Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- DuPont de Nemours Inc (DD, Financial) reported better-than-expected volumes in all segments, driving strong first quarter performance.
- The company has raised its full-year 2024 guidance for net sales, operating EBITDA, and adjusted EPS based on robust first quarter results.
- Significant improvement in cash flow was achieved, with a focus on optimizing working capital performance.
- DuPont de Nemours Inc (DD) completed a $500 million accelerated share repurchase transaction, enhancing shareholder value.
- The company is well-positioned in high-growth areas such as electronics and water filtration, expecting continued recovery and growth in these sectors.
Negative Points
- First quarter reported sales declined by 3% year-over-year, with operating EBITDA and adjusted EPS also seeing declines.
- Continued channel inventory destocking led to revenue declines in certain industrial-based businesses.
- The organic sales decline reflects a decrease in volume and price, indicating some ongoing challenges in market demand.
- Despite improvements, certain segments like Water Solutions and Safety Solutions are still experiencing pressure from industrial demand weakness in China.
- DuPont de Nemours Inc (DD) faces uncertainties in recovery timings for some markets, particularly in biopharma and industrial technologies.
Q & A Highlights
Q: Ed, good to see the bottom is apparently in here. And really, the nature of my question is you did a lot of hard work trying to protect margins and minimize decrementals through this protracted period of volume declines. Now that we're heading the other way, I just wonder if you could give us any perspective on, I don't know, costs that need to come back or how you feel about structural costs. And maybe the punch line is just a little bit of guidance on your incrementals as we think about volumes going the other way in E&I.
A: Yes, 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 and we announced in November, we'll get about $100 million of that cost savings this year. And I would say out of the $150 million though, as you get into 2025, and we're really cranking along in all our end markets, we'd probably bring back about $30 million or $40 million of cost, which is kind of on the factory footprint side, where it will be a little bit of cost there, so that would be it.
Q: I think you guys had said you expected like a 10% sequential bounce off the first quarter. This is a little -- the EBITDA -- I mean, good first quarter, but the EBITDA quarter-over-quarter is a little bit lower than that, more like 4%, 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?
A: Yes. No, I think it was more a reflection of the overdelivery of Q1. So originally, when we said a 10% sequential lift, we were guiding to Q1 of $610 million so would have got you roughly to $670 million. So delivering the $682 million mutes the ramp a little bit, but we still are now at $710 million versus the original $670 million, so no, actually some upside to the expectations that we had back in February when we gave that number.
Q: This may be hard to define explicitly, Ed, but you've mentioned a couple of 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 5-year period? Or is there enough stuff 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.
A: Yes. So the AI -- so the data center size for us is about $700 million of our revenue and $250 million of that 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. And I do think it's -- 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 is going to push it down into your devices. So it's going to be a pretty broad-based growth market.
Q: Just one for me. Maybe Lori, you could give us an update on adhesives multi-base in 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?
A: Yes. So we continue to see strength on the EV side of auto. So as you had mentioned, overall auto builds are weaker right now, but there's still a lot of upside within the EV side. So that was up double 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.
Q: 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?
A: Yes, David, no change on our thinking on the back half. It's just as I said earlier, I feel good we've derisked the ramp in the year. So no, I don't feel any different about it. And hopefully, it ends up being a little bit conservative.
Q: 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 in the past few quarters. So what's your expectation for price? Should we expect this to stay relatively flat as we move through the year?
A: Yes. So yes, 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.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
