Dupont De Nemours, Inc. annual report, FY2021

DuPont de Nemours, Inc. — 2021 Form 10-K

Reporting period: Fiscal year ended December 31, 2021. This is an annual filing, not a standalone fourth-quarter report. DuPont is a global specialty materials company reporting three continuing-operation segments: Electronics & Industrial, Water & Protection, and Mobility & Materials. Nutrition & Biosciences (N&B), divested to IFF on February 1, 2021, is presented as discontinued operations.

Financial performance and condition

Metric20212020
Net sales$16.653 billion$14.338 billion
Income (loss) from continuing operations, net of tax$1.804 billion$(2.406) billion
Net income (loss) attributable to DuPont common stockholders$6.467 billion$(2.951) billion
Operating EBITDA$4.170 billion$3.439 billion
Cash provided by operating activities$2.281 billion$4.095 billion
Capital expenditures$891 million$1.194 billion
Cash and cash equivalents at year-end$2.011 billion$2.544 billion
Total debt at year-end$10.782 billion$15.612 billion
Net working capital / current ratio$3.803 billion / 1.89$4.733 billion / 2.31

Sales increased 16% year over year, reflecting 10% volume growth, 4% higher local price and product mix, and 2% favorable currency. Operating EBITDA rose about 21%; its margin was approximately 25.0% of sales, versus 24.0% in 2020. Cost of sales was 64.9% of sales, down from 66.3%, implying gross margins of approximately 35.1% and 33.7%, respectively. Interest expense declined to $525 million from $672 million. The effective tax rate on continuing operations was 17.9%.

Reported 2021 net income includes $4.711 billion of income from discontinued operations, principally a $4.920 billion non-taxable gain on the N&B split-off. Accordingly, total net income and total EPS are not a direct measure of continuing-business performance: diluted EPS was $11.89 overall and $3.23 from continuing operations.

Segment results and changes

Segment2021 sales2021 Operating EBITDAYear-over-year sales change
Electronics & Industrial$5.554 billion$1.758 billion+19%
Water & Protection$5.552 billion$1.385 billion+11%
Mobility & Materials$5.045 billion$1.082 billion+26%

All three segments grew as end markets recovered and volumes improved. Mobility & Materials also benefited from 12% higher local pricing and product mix, including actions to offset input-cost inflation. Electronics & Industrial benefited from electronics demand and the Laird Performance Materials acquisition. Water & Protection reported gains in safety, construction, and water-treatment markets. Segment results use the company’s Operating EBITDA measure, which is non-GAAP as defined in the filing.

Operating cash flow fell 44% from 2020, primarily because receivables and inventory used cash as sales recovered and supply-chain constraints increased inventory. Investing cash outflow was $2.401 billion, including the Laird acquisition; financing cash outflow was $6.507 billion, reflecting debt repayment and share repurchases. DuPont repurchased $1.1 billion of shares under its 2021 authorization and paid $1.20 per share in dividends. The board declared a $0.33-per-share first-quarter 2022 dividend, a 10% increase year over year.

Outlook, transactions, and risks

  • Outlook: Management expected strong 2022 demand across segments, led by semiconductors, industrial technologies, smartphones, water filtration, and residential construction. It expected raw-material and logistics costs to remain elevated, with earnings improvement versus 2021 supported by demand, productivity, Laird synergies, and pricing. The filing provides no specific numerical earnings or revenue guidance.
  • Portfolio actions: DuPont completed the $2.404 billion Laird acquisition in July 2021. Its proposed Rogers acquisition, valued at about $5.2 billion, was expected to close by the end of the second quarter of 2022, subject to approvals and closing conditions; a committed $5.2 billion term loan was arranged to fund it. DuPont also began a process to divest a substantial portion of Mobility & Materials, subject to board approval and with no assurance of a transaction.
  • Supply-chain and macro risks: COVID-related labor, raw-material, component, and logistics disruptions, inflation, and higher energy costs could constrain production, raise costs, and affect margins. Management said price increases and productivity actions are intended to mitigate these pressures.
  • PFAS and legacy liabilities: Under the 2021 cost-sharing arrangement, Chemours bears 50% of eligible future PFAS costs and DuPont and Corteva together bear 50%, subject to a combined $2 billion cap and other terms. DuPont recorded a $126 million liability under the arrangement at year-end. Litigation, remediation, indemnification, and the ability of counterparties to meet obligations remain uncertainties.
  • Environmental and tax contingencies: Environmental obligations accrued were $205 million; the filing indicates potential exposure above accruals and notes material estimation uncertainty. Legacy separation and transaction tax treatment could also create significant liabilities if intended tax-free treatment is challenged.
  • Other considerations: DuPont cited foreign-exchange, cyber, regulatory, competitive, impairment, and acquisition-integration risks. It reported no 2021 goodwill impairment; annual qualitative testing found no reporting unit more likely than not to be impaired.

Most important facts for investors to verify

  • Reconcile the $6.467 billion of common-stockholder net income and $11.89 diluted EPS to continuing results, particularly the N&B split-off gain and discontinued-operation items.
  • Assess the quality and sustainability of the 2021 cash flow decline, especially working-capital investment, inventory buildup, and the expected cash conversion as supply conditions evolve.
  • Track the Rogers acquisition’s approval, closing, financing, and leverage implications, as well as the status, scope, proceeds, and tax consequences of the proposed Mobility & Materials divestiture.
  • Review PFAS cost-sharing exposures, environmental accruals and potential excess exposure, pending litigation, and related indemnification recoveries; estimates may change as matters develop.
  • Compare actual 2022 demand, pricing, raw-material and logistics costs, productivity, and Laird synergies with management’s qualitative outlook; no quantified earnings guidance was provided.