Dupont De Nemours Inc Q1 2025 Earnings Call Summary

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

Question: Jeffrey Sprague - Vertical Research Partners - Analyst : Hey. Thank you. Good morning, everyone. Hope everyone's well and busy, I see. Maybe since we have Jon on the call, could I start there? Jon, I just wonder if you could just walk us through the exemption process. How many different exemptions do you need or do you have? And most of what you need relative to the guide, is that in hand at this point? Jon Kemp - Dupont De Nemours Inc - President of the Electronics division for DuPont and Chief Executive Officer-Elect for the planned independent Electronics Company Yeah, Jeff, and good morning. Thanks for the question. When you look at it total, when we think about all of the tariff actions that we're pursuing in terms of supply chain adjustments, sourcing strategies, surcharges and pricing adjustments and mitigation, the product exemptions, I would say, is probably the smallest of those four categories. 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 02, 2025 / 12:00PM, DD.N - Q1 2025 Dupont De Nemours Inc Earnings Call Really the bulk of the tariff savings and mitigation actions that we've done have really been on the procurement and supply chain optimization side of the house. We continue to have very constructive dialogue with both the US and China authorities on the dynamics, particularly in the semiconductor industry. It's a relatively small percentage of our total mitigation strategy, and we continue to have those dialogues with the teams on the ground.

Question: Jeffrey Sprague - Vertical Research Partners - Analyst : Right. So that those intermediates can come from other places as part of the sourcing changes and optimization then to some degree.

Question: Scott Davis - Melius Research - Analyst : Hey. Good morning, everyone. Congrats on all this stuff. As Jeff said, you guys have been busy. I wanted just to see if you could give us the tariff numbers broken down into the two businesses, just starting to think about DuPont as completely separate (technical difficulty) you've got a few months left. Do you have that data available to Qnity and for DuPont.

Question: Scott Davis - Melius Research - Analyst : That's helpful, Antonella. And just to follow-up on Jeff's question, that $200 million of intermediate product that's being shipped to China, would there be a long-term plan to try to locate that in China? Is there IP protection? Is that one of the reasons why you're shipping it from here to there? Just trying to get a sense of just the challenge of moving that asset base or whether this is a bit of a permanent structural issue.

Question: Scott Davis - Melius Research - Analyst : Okay. But it's not moving your own fixed assets? I guess that was the question. 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 02, 2025 / 12:00PM, DD.N - Q1 2025 Dupont De Nemours Inc Earnings Call

Question: Stephen Tusa - JPMorgan - Analyst : Hey. Good morning. I'm just curious, how much of the sales in China do you think -- are you like speced on with like long-term contracts with your OEMs there or whoever is buying and integrating your products and the finished products? What percentage of those sales can they substitute? Jon Kemp - Dupont De Nemours Inc - President of the Electronics division for DuPont and Chief Executive Officer-Elect for the planned independent Electronics Company So, Steve, this is Jon. Good question. So when you think about from an electronics point of view, we've got roughly -- last year, for example, we had about $1.4 billion of sales into China. I would say almost half of that went to multinational company sales and almost 100% of those multinational company sales are materials that are speced in. There is an additional probably 25% to 30% that go to the semi customers, where we have, what we would call process of record identified, which means that we're speced into their particular technologies. So switching us out immediately for a competitor is not an easy task. It takes time and there's a lot of costs involved in making that switch. So in general, you put those two numbers together and we get to a point where north of 70% of our sales into China are really speced in materials.

Question: John McNulty - BMO Capital Markets - Analyst : Yeah. Good morning. Thanks for taking my question. Maybe a little bit of a shift away from the tariff question. We've been seeing some of the water markets starting to accelerate a bit, but you guys seem like you're definitely at the high end of some of the results that we're seeing. I guess can you help to unpack that a little bit as to what that demand really is stemming from, if there's any specific end markets or industries that are maybe driving that? That would be helpful. Thank you.

Question: John McNulty - BMO Capital Markets - Analyst : Got it. Okay. That's helpful color. And then just another question on the ElectronicsCo side. I know, in the past, you've spoken to some of your AI exposure. You specifically called out the Interconnect Solutions side and some of the AI-driven technology ramps. I guess can you help us to understand the size of that business in Interconnect Solutions and some of the applications that you're helping to address there? Jon Kemp - Dupont De Nemours Inc - President of the Electronics division for DuPont and Chief Executive Officer-Elect for the planned independent Electronics Company Yeah. Sure. So I think last time, on the last call, we talked about AI and particularly the data center and high-performance computing exposure. And part of that is comprised of the advanced chips that are coming from advanced nodes, whether that's 3-nanometer, 2-nanometer coming out this year and the high-bandwidth memory, and then the rest of it is in advanced packaging and other interconnect technologies. So data center for us is about 15% of our portfolio. And I would say in the first quarter, we had another terrific number. It was actually up mid-teens in the quarter really with the growth across all of those categories of the advanced chip, the advanced packaging, the layered thermal materials and EMI shielding materials and then in particular some high-performance laminates.

Question: Christopher Parkinson - Wolfe Research - Analyst : Great. Thank you so much. Can you just hit on very quickly what you're seeing across both semi-tech and ICS and how you're thinking about the China market versus just the non-China market in terms of how things are evolving thus far in 2Q and how that could potentially lead to second half trends? Thank you so much. Jon Kemp - Dupont De Nemours Inc - President of the Electronics division for DuPont and Chief Executive Officer-Elect for the planned independent Electronics Company Yeah. Chris. Sure. So in China, as we've talked about before, the China growth has really been driven by fairly strong domestic demand in China as well as a bunch of new fab start-ups that are taking place. And if you recall, when you start up a new fab, typically, you're running a lot of material because you're starting out with a fairly low yield. And then over time, your yields will gradually come up. And so, as you start up new fabs, the material consumption is a little bit higher, that benefits us. And then the underlying demand in China has been strong for several quarters now. As we think about the China demand in semi going forward, we think that normalizes to -- so it doesn't have be elevated. It normalizes to a more normal demand level, and we are expecting about flat for the full year. On the ICS side, those customers are operating kind of most closer to actual demand. So there's not really pull-forward dynamics that are happening in the ICS market. It's more realtime production. And that demand continues to be strong both in China and really in the rest of the world driven from really, I would say, the smartphone PCs bill that is happening in China as well as some of the data centers and the advanced packaging applications, the OSATs, for example. And when you go more broadly, the rest of the world, we're expecting high single-digit growth from both semi and ICS for the rest of the year. So even with a flat China, we see demand really being driven by the AI advanced nodes and advanced packaging applications continuing through the year. And that's really what's fueling most of the growth. Advanced logic and DRAM continue to have high utilization rates. And then as we've talked about before, NAND and [mature logic] are a little bit slower. So I would say, if we see any uptick in mature logic and NAND, that would probably give us some nice upside. And those tech commentary is pretty consistent with what I think what you've heard from our customer base in the broader market over the last couple of weeks.

Question: Josh Spector - UBS - Analyst : Yeah. Hi. Good morning. First, I just want to ask on the guidance and just the logic of not changing the guidance but highlighting the tariff impact. I guess are you messaging that there is potentially more offsets that could that get you into your original guidance range? Or is it just uncertainty and you didn't want to adjust yet?

Question: Josh Spector - UBS - Analyst : Thanks. That's helpful. And if I could follow up on the China anti-competitive review that's going on, on Tyvek. One, can you comment on that beyond what you guys had in the press release a month or so ago? And then two, if you can say anything about the potential or lack of potential for further China reviews to spread to other parts of the business. Is that a risk that you're worried about? Or is it something that you're not worried about? 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 02, 2025 / 12:00PM, DD.N - Q1 2025 Dupont De Nemours Inc Earnings Call

Question: David Begleiter - Deutsche Bank AG - Analyst : Thank you. Lori, are Kevlar, Nomex core to the new DuPont? I would have thought they would be, but it sounds like they may not be. So why is that the case? Thank you.

Question: David Begleiter - Deutsche Bank AG - Analyst : Got it. And just can you quantify the impact of the pull forward of Semiconductor Technologies earnings into Q1 versus Q2? Thank you.

Question: John Roberts - Mizuho Securities - Analyst : Thank you. Could you give us a little more granularity for the Diversified Industrials segment? And will the 10-Q have any more additional reporting within that subsegment?

Question: Patrick Cunningham - Citigroup Inc. - Analyst : Hi. Good morning. You noted share gains pretty consistently for Electronics. I'm just wondering, in the current sort of environment where we're seeing normalization and tariff uncertainty, do you see any pressure on that outperformance, whether it's additional competitive dynamics or changes with customer relationships or engagement on new product introduction? Jon Kemp - Dupont De Nemours Inc - President of the Electronics division for DuPont and Chief Executive Officer-Elect for the planned independent Electronics Company So thanks, Patrick. Look, it's a competitive space. Our teams have been -- we're fighting the battle on the street customer by customer, business by business every single day. Our teams are in constant contact with our customers and we're watching that really closely. It is a competitive environment. We feel good about our competitive position. The dialogue that we have with our customers is strong. And when I think about the way in which our customers continue to work towards more advanced technologies with increasing process complexity and increasing quality requirements, the reality is that there's not as many participants who can help them to maintain the quality and the yields that they need in their facilities, whether you're talking a semiconductor chip or a printed circuit board. And we supplement that with large groups of application engineers in the local geographies where our customers are at to help them optimize their production really -- our engineers are working side by side with them in the factory to help them optimize how 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 02, 2025 / 12:00PM, DD.N - Q1 2025 Dupont De Nemours Inc Earnings Call our products are used to maximize their performance. And that's part of the value proposition that we bring and part of why we have a seat at the design table with them.

Question: Aleksey Yefremov - KeyBanc Capital Markets Inc. - Analyst : Thanks. Good morning, everyone. In Industrial, your full year sales guide is for 3% to 4% growth, that's acceleration from flat in 1Q. So what would get better this year and year over year?

Question: Aleksey Yefremov - KeyBanc Capital Markets Inc. - Analyst : Okay. That's helpful. So not much of a change in trends, it sounds like -- and just going back to Electronics in China, just to clarify, you mentioned the pull-in from Q2 to Q1. And last year, you've been talking about also potentially some of the givebacks from strong sales in China that you could see in '25. Is that still on the table sometime later in '25? Or how do you think about that dynamic just China being so strong last year? Jon Kemp - Dupont De Nemours Inc - President of the Electronics division for DuPont and Chief Executive Officer-Elect for the planned independent Electronics Company Yeah. So I think our guide has normalizing through the rest of the year as we continue to see the customers. It's kind of flat year-over-year. And part of that is whatever materials they have, we expect will be consumed based on demand. But when we talk to our China customers, they continue to see fairly strong local demand and they're not talking about hugely elevated inventories. 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 02, 2025 / 12:00PM, DD.N - Q1 2025 Dupont De Nemours Inc Earnings Call We do expect that there will be some normalization. So we'll be flat year-over-year. But we'll have to monitor we'll have to monitor how that goes. I would go back to -- globally, we still expect the market to be fairly strong, especially in some of the advanced technologies that I've talked about. For China, China has got data center activity going on. They've got a very strong EV and automotive business that they're supporting. Their consumer electronics businesses have been fairly strong. And as we see that pan out globally, we think that demand conditions -- what we're hearing from our customers is those demand conditions should continue.

Question: Michael Leithead - Barclays Capital Inc - Analyst : Great. Good morning, team. Appreciate it. My first question is -- my understanding is water and some of the industrials businesses are often sold through distributors. So I guess do you have any sense of channel inventories and any impact to potential pre-buying in that segment?

Question: Michael Leithead - Barclays Capital Inc - Analyst : Okay. Great. And then second, I wanted to follow up on the Aramids business. I appreciate the disclosure around what drove the timing or need to perform an impairment analysis. But can you just talk a bit more about what drove the write-down? Was it volume, profitability decline? Was it recent? Or was it long ago, closer to when the merger occurred? Just some context on that would be helpful.

Question: Mike Sison - Wells Fargo Securities, LLC - Analyst : Hey. Good morning, Congrats, Jon. A question for you. In terms of Qnity comparisons, how should investors think about the right companies to compare you with? And the thought was semiconductor materials and equipment folks, but you've seen pretty significant multiple compression at Entegris and others. And then on the other side, a lot of the higher-quality materials companies like Lindy, Sherwin, (inaudible) Ecolab, their multiples have held up really, really well. So how do you think about the right comps for your business and how we look to value the company post spin? Jon Kemp - Dupont De Nemours Inc - President of the Electronics division for DuPont and Chief Executive Officer-Elect for the planned independent Electronics Company Yeah. Thanks, Mike. I still think that the industry, the semi-industry pure plays are still probably the best peer set for us. So Entegris is still a good peer. I recognize there's been a little -- there's been some compression in the short term. But I think over the long term, the industry dynamics are still very favorable with long-term growth and where we're going broadly across the electronics space. And I think over time, that will support a long-term very nice valuation for us and for others in the electronics industry.

Question: Frank Mitsch - Fermium Research - Analyst : Hey. Good morning and thanks. I wanted to drill into the IndustrialsCo side of the house. Obviously, very strong in the Healthcare and Water did low-teens. I believe that initially, there was a thought that the Healthcare & Water side would grow mid- to high single digits. And having done low-teens in the first quarter, what your thoughts are for the balance of the year? And then secondly, taking a look at Diversified Industrials obviously down in 1Q, what your thoughts are in terms of growth rates on that side of the business. Thank you.

Question: Frank Mitsch - Fermium Research - Analyst : Very helpful. And just to follow up on the building and construction and auto side, how are your order books looking April, May for 2Q relative to how they are historically? I mean, are you seeing a lot less visibility? How could you characterize the order books there?

Question: Vincent Andrews - Morgan Stanley - Analyst : Thank you. Good morning, everyone. Ed, wondering if you can give us an update on PFAS and whether you think there'll be any material developments between now and the November spin, either in the state attorney generals or in the individual litigations?

Question: Arun Viswanathan - RBC Capital Markets - Analyst : Great, thanks for taking my questions. Hope you guys are well. Maybe I could just ask a question about the logistics of the spin. So I guess, is it possible that you could pursue any M&A ahead of the spin? You talked about growth in Healthcare and Water. If you were to possibly monetize -- and could you potentially monetize any other assets ahead of the spin? Or is that something that we should expect after November 1? Thanks.

Question: Arun Viswanathan - RBC Capital Markets - Analyst : Okay. Great. And then just as a follow-up, have you seen any change in your order patterns amongst some of the industrial customers maybe in different countries on the water side? Do you see any change in behavior as far as pulling back or maybe extending out orders as it relates to tariffs or any other macro concerns or have that momentum continued? Thanks.

Question: Steve Byrne - BofA Securities - Analyst : Yes. Thank you. A couple of days ago, the EPA put out their PFAS action item list, and I'm really anxious to hear your view of it. It is quite detailed and quite a few action items. It seems to be a little bit of a different approach than the way they've taken on to cut lots of other environmental regs. But a couple of items in there that I wonder what your view is. Like they're proposing to develop some effluent guidelines, which Lori, you had mentioned the potential benefit in your Water business from treatment for PFAS, maybe effluent guidelines could assist in that, although they might cut or change drinking water standards. And the other one they've highlighted was the liability framework, whether or not you think that could have an effect on some of the future litigation.

Question: Steve Byrne - BofA Securities - Analyst : And then one quick follow-up. This $200 million of finished goods shipments from the US to China, what products are those? What business is that? And how are you avoiding this 125% tariff? 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 02, 2025 / 12:00PM, DD.N - Q1 2025 Dupont De Nemours Inc Earnings Call