Dupont De Nemours Inc Investor Update Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jeff Sprague - Vertical Research - Analyst : Thank you. Good morning, everyone, congrats --

Question: Jeff Sprague - Vertical Research - Analyst : Congrats, especially Lori and Antonella.

Question: Jeff Sprague - Vertical Research - Analyst : First, as it relates the kind of the PFAS liabilities. Would there be any issue with the remaining burden of the PFAS liabilities on say two of these three pieces, if you were to somehow kind of execute outright divestiture of a third piece in advance of the spins?

Question: Jeff Sprague - Vertical Research - Analyst : Okay. So there's no way to carve out and kind of keep the PFAS away from a particular piece, okay.

Question: Jeff Sprague - Vertical Research - Analyst : Great. Then just as a follow-up, 18 to 24 months does sound like a long time. Is there a particular complexity you're working through here as part of this? And do you have an initial view on what the kind of the dis-synergies are standing up two new public companies?

Question: Jeff Sprague - Vertical Research - Analyst : Great. Thank you.

Question: Steve Tusa - JPMorgan - Analyst : Hey, good morning. Congrats.

Question: Steve Tusa - JPMorgan - Analyst : I'm just curious as to timing, Ed. I mean when do you actually like leave the building and it just seems a little bit sudden that you'd announce this and then, I guess you're moving into the Executive Chairman role like before you guys actually report the second quarter. Is that right?

Question: Steve Tusa - JPMorgan - Analyst : So I guess when it comes to this kind of orders backlog thing you guys have been talking about for a while. Any update there as we move to the end of May?

Question: Steve Tusa - JPMorgan - Analyst : Okay. Great. Congrats again and looking forward to watching this progress.

Question: John Roberts - Mizuho - Analyst : Thank you. Ed, would you plan on going on the Boards of the two spincos like you did in nutrition?

Question: John Roberts - Mizuho - Analyst : Then the peers for old DuPont included peers that had water and electronic or technical products, who would you consider the smaller subset as the peers for new DuPont?

Question: John Roberts - Mizuho - Analyst : Thank you.

Question: Josh Spector - UBS - Analyst : Yeah. Hi. Good morning. Congrats to the team here. I just wanted to ask on, is there any thought around dual tracking any of this? So I guess specifically, when I look at water, clearly, it's a good business, but it's smaller scale relative to the other two. So while this process might take two years to stand them up, would you run potentially a divestment process for that or frankly, anything at the same time of any of this?

Question: Josh Spector - UBS - Analyst : Okay. And just if I could follow up specifically again around water. I think relative to investor perceptions, probably the peers for that business relative to your business is arguably probably the biggest gap in valuation in the portfolio. I guess can you give some comments on how you view your positioning in that business versus some of those peers you mentioned because there's definitely differences in how you compete and go to market and mix. So why do you think your business should deserve a much higher multiple similar to those peers?

Question: Josh Spector - UBS - Analyst : Got it. Thank you.

Question: Harris Fein - Wolfe Research - Analyst : Hi, everyone. It's Harris Fein on for Chris. Thanks for taking my question. So you cited an ability just to be more agile and drive more tailored capital allocation strategy across the businesses. I guess are there any areas that stand out to you as places where maybe you've been sub-optimally investing in? And I'm just curious, given the level of buybacks over the last couple of years, why that would be the case.

Question: Harris Fein - Wolfe Research - Analyst : Got it. And then for my follow-up, maybe if you'd be able to just give a little bit more detail about the leadership search for the spincos. I guess what will that process look like? And maybe just how you're thinking about the ideal capital structure for each of the three entities? Thank you.

Question: John McNulty - BMO Capital Markets - Analyst : Yeah, good morning. Thanks for taking my question and congratulations again. So I guess I understand you're trying to do this in a tax-free manner. I guess that's -- can you just give us your thoughts on the cost basis for each of these businesses? I guess my presumption would be water actually has a pretty high cost base just given a bunch of acquisitions there. But maybe you can kind of help us to think about that just in case there is somebody who maybe is interest in some of these assets and comes over the top on them?

Question: John McNulty - BMO Capital Markets - Analyst : Got it. Okay. Okay. Fair enough. Then just as the follow-up, in terms of the balance sheet and maybe more importantly, the cash flows that you're going to be generating over the next 18 to 24 months, given all the moving parts now, are you precluded from buying back stock? And so should we just think about cash continuing to build on the balance sheet and further improving the balance sheet? Or can you keep deploying capital or cash into buybacks? How should we be thinking about that?

Question: John McNulty - BMO Capital Markets - Analyst : Got it. Thanks very much for the color.

Question: Frank Mitsch - Fermium Research - Analyst : Good morning and congratulations, Lori. And I'm curious, you mentioned that the timing for doing this transaction is perfect now. I think those were your words. I'm curious how long have you been -- has kind of you've been seriously considering doing this transaction? And along with that, when can we expect to see the pro forma financials for each of the three companies?

Question: Frank Mitsch - Fermium Research - Analyst : I got you. I guess it's a little more difficult to separate out. Since you've re-segmented to some extent, obviously it's a bit more difficult to try and give us the last couple of years for the various segments -- sorry.

Question: Frank Mitsch - Fermium Research - Analyst : Terrific. Thanks so much.

Question: David Begleiter - Deutsche Bank - Analyst : Thank you. And of course, congrats to you, Lori and Ed as well. Lori, Ed, does the side agreement with Corteva have an expiration date? And can you remind us of the minimum EBITDA threshold in that side agreement?

Question: David Begleiter - Deutsche Bank - Analyst : Got it. And does (inaudible) estimate of the transaction and separation costs of this transaction?

Question: David Begleiter - Deutsche Bank - Analyst : Perfect. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 23, 2024 / 12:00PM, DD.N - Dupont De Nemours Inc Investor Update Call

Question: Michael Leithead - Barclays - Analyst : Thanks. Good morning. I just want to echo my congrats to Ed, Lori and Antonella. As we think about new DuPont, obviously a lot of focus today is on extracting the value from electronics and water. Does the new DuPont portfolio make the most sense going forward? Or do you think there's more evolution possible there?

Question: Michael Leithead - Barclays - Analyst : Great. Thank you.

Question: Daniel Rizzo - Jefferies - Analyst : Thank you for taking my question. Just first, do you anticipate or how much restructuring do you think will be needed after the split to protect the margins for the three different companies?

Question: Daniel Rizzo - Jefferies - Analyst : Okay. Thanks. And then I know it's a little early, but how should we think about like dividend policy after the splits for the companies? Is it I mean this is something that's considered or given the post the profile for the water and electronics business, that's not part of that type of business. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 23, 2024 / 12:00PM, DD.N - Dupont De Nemours Inc Investor Update Call

Question: Daniel Rizzo - Jefferies - Analyst : Okay. Thanks.

Question: Aleksey Yefremov - KeyBanc Capital Markets - Analyst : Thanks. Good morning. And congrats, everyone. You gave some indication of growth rates relative to GDP, but I was hoping you could give us a bit more specific sort of your expectations for long-run top line growth for each of the spincos.

Question: Aleksey Yefremov - KeyBanc Capital Markets - Analyst : Thanks. And as a follow-up, I was hoping you could describe the current state of back office and IT integration, is this something that is currently sort of neatly integrated for a steady state? Would you need new sort of SAP instance for the spincos? How much work does need to be done in those areas after spin?

Question: Vincent Andrews - Morgan Stanley - Analyst : Thank you. Good morning and congratulations to everyone. Lori, maybe I could ask you just a little bit on 2024. You obviously reconfirmed guidance for the total company. But can you just help us think about maybe not precisely, but round numbers, how that guidance might be reallocated to the new segmentation ahead of spin, the growth rates could be materially different with the way that the chessboard has moved around?

Question: Vincent Andrews - Morgan Stanley - Analyst : Okay. That's very helpful. And Ed, can I just ask you to confirm that there has not been a formal M&A process run for either water or electronics and that the Board's determination is to just go direct to a spin plan.

Question: Vincent Andrews - Morgan Stanley - Analyst : Thank you.

Question: Abigail Eberts - Wells Fargo - Analyst : Hey there. So you touched on the $700 million in transaction costs. I was just wondering if you could provide a bit more color there. Then similarly, for the $60 million in dis-synergies, is that specifically for new DuPont or is that across all three new businesses? Thanks.

Question: Abigail Eberts - Wells Fargo - Analyst : Okay, thank you.

Question: Arun Viswanathan - RBC Capital Markets - Analyst : Great. Thanks for taking my question, and congrats, everyone, on the announcement. I guess I just wanted to ask two questions. So first off, presumably, we have observed very strong valuations for some of your transactions in the past couple of years. So presumably, you did maybe potentially consider continued asset sales as well for these businesses. You will be relying now on some of the implied market valuation upside. So just maybe wanted to get your thoughts there. Then secondly, just on the margins for all three, the 24% and the 29%, you highlighted those were kind of '23 levels, where do you see those potentially going over time? What's the upside opportunity there as well?

Question: Arun Viswanathan - RBC Capital Markets - Analyst : Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 23, 2024 / 12:00PM, DD.N - Dupont De Nemours Inc Investor Update Call

Question: Steve Byrne - Bank of America - Analyst : Yeah. Thank you. In your view, were there any cross-selling benefits between these businesses? Any expertise, R&D, technology, anything that was shared between the businesses that could be a bit of a headwind?

Question: Steve Byrne - Bank of America - Analyst : And then just what's the fate of the experimental station going on from here? Is that something that will just be increasingly leased? Could it be divested? And on that $60 million dis-synergy, Lori, how do you derive that? I'm curious out of the $1.4 billion SG&A of DuPont, what fraction of that is G&A that will need to be replicated?

Question: Steve Byrne - Bank of America - Analyst : Thank you.