DuPont Reports Fourth Quarter and Full Year 2023 Results

Announces New Share Repurchase Authorization and Quarterly Dividend Increase

Fourth Quarter 2023 Highlights

Net Sales of $2.9 billion decreased 7%; organic sales decreased 10% versus year-ago period
GAAP Loss from continuing operations of $(300) million, includes ~$800 million non-cash goodwill impairment charge; operating EBITDA of $715 million
GAAP EPS from continuing operations of $(0.72); adjusted EPS of $0.87
Cash provided by operating activities from continuing operations of $646 million; adjusted free cash flow of $501 million

Full Year 2023 Highlights

Net Sales of $12.1 billion decreased 7%; organic sales decreased 6% versus prior year
GAAP Income from continuing operations of $533 million; operating EBITDA of $2.9 billion
GAAP EPS from continuing operations of $1.09; adjusted EPS of $3.48
Cash provided by operating activities from continuing operations of $2.2 billion; adjusted free cash flow of $1.6 billion

Capital Allocation Updates

Completed the $2 billion accelerated share repurchase transaction launched in September 2023
Announces Board approval of new $1 billion share repurchase program authorization with intended $500 million accelerated share repurchase transaction to be launched imminently
Announces Board declared the first quarter 2024 dividend, representing a 6% increase to quarterly dividend

WILMINGTON, Del., Feb. 6, 2024 /PRNewswire/ — DuPont (NYSE:DD) announced its financial results(1) for the fourth quarter and full year ended December 31, 2023.

“In the face of inventory destocking that impacted many of our end-markets in 2023 and continued economic softness in China, our teams remained focused on sound operational execution and driving productivity and cost discipline,” said Ed Breen, DuPont Executive Chairman and Chief Executive Officer. “We delivered significant year-over-year cash flow improvement in 2023, including a strong fourth quarter finish, which underscores our ongoing prioritization of working capital management.”

“We continue to see demand stabilization within Semiconductor Technologies and Interconnect Solutions and we remain confident of a broad-based electronics materials recovery in 2024. We did, however, see incremental channel inventory destocking within our industrial-based businesses as we closed out 2023 and we are seeing similar trends continue as we enter 2024 with recovery timing expected to vary by end-market as the year progresses,” Breen added. “We remain confident in the through-cycle strength of our portfolio as our businesses are well-equipped to leverage market-leading positions and accelerate growth as inventories normalize and key end-markets recover.”

“We also continue to execute on our capital allocation strategy,” Breen continued. “Today we announced completion of the $2 billion accelerated share repurchase transaction launched last September, which completes our previous $5 billion share repurchase program announced in November 2022. We also announced authorization of a new $1 billion share repurchase program and a 6% increase to our quarterly dividend. These actions demonstrate our ongoing commitment to a balanced capital allocation approach focused on value creation for our shareholders.”

 

Net sales

Net sales decreased 7% as organic sales(2) decline of 10% was partially offset by favorable portfolio impact of 3%, primarily reflecting the August 1st acquisition of Spectrum.
Organic sales(2) decline of 10% consisted of a 9% decrease in volume and a 1% decrease in price.

Lower volume was driven primarily by the impact of channel inventory destocking within Safety Solutions, most notably for medical packaging, and within Water Solutions mainly in China.

15% organic sales(2) decline in Water & Protection; 7% organic sales(2) decline in Electronics & Industrial; 4% organic sales(2) decline in the retained businesses reported in Corporate.
13% organic sales(2) decline in U.S. & Canada; 11% organic sales(2) decline in Asia Pacific; 9% organic sales(2) decline in EMEA.

GAAP Loss from continuing operations

GAAP Loss from continuing operations compared to GAAP Income from continuing operations in the year-ago period resulted primarily due to a goodwill impairment charge partially offset by a tax benefit related to internal restructuring.

Goodwill Impairment
In connection with the preparation of year-end 2023 financial statements, driven by the continuation of a challenging macroeconomic environment primarily impacting construction markets, as well as incremental channel inventory destocking in medical packaging and industrial-based end-markets, DuPont identified a triggering event as of December 31, 2023 and performed an impairment analysis of the Protection reporting unit which consists of the Shelter Solutions and Safety Solutions lines of business within Water & Protection. The carrying value of the Protection reporting unit contains historical DuPont assets and liabilities that were measured at fair value in connection with the merger between Dow and DuPont, including the recognition of significant goodwill and intangible asset balances. Based on the analysis, DuPont recorded an $804 million non-cash goodwill impairment charge which is reflected in fourth quarter and full year 2023 GAAP earnings results.

Operating EBITDA(2)

Operating EBITDA(2) decreased as volume declines and the impact of reduced production rates to better align inventory with demand were partially offset by lower input costs, certain discrete items which benefited earnings by about $40 million and the earnings contribution from the Spectrum acquisition.

Adjusted EPS(2)

Adjusted EPS(2) decreased as lower segment earnings, foreign exchange losses led by devaluation of the Argentinian peso and higher depreciation more than offset the impact of a lower share count and a lower tax rate.

Cash provided by operating activities from continuing operations

Cash provided by operating activities from continuing operations in the quarter of $646 million and capital expenditures of $145 million resulted in adjusted free cash flow(2) of $501 million. Adjusted free cash flow conversion(2) during the quarter was 133%.

 

Net sales

Net sales decreased 7% on organic sales(2) decline of 6% and a currency headwind of 1%.
Organic sales(2) decline of 6% consisted of an 8% decrease in volume partially offset by a 2% increase in price.
11% organic sales(2) decline in Electronics & Industrial; 4% organic sales(2) decline in Water & Protection; 3% organic sales(2) growth in the retained businesses reported in Corporate.
11% organic sales(2) decline in Asia Pacific; 6% organic sales(2) decline in U.S. & Canada; 1% organic sales(2) decline in EMEA.

GAAP Income/GAAP EPS from continuing operations

GAAP income/GAAP EPS from continuing operations decreased as a goodwill impairment charge and lower segment earnings more than offset a tax benefit related to internal restructuring, lower net interest expense and the impact of a lower share count.

Operating EBITDA(2)

Operating EBITDA(2) decreased as volume declines and the impact of reduced production rates to better align inventory with demand were partially offset by the carryover impact of pricing actions and lower input costs.

Adjusted EPS(2)

Adjusted EPS(2) increased as the impact of a lower share count and lower net interest expense more than offset lower segment earnings.

Cash provided by operating activities from continuing operations

Cash provided by operating activities from continuing operations for the year of $2.2 billion and capital expenditures of $0.6 billion resulted in adjusted free cash flow(2) of $1.6 billion. Adjusted free cash flow conversion(2) for the year was 100%.

Share Repurchase

DuPont today announced completion of the $2 billion accelerated share repurchase (“ASR”) transaction launched in September 2023 which completes its $5 billion share repurchase program announced in November 2022. In connection with completion of the $2 billion ASR transaction, DuPont received and retired in the first quarter of 2024 an additional 6.7 million shares of its common stock. In total for the $2B ASR transaction, DuPont received and retired 27.9 million shares of its common stock.

Additionally, DuPont announced that its Board of Directors approved a new share repurchase program authorizing the repurchase and retirement of up to $1 billion of common stock (the “$1B Program”). DuPont intends to enter into ASR transactions under the $1B Program beginning with an ASR transaction expected to be launched imminently to repurchase in aggregate $500 million of common stock. DuPont expects to complete the $1B Program by the end of 2024.

Under the $1B Program, repurchases may be made from time to time on the open market at prevailing market prices or in privately negotiated transactions off market. The $1B Program terminates on June 30, 2025, unless extended or shortened by the Board of Directors. The timing and number of shares to be repurchased will depend on factors such as the share price, economic and market conditions, and corporate and regulatory requirements.

Quarterly Dividend

The Company today also announced that its Board of Directors has declared a first quarter dividend of $0.38 per share on its outstanding common stock, representing a 6% increase to its quarterly dividend(3), payable March 15, 2024, to holders of record at the close of business on February 29, 2024.

Segment Highlights

Fourth Quarter 2023

 

Net sales

Net sales increased 1% as favorable portfolio impact of 8% reflecting the Spectrum acquisition was offset by organic sales(2) decline of 7%.
Organic sales(2) decline of 7% reflects a 5% decline in volume and a 2% decline in price.

Semiconductor Technologies sales down high-single digits on an organic basis resulting from a continuation of customer inventory destocking and reduced semiconductor fab utilization rates. Semiconductor Technologies sales increased 2% sequentially in the fourth quarter.
Interconnect Solutions sales down mid-single digits on an organic basis as low-single digit volume gains were more than offset by the impact of lower pass-through metals prices.
Industrial Solutions sales down mid-single digits on an organic basis due primarily to channel inventory destocking within biopharma markets and for semiconductor-related capex equipment, slightly offset by increased demand for OLED materials.

Operating EBITDA

Operating EBITDA decreased due to volume declines and reduced production rates to better align inventory with demand, partly offset by earnings associated with Spectrum.

 

Net sales

Net sales decreased 15% due to lower volumes.

Safety Solutions sales down 20% on an organic(2) basis on volume declines driven mainly by channel inventory destocking, most notably for medical packaging products within healthcare markets.
Water Solutions sales down high-teens on an organic(2) basis driven by lower volumes resulting from distributor inventory destocking and weaker industrial demand in China.
Shelter Solutions sales down mid-single digits on an organic(2) basis, however, the year-over-year decline continues to improve and channel inventory destocking is complete.

Operating EBITDA

Operating EBITDA decreased due to lower volumes and reduced production rates partially offset by the impact of lower input costs and certain discrete items of about $25 million which benefited earnings.

Full Year 2023

Net sales

Net sales decreased 10% as organic sales(2) decline of 11% and a currency headwind of 1% was slightly offset by favorable portfolio impact of 2%, primarily reflecting the Spectrum acquisition.
Organic sales(2) decline of 11% reflects a decline in volume.

Semiconductor Technologies sales down mid-teens on an organic basis resulting from channel inventory destocking and reduced semiconductor fab utilization rates.
Interconnect Solutions sales down mid-teens on an organic basis driven by lower consumer electronics volumes and channel inventory destocking compared to the prior year, as well as the impact of lower pass-through metals prices.
Industrial Solutions sales down low-single digits on an organic basis due primarily to channel inventory destocking within biopharma markets and continued lower demand in electronics-related markets, slightly offset by increased demand for OLED materials.

Operating EBITDA

Operating EBITDA decreased due to volume declines and reduced production rates to better align inventory with demand, slightly offset by contribution associated with Spectrum.

Net sales

Net sales decreased 5% due to organic sales(2) decline of 4% and a currency headwind of 1%.
Organic sales(2) decline of 4% consists a 7% decline in volume partially offset by a 3% increase in price reflecting the carryover impact of actions taken in the prior year to offset inflation.

Shelter Solutions sales down high-single digits on an organic(2) basis.
Safety Solutions sales down mid-single digits on an organic(2) basis due to volume declines driven by channel inventory destocking.
Water Solutions sales down low-single digits on an organic(2) basis driven by lower volumes resulting distributor inventory destocking and weaker industrial demand in China.

Operating EBITDA

Operating EBITDA decreased due to lower volumes, reduced production rates and currency headwinds partly offset by the impact of net pricing benefits.

“Despite significant volume pressure in 2023, we maintained sound focus on the operational levers within our control, working to minimize margin impacts while driving substantial cash flow improvement versus last year,” said Lori Koch, Chief Financial Officer of DuPont. “In addition, we acted quickly in executing restructuring actions to reduce costs that we announced this past November and will begin to realize the associated savings later in the first quarter.”

“For the first quarter of 2024, we expect sequential sales and earnings decline from the fourth quarter driven by additional channel inventory destocking within our industrial-based businesses along with continued weak demand in China. We also note the absence of about $40 million of certain discrete items which benefited fourth quarter operating EBITDA,” Koch continued. “We expect sequential sales improvement and an approximate ten percent increase in operating EBITDA in the second quarter of 2024 from first quarter driven by some inventory destocking abatement, seasonality factors and realization of cost savings.”

“Our current expectation for full year 2024 forecasts a return to year-over-year sales and earnings growth in the second half driven by anticipated electronics market recovery, including improvement in semiconductor fab utilization rates, as well as improved orders within industrial markets as customer inventory levels normalize,” Koch concluded.

Conference Call
The Company will host a live webcast of its quarterly earnings conference call with investors to discuss its results and business outlook beginning today at 8:00 a.m. ET. The slide presentation that accompanies the conference call will be posted on the DuPont’s Investor Relations Events and Presentations page. A replay of the webcast also will be available on the DuPont’s Investor Relations Events and Presentations page following the live event.

About DuPont
DuPont (NYSE:DD) is a global innovation leader with technology-based materials and solutions that help transform industries and everyday life. Our employees apply diverse science and expertise to help customers advance their best ideas and deliver essential innovations in key markets including electronics, transportation, construction, water, healthcare and worker safety. More information about the company, its businesses and solutions can be found at www.dupont.com. Investors can access information included on the Investor Relations section of the website at investors.dupont.com.

DuPontTM and all products, unless otherwise noted, denoted with TM, SM or ® are trademarks, service marks or registered trademarks of affiliates of DuPont de Nemours, Inc.

Overview
On November 1, 2022, DuPont completed the divestiture, previously announced on February 18, 2022, of the majority of the historical Mobility & Materials segment, including the Engineering Polymers business line and select product lines within the Advanced Solutions and Performance Resins business lines (the “M&M Divestiture”), to Celanese Corporation (“Celanese”). The Company also announced on February 18, 2022, that its Board of Directors approved the divestiture of the Delrin® acetal homopolymer (H-POM) business. On November 1, 2023, DuPont completed the divestiture of the Delrin® business to TJC LP, (the “Delrin® Divestiture” and together with the M&M Divestiture, the “M&M Divestitures”)

The results of operations for the three and twelve months ended December 31, 2023, present the financial results of the Delrin® Divestiture as discontinued operations. In the comparative periods, the results of operations for both the M&M Divestiture and the Delrin® Divestiture are presented as discontinued operations. Unless otherwise indicated, the discussion of results, including the financial measures further discussed below, refers only to DuPont’s Continuing Operations and does not include discussion of balances or activity of the M&M Divestitures.

Cautionary Statement about Forward-looking Statements
This communication contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “target,” “stabilization,” “confident,” “preliminary,” “initial,” and similar expressions and variations or negatives of these words. All statements, other than statements of historical fact, are forward-looking statements, including statements regarding outlook.

Forward-looking statements address matters that are, to varying degrees, uncertain and subject to risks, uncertainties, and assumptions, many of which that are beyond DuPont’s control, that could cause actual results to differ materially from those expressed in any forward-looking statements. Forward-looking statements are not guarantees of future results. Some of the important factors that could cause DuPont’s actual results to differ materially from those projected in any such forward-looking statements include, but are not limited to: (i) the possibility that the Company may fail to realize the anticipated benefits of the $1 billion share repurchase program announced on February 6, 2024 and that the program may be suspended, discontinued or not completed prior to its termination on June 30, 2025; (ii) risks and uncertainties related to the settlement agreement concerning PFAS liabilities reached June 2023 with plaintiff water utilities by Chemours, Corteva, EIDP and DuPont, including timing of court approval; (iii) risks and costs related to each of the parties respective performance under and the impact of the arrangement to share future eligible PFAS costs by and between DuPont, Corteva and Chemours, including the outcome of any pending or future litigation related to PFAS or PFOA, including personal injury claims and natural resource damages claims; the extent and cost of ongoing remediation obligations and potential future remediation obligations; changes in laws and regulations applicable to PFAS chemicals; (iv) ability to achieve anticipated tax treatments in connection with completed and future, if any, divestitures, mergers, acquisitions and other portfolio changes actions and impact of changes in relevant tax and other laws; (v) indemnification of certain legacy liabilities; (vi) failure to realize expected benefits and effectively manage and achieve anticipated synergies and operational efficiencies in connection with completed and future, if any, divestitures, mergers, acquisitions, and other portfolio management, productivity and infrastructure actions; (vii) risks and uncertainties, including increased costs and the ability to obtain raw materials and meet customer needs from, among other events, pandemics and responsive actions; timing and recovery from demand declines in consumer-facing markets, including in China; adverse changes in worldwide economic, political, regulatory, international trade, geopolitical, capital markets and other external conditions; and other factors beyond the Company’s control, including inflation, recession, military conflicts, natural and other disasters or weather related events, that impact the operations of the Company, its customers and/or suppliers; (viii) ability to offset increases in cost of inputs, including raw materials, energy and logistics; (ix) risks associated with demand and market conditions in the semiconductor industry and associated end markets, including from continuing or expanding trade disputes or restrictions, including on exports to China of U.S.-regulated products and technology; (x) risks, including ability to achieve, and costs associated with DuPont’s sustainability strategy including the actual conduct of the company’s activities and results thereof, and the development, implementation, achievement or continuation of any goal, program, policy or initiative discussed or expected; and (xi) other risks to DuPont’s business and operations, including the risk of impairment; each as further discussed in DuPont’s most recent annual report and subsequent current and periodic reports filed with the U.S. Securities and Exchange Commission. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business or supply chain disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on DuPont’s consolidated financial condition, results of operations, credit rating or liquidity. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. DuPont assumes no obligation to publicly provide revisions or updates to any forward-looking statements whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws.

Non-GAAP Financial Measures
Unless otherwise indicated, all financial metrics presented reflect continuing operations only.

This communication includes information that does not conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) and are considered non-GAAP measures. Management uses these measures internally for planning, forecasting and evaluating the performance of the Company, including allocating resources. DuPont’s management believes these non-GAAP financial measures are useful to investors because they provide additional information related to the ongoing performance of DuPont to offer a more meaningful comparison related to future results of operations. These non-GAAP financial measures supplement disclosures prepared in accordance with U.S. GAAP, and should not be viewed as an alternative to U.S. GAAP. …

Full story available on Benzinga.com