Business context and reporting period
DuPont de Nemours, Inc. filed this unaudited Form 10-Q for the quarter and six months ended June 30, 2023. The company supplies technology-based materials and solutions. Continuing operations are reported in Electronics & Industrial, Water & Protection, and Corporate & Other. Comparisons are affected by the divestiture of most of Mobility & Materials; Delrin remained classified as discontinued operations at quarter-end.
Financial performance
Amounts are in millions of dollars except per-share data and percentages.
| Metric | Q2 2023 | Q2 2022 | First half 2023 | First half 2022 |
|---|---|---|---|---|
| Net sales | $3,094 | $3,322 | $6,112 | $6,596 |
| Income from continuing operations, net of tax | $269 | $365 | $542 | $597 |
| Net income (loss) attributable to DuPont common stockholders | $(131) | $787 | $126 | $1,275 |
| Diluted EPS from continuing operations | $0.55 | $0.71 | $1.13 | $1.12 |
| Operating EBITDA | $738 | $829 | $1,452 | $1,647 |
Sales declined 7% in both comparison periods. Volume was down 6% in Q2 and 7% in the first half; price and product mix partly offset the decline. Approximate gross margin was 34.4% in Q2 and 34.7% in the first half, versus 35.3% and 35.4%, respectively. Operating EBITDA margin was approximately 23.9% in Q2 and 23.8% in the first half, compared with about 25.0% in both prior-year periods.
Q2 continuing-operations pretax income was $356 million, down from $478 million; first-half pretax income was $712 million versus $757 million. Interest expense decreased to $98 million in Q2 and $193 million in the first half, primarily following the November 2022 redemption of $2.5 billion of notes due 2023. The continuing-operations effective tax rate was 24.4% for Q2 and 23.9% for the first half.
Segments and material changes
- Electronics & Industrial: Q2 sales fell 14% to $1,312 million and Operating EBITDA fell 27% to $349 million. First-half sales declined 15% and EBITDA declined 26%. Management cited weaker semiconductor and consumer-electronics demand, China-related weakness, destocking, and lower production rates.
- Water & Protection: Q2 sales were essentially flat at $1,494 million, while EBITDA rose 6% to $368 million. First-half sales rose 1% and EBITDA rose 3%; pricing gains were partly offset by lower volumes and unfavorable currency.
- Corporate & Other: Q2 sales were $288 million versus $298 million; first-half sales were $561 million versus $607 million, primarily reflecting the prior-year Biomaterials divestiture.
- Reported net loss in Q2 and the sharp year-over-year decline in first-half net income primarily reflect discontinued-operations losses, including a $400 million pretax charge for the PFAS water-district settlement. Discontinued-operations results are not directly comparable because the 2023 and 2022 periods include different divested businesses and settlement-related activity.
Cash flow, debt and liquidity
- First-half cash from continuing operating activities was $805 million, compared with $486 million. Continuing-operations capital expenditures were $355 million. Investing activities provided $951 million, including $1,334 million from sales and maturities of investments; financing activities used $377 million. Discontinued operations used $126 million of cash.
- At June 30, cash and cash equivalents were $4,885 million; restricted cash was $111 million. Total debt was approximately $8,075 million, including $300 million of short-term borrowings and $7,775 million of long-term debt.
- Continuing-operations net working capital was $6,208 million and the current ratio was 2.72:1. DuPont reported approximately $734 million of unused uncommitted credit lines and entered a new $1 billion 364-day revolving credit facility in May. It was in compliance with its credit-facility financial covenant.
- Management said operating cash generation and access to debt markets should provide sufficient liquidity, while noting uncertainty around macroeconomic impacts. The board declared a Q3 dividend of $0.36 per share. No common shares were repurchased in the first half; approximately $2 billion remained authorized under the $5 billion repurchase program at June 30.
Outlook, risks and unusual items
- Management reported continuing demand declines and customer destocking in consumer-facing markets, including China, and said the duration and extent of these effects were uncertain. The filing provides no specific full-year revenue or earnings guidance.
- On June 30, DuPont and Chemours, Corteva and EIDP agreed to a $1.185 billion settlement resolving defined U.S. public-water-system PFAS claims. DuPont’s expected contribution is approximately $400 million, accrued at June 30. Court approval, class certification and opt-out levels remained outstanding; the agreement includes termination rights if opt-outs exceed confidential thresholds.
- DuPont disclosed continuing PFAS-related litigation and indemnification exposures. It had accrued $200 million under the MOU for eligible PFAS costs and reported $291 million of environmental remediation and restoration obligations. Management said additional eligible PFAS and indemnification costs above accruals are reasonably possible and could significantly affect financial condition or cash flows.
- Delrin was expected to be sold around year-end 2023 as of June 30. Separately, on August 1, 2023, DuPont completed its approximately $1.75 billion Spectrum Plastics Group acquisition, funded with existing cash; purchase-price allocation was not yet complete when the filing was issued.
- Other identified risks include weaker demand, supply-chain and input-cost pressures, trade restrictions affecting semiconductor-related business, environmental obligations, and potential impairment sensitivity in a Water & Protection reporting unit.
Important facts for investors to verify
- Whether the PFAS settlement receives preliminary and final court approval, and whether opt-outs or excluded claims change the expected cost.
- The timing and proceeds of the Delrin divestiture, and the final accounting and financing effects of the Spectrum acquisition.
- Whether demand and destocking—especially in China and semiconductor-related markets—recover, and the resulting effect on segment volumes and EBITDA.
- Whether operating cash flow remains resilient after considering working-capital movements and investment maturities, and how planned buybacks affect liquidity after the Spectrum purchase.
- Any changes to PFAS, environmental, or indemnification accruals, and impairment indicators for the sensitive Water & Protection goodwill reporting unit.