The operator welcomes participants to the DuPont first quarter 2024 earnings call and provides instructions for asking questions. Chris Mecray, CEO, and Lori Koch, CFO, will be leading the call and slides are available on the company's website. The speakers will make forward-looking statements and risks and uncertainties may affect the company's actual performance. Historical financial measures will be presented on a continuing operations basis and non-GAAP measures will also be referenced.

The article discusses DuPont's first quarter financial results for 2024, which exceeded expectations due to increased volumes in all segments. The company's semiconductor technologies business saw growth, while interconnect solutions experienced a decline in certain industrial-based businesses. DuPont has raised its full year guidance for net sales, operating EBITDA, and adjusted EPS. The company also prioritized working capital and completed a $500 million share repurchase transaction in April.

The speaker discusses their excitement about the growth potential of their businesses in five high-growth areas. They highlight their strong sales exposure in the electronics industry, particularly in semiconductor manufacturing and consumer electronics. They also mention their involvement in the AI-driven growth in this sector. The water business, which makes up 12% of their portfolio, is expected to see strong growth due to increasing regulations and concerns about water scarcity. The speaker also mentions their leadership positions in protection and industrial technologies, with a focus on healthcare markets.

The company has seen strong demand for devices and expects recovery in medical packaging and biopharma products later in the year. Their auto market segment, which makes up 10% of sales, is also expected to see growth due to increasing demand for hybrid and electric vehicles. The first quarter results showed a 3% decrease in net sales, with a decline in organic sales due to lower volume and pricing. However, the company's restructuring efforts have helped minimize the impact and improve cash flow.

In the first quarter, the company saw declines in sales in the W&P and E&I segments, but strong growth in electronics helped partially offset these declines. Sales were down globally, with Europe, North America, and Asia Pacific all experiencing decreases. However, sales in China saw a 3% increase due to growth in E&I. Operating EBITDA decreased by 4%, but the company saw improvement in cash flow and adjusted free cash flow conversion. Adjusted EPS also decreased, but this was partially offset by a lower share count. The tax rate for the quarter increased compared to the year-ago period.

In the first quarter, E&I segment net sales increased by 5%, driven by a contribution from Spectrum sales. However, there was a 2% organic sales decline and a 1% currency headwind. This was due to a decrease in volume and price, as well as realigning certain product lines within the segment. Semiconductor technologies saw a 10% increase in organic sales, while interconnect solutions and industrial solutions had slight and significant declines, respectively. The decline in industrial solutions was mainly due to inventory destocking, but improvement is expected in the coming quarters.

In the first quarter, operating EBITDA from E&I increased by 3%, driven by strength in semi and interconnect solutions and the contribution from Spectrum. However, lower volumes in industrial solutions had a negative impact. W&P's net sales in the first quarter declined by 11% due to lower volumes and currency headwinds. Within safety solutions, organic sales were down due to channel inventory destocking, but the company believes inventory levels are now close to normal. Water sales were also down due to distributor inventory destocking and lower industrial demand in China. Shelter solutions were flat, but the company expects a sequential lift in the second quarter. For the full year 2024, the company has raised its guidance for net sales, operating EBITDA, and adjusted EPS. For the second quarter of 2024, the company expects net sales of $3.025 billion, operating EBITDA of $710 million, and adjusted EPS of $0.84 per share.

In the second quarter, there was a sequential sales and earnings lift expected due to volume improvement and reduced destocking impacts. The second half of the year is expected to have year-over-year growth in sales and earnings, driven by further electronics market recovery and a return to volume growth. The company also published their annual sustainability report, highlighting their commitment to innovation, protecting the environment, and empowering employees and communities. They have surpassed their 2030 goals for reducing greenhouse gas emissions and have been recognized for their commitment by Samsung Electronics.

The company made significant progress in implementing an operational excellence framework to improve productivity and safety, resulting in the safest year on record. They also focused on strengthening their sustainability strategy and supplier code of conduct. The operator then opens the floor for questions, with the first one coming from Jeff Sprague. He asks about the impact of volume declines on margins and costs, and the company's plans for managing costs as volumes increase in the future. The company's CEO responds that most of the cost actions taken will remain in place.

The company expects to achieve $100 million in cost savings this year out of a total of $150 million announced in November. In 2025, they anticipate bringing back $30-40 million in costs due to increased demand in all their markets. The second half of the year is de-risked and they expect 56% incrementals, with a 200 basis point increase in margin compared to the first half. The electronics business consistently maintains 31-32% EBITDA margins.

The speaker discusses the expected impact of Spectrum on the company's EBITDA margin and the potential for advancements in the electronics industry to improve margins. They also mention the potential for price decreases in certain areas of the business, but anticipate being able to maintain or improve prices in other areas. They also mention a predicted 10% increase in the following quarter.

The speaker is discussing the company's first quarter earnings and EBITDA. They explain that the EBITDA quarter-over-quarter is a bit lower than expected due to over-delivery in Q1. They also mention that the electronics sector is performing well, but other areas, such as shelter and water, are still recovering. They expect the biopharma and Kalrez businesses to recover in the second half of the year.

The speaker discusses a positive development in the growth of the company's market in China and the impact of the electronics business on this growth. They also mention a favorable price-cost spread in the first quarter and the potential impact of new chip designs on future growth. A question is asked about the materiality of this impact on the company's growth rate over the next five years.

Edward Breen discusses the impact of AI on their data center revenue, stating that $250 million of their $700 million revenue is from AI. He predicts a supercycle in the semiconductor industry due to the increasing use of AI in devices. Breen expects high single digit growth in the E&I business in 2025, with fab utilization increasing from low 70s to low 90s. He also mentions that the AI chips have higher margins. Breen clarifies that the excess inventory in water solutions in China was not due to one customer, but rather multiple distributors.

Edward Breen, CEO of the company, discusses their business in China and the impact of the industrial production slowdown on their sales. He mentions that they have four main distributors in China and that they also do direct business. The distributors have verbalized that they had to go through a destock and that it lasted about five to six months. Breen expects orders to pick up in the June timeframe. The next question comes from John Roberts who asks for an update on the company's adhesives, Multibase, and Kevlar products. Lori Koch, a company executive, explains that they have seen strength in the electric vehicle market and that Kevlar sales were up in the photovoltaic space, contributing to a 1% organic growth in the quarter. The call ends with a question from Chris Parkinson.

Chris Parkinson asks about the market share shift between Chinese and American OEs in the ICS business, as well as the increase in sophistication of Chinese handsets. Edward Breen responds by mentioning the expected increase in PCB utilization rates and Lori Koch adds that they have seen wins in the circuitry space and share gains in premium smartphones and other devices. Parkinson then asks about the long-term margin potential for the W&P business.

Lori Koch, speaking on the first quarter results, notes that the entitlement for W&P margins is still in the 27% range, but has been challenged due to lower volume and mix issues. The Tyvek business is down because of medical packaging destocking, but they expect improvement in the second half of the year. The full year guidance was only raised by the amount of the Q1 beat, with no change in thinking for the back half. There is no significant update on PFAS, but the next thing to settle is the state AG cases, which is not expected to happen until 2024.

The speaker believes that a settlement for a class action lawsuit related to firefighting foam will occur in 2025, with potentially one or two states settling separately this year. They mention that a previous settlement with water districts has been finalized and that it has been determined that the exposure of Corteva, DuPont, and Chemours is 3-7% of the total. The speaker also discusses the performance of W&P and expects a slight decrease in price, but overall they are satisfied with the company's performance. They also mention that Spectrum is performing according to their initial expectations.

The company is pleased to see that they are not experiencing a destock and that their business is growing nicely. They have a major ramp going on with a key medical device company, which is on track and a stable end market for them. They are also not planning on any acquisitions this year and are focused on operational improvement. They may consider tuck-in opportunities in the healthcare sector in the future.

The company has completed one ASR and plans to complete another this year. They also plan to make some tuck-in acquisitions and may repurchase shares if the stock price is not where they want it to be. In terms of guidance, they expect to see a return to volume growth in the second half of the year, with China recovering in the E&I sector but still experiencing industrial weakness in the water space.

The company expects to see a sequential ramp in water orders in the second half of the year as they receive orders from key distributors. They also anticipate achieving a free cash flow conversion rate of over 90% for the year. The CEO also mentions progress in Asia, specifically in China, with a 4% organic decline in the first quarter and expects overall flat performance for the year.

The speaker, Lori Koch, is addressing a question from Steve Byrne about the flat volumes in the company's water and protection segment over the past three years. Koch explains that this is due to the impact of COVID and industrial destocking, but they expect low to mid-single digit volume growth in 2025. Byrne also asks about potential customer concerns about fluoropolymer products and the company's management of wastewater from their manufacturing. Koch mentions some questions around Kevlar, but overall there are no concerns about the efficacy of their products.

The speaker discusses the potential for growth in the advanced materials and PB sides of the business, as well as the company's commitment to sustainability. They also mention the possibility of expanding the electronics business and the relatively low cost and ease of upgrading manufacturing capacity in that area.

The operator announces that there are no more questions and hands the call back to Chris Mecray. Mecray thanks everyone for joining and mentions that the transcript will be posted on the company's website. The call is then concluded by the operator.

This summary was generated with AI and may contain some inaccuracies.