DuPont(DD)2023-05-02 16:01Financial Data and Key Metrics - Q1 2023 net sales decreased by 8% YoY to 714 million, with a margin of 23.7%, down 130 basis points [20] - Adjusted EPS increased by 2% YoY to 102 million, impacted by 75 million in transaction costs related to the M&M deal and Delrin divestiture [21] Business Line Performance - Electronics & Industrial (E&I) segment sales declined by 16% YoY to 1.3 billion, driven by a 15% volume drop, particularly in Interconnect Solutions (down 21%) and Semiconductor Technologies (down mid-teens) [23] - Water & Protection (W&P) segment sales increased by 1% YoY to 1.45 billion, with Water Solutions up low double digits and Safety Solutions up mid-single digits [25] - Shelter Solutions within W&P declined mid-single digits due to softness in construction markets [25] Market Performance - North America sales increased by 1% YoY, Europe by 5%, while Asia Pacific declined by 10%, with China down nearly 20% due to electronics weakness [19] - Electronics and construction end markets saw high-teens volume declines, while other businesses grew low single digits [19] Strategic Direction and Industry Competition - The company announced the acquisition of Spectrum for 1.75 billion, expanding its healthcare portfolio and reducing cyclicality [7][8] - Spectrum is expected to generate 20 million in cost synergies [13] Management Commentary on Operating Environment and Future Outlook - Management expects ongoing strength in water, automotive, aerospace, and healthcare markets, with electronics recovery anticipated in Q3 2023 [26][27] - Full-year 2023 guidance includes net sales of 12.5 billion, operating EBITDA of 3.1 billion, and adjusted EPS of 3.70 [28] - The company is focused on optimizing cash flow and minimizing volume pressure in the near term [6] Other Important Information - The company completed a 2.5 billion, with no significant debt maturities until November 2025 [14][15] - Net leverage is expected to finish the year around 2x, in line with multi-industrial peers [16] - The company published its annual sustainability report, highlighting progress on ESG goals, including a 30% reduction in Scope 1 and 2 greenhouse gas emissions [29][30] Q&A Session Summary Share Repurchases and Delrin Divestiture - The company has 180 million [35] Pricing and Cost Outlook - Pricing in Q1 was 4%, with 6% in W&P, expected to decelerate to 1% overall in Q2 [38] - The company has not changed its $100 million price-cost spread assumption for 2023 [37] M&A and Capital Allocation - No significant M&A activity is expected in the near term, with a focus on completing the Spectrum acquisition [41] - The company may lean towards additional share repurchases with excess cash [42] Electronics Market Recovery - The electronics downturn is expected to last 3-4 quarters, with recovery anticipated in Q3 2023 [44][45] - Inventory destocking is expected to moderate in Q2, with recovery in Q3 and Q4 [110] Spectrum Acquisition and Margin Expansion - Spectrum's EBITDA margin is expected to improve by 300 basis points as new production capacity is utilized [51][52] - The acquisition is expected to deliver high single-digit ROIC, with potential for additional cost synergies [48][49] Water and Safety Business Resilience - Water Solutions and Safety Solutions are expected to remain strong, driven by secular trends in water filtration and healthcare packaging [58] - The EV market is also contributing to growth in the Safety Solutions segment [58] Raw Material Costs - Raw material costs have not yet seen significant declines, with potential upside in H2 2023 as prices adjust [93][95] PFAS Litigation Update - The company is in regular discussions with plaintiffs regarding the upcoming PFAS trial in Florida [100] Construction Market Weakness - North American construction markets, including residential and commercial, saw similar volume declines, with no significant recovery expected in 2023 [102]