. But we have done a really nice job, as you had mentioned, holding on to price.

Got it. That's helpful. And then bigger picture, Ed, how is Spectrum performing relative to your initial expectations?

Right on what we told our board. It's nice to see They are basically not going through a D-Stock, which is good. And I think we've told you this before. The business is growing nicely, but there's also a major ramp going on with one key medical device company. And that ramp, by the way, was a very significant ramp. So we were... That was the one area we've been watching really close, and they are ramping very nice with that customer. It's more of a manufacturing ramp we had to go through that was pretty significant, and that's on track also, so feeling good about that. It's clearly an area we like. It's in between Tyvek Medical Packaging, the Spectrum business, and the Livio business. It's a really nice percentage of our portfolio now, as we mentioned in our prepared remarks. So it's 10% of the company and it's just a nice end market, stable end market to be in with a very solid, steady growth rate. So we're really liking that business.

All right, thank you.

Your next question comes from the line of Josh Spector of UBS. Your line is open.

Hi, thanks for taking my question here. I'm curious if you could talk about your expectation on buybacks versus M&A. I know you talked about no M&A in 2020 for kind of through the September period. Can you extend that through the rest of this year and maybe think about 25 in terms of your total capital allocations?

Yeah, I would think we're so we're not planning on any acquisition this year. But if we if when we do one, I would think it's more in the tuck in size, we're not looking at anything big, we would love to add to the healthcare platform. And there's a fair amount of what I call tuck-in opportunities there. So, I mean, it's possible we could do one this year, but it's not really in our plans. Our team, Lori and I, have said that a team's all hands on deck operationally as we were going through the D-stock. And, you know, that was our focus area. We still have an outstanding ASR for D-stock. You know, we just completed the one 500 million ASR. We have one more to do. So we would plan on doing that, obviously, this year. And then after that, I think we'll be a nice mix of some tuck-in acquisition. And, you know, depending where our stock price is, you know, I've always been a pretty big shareware purchaser when I feel our stock or our multiple is not where it should be. So I don't think you'll see any change in our thinking there. Got it.

Thanks, Estes. Thanks, Josh. Your next question comes from the line of Michael Sisson of Wells Fargo. Your line is open.

Hi, this is Richard on for Mike. So I just wanted to ask in terms of the guidance for the full year and what you're seeing in terms of demand and destocking coming to an end, should we expect year-over-year volume growth starting in the third quarter, or how are you looking at volumes in the second half of the year?

Yeah, in the guide that we gave, we do see a return to volume growth in the second half. It ramps as you go from 3Q to 4Q, really just a comp because 4Q was our weakest quarter last year. But yeah, it will be returning to growth from both a volume and an earnings perspective in the second half.

Okay, great. And then just in terms of your comments on China recovering, Was that more specific to E&I? Maybe we can talk about what you're seeing on the water solution side, because you do cite that industrial demand remains weak in China, but I guess you're saying it's recovering better than you thought?

Yeah, no change there. So the volume uptick that we saw in China in the first quarter was primarily E&I. As Ed had mentioned, we are up kind of mid-teens for volumes in China. We still do see industrial weakness that's impacting W&P, primarily in the water space. So no change to our expectations that we will get the orders in from the key distributors towards the end of this quarter and be able to ship those to see a ramp sequentially in water and then a further ramp as you head into the second half.

Great. Thank you.

Your next question comes from the line of Frank Mitch of Fermium Research. Your line is open.

Yes. Hi. Good morning. Laurie, if I could follow up on a free cash flow question. What are your expectations? You did 86% free cash flow conversion in 1Q. What is your expectations for 2024?

Yeah, I think we'll be at or near our target of greater than 90%. So I was really pleased with the Q1 performance of 86%. That's a sizable improvement from where we were last year, which was around 45%. I do expect to take a little bit of a dip down in Q2, really reflecting the payment of our biannual interest expense. So that's about $200 million. We pay it in May and in November. So we'll see a headwind in Q2. But overall, I expect us to deliver nicely. Nice free cash flow conversion for the year really around the target.

Terrific. And, Ed, you commented multiple times on how you're seeing the progress in Asia, especially in China. You know, the year-over-year negative deltas has been lessening down to 4% organic decline in 1Q. Are you anticipating that to be flatter up in 2Q and beyond in terms of the year-over-year comp?

Yeah, we expect overall China to be both price and volume and currency headwinds about flat for the year. So, you know, as you had mentioned, the Q1 numbers, we were up in volume, but overall it was about flat with the currency headwinds. So, yes, an improvement in volume that we expect to see and then some currency headwinds as the year goes on.

Understood. Thanks so much.

Thanks, Frank.

Your next question comes from the line of Patrick Cunningham of Citi. Your line is open.

Let's go to the next one.

Your next question comes from the line of Steve Byrne of Bank of America. Your line is open.

Yes, thank you. The three-year stack on volumes in your water and protection segment is flat. The losses over the last four or five quarters essentially offset the gains in 2021, and you had kind of flat volumes in 22. So just a question about that. Do you see that as suggesting just modest underlying volume growth? Or do you think that there might be some, you know, losses to generic products in that segment? And, you know, did you have visibility on those inventory levels that have been destocked now?

Yeah, I mean, I think the history has been impacted a lot by COVID. So, you know, we saw a unwind up the garments that were a sizable benefit during the 2020 timeframe. Then you saw an unwind, not unlike most of the peers out there that saw a run up from the garment perspective. And then once we move through that, then we transitioned into the general industrial D stock. So I think we need to look into 2025 to really get a good read on the volumes in that business. And right now we're expecting low to mid-single-digit volume growth in 2025 off of a more normal macro. So no concerns overall around the efficacy of those products in the market. It's really just getting beyond those chunky one-timers around COVID and then the broader industrial destock to be able to see the true growth profile of that business.

And then CalRez and Tedlar, these are both fluoropolymer products. Just a question for you on that. Do you have any customers that are saying, I'm going to switch to something else just to avoid the fluoropolymer issue? And how are you managing your own wastewater from the manufacturing of those products?

No, I mean, in fact, in TEDLAR, we're actually seeing some questions around. It is a PFAS-free, so there's some opportunity there to maybe pick up some share on the advanced materials side or the PV side and be opportunistic. So no direct feedback from customers And obviously, we published our sustainability report earlier this week. There's a lot of examples in there around our commitments to that, as well as just overall water key drivers around the sustainability footprint.

Thank you.

Thanks, Steve.

And our last question comes from Lawrence Alexander from Jefferies LLC. Your line is open.

Good morning. Just a quick one on the electronics side. How far do you see the growth trajectory for that business, or how much can you expand it before you need to do a significant round of CapEx additions?

Yeah, the good news on the E&I side, by the way, which is very different than the W&P side, is they're not heavy assets. More of our CapEx on the electronic side, Lawrence, actually goes into our testing equipment. We have that very state-of-the-art testing equipment in the key regions where our customers are. And so that's where we'll add some CapEx over time. But we kind of modularly upgrade the electronics manufacturing location. So that's not going to be a big CapEx issue. spend for us but my gut is we'll be looking at some expansion work here as we see this kind of super cycle coming on the uh semi side um so that's you know if it by way if this were like our Tyvek business as you know we're launching line eight over in Luxembourg we've already done our first test runs of product by way which has gone very well and but that project was 450 million dollars we don't have anything like that on the electronic side. So that's good, and it's quicker to upgrade the manufacturing capacity also on the electronic side. So we'll stay on top of that as we see this growth over the next set of years come.

Okay, great. Thank you.

Thank you, Lawrence. There are no further questions at this time, so I'd like to hand the call back to Chris McRae. Okay.

Thank you, everybody, for joining the call. We appreciate your interest. And as always, we'll post a copy of the transcript on the DuPont IR website. This concludes the call. Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.