DuPont de Nemours, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2023. Amounts are in U.S. dollars; financial statement amounts are in millions except per-share data. Comparisons are with the corresponding 2022 periods. DuPont reports continuing operations separately from discontinued operations, and the discontinued businesses differ between periods, limiting comparability.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Net sales | $3,058 | $3,317 | $9,170 | $9,913 |
| Income from continuing operations, net of tax | $291 | $359 | $833 | $956 |
| Net income attributable to DuPont common stockholders | $319 | $367 | $445 | $1,642 |
| Diluted EPS from continuing operations | $0.62 | $0.69 | $1.75 | $1.80 |
| Diluted EPS, total | $0.70 | $0.73 | $0.97 | $3.24 |
| Operating EBITDA | $775 | $856 | $2,227 | $2,503 |
Q3 sales declined 8%, primarily from a 10% volume decrease, partly offset by portfolio changes. Nine-month sales declined 7%, reflecting an 8% volume decrease and 1% unfavorable currency, partly offset by 2% favorable price and product mix. Cost of sales was 64% of sales in Q3 versus 63% a year earlier, and 65% year to date versus 64%; management cited lower production rates to align inventory with demand.
- Electronics & Industrial: Q3 sales were $1,368 and Operating EBITDA $383, down 9% and 19%, respectively. Nine-month sales were $3,976 and EBITDA $1,094, down 13% and 23%. Weak consumer electronics demand, semiconductor inventory destocking and lower fab utilization weighed on results.
- Water & Protection: Q3 sales were $1,413 and EBITDA $362, down 8% and 5%. Nine-month sales were $4,356, down 2%, while EBITDA was $1,074, approximately flat. Construction-related weakness and destocking were partially offset by pricing.
- Corporate & Other: Q3 sales were $277 and EBITDA $30; nine-month sales were $838 and EBITDA $59. Prior-year comparisons include Biomaterials activity that was subsequently divested.
Cash flow, balance sheet and capital allocation
- Cash from continuing operating activities for the first nine months was $1,545, up from $1,064. Cash used in continuing investing activities was $919, including the Spectrum acquisition; cash used in continuing financing activities was $2,359, primarily reflecting share repurchases.
- At September 30, cash and cash equivalents were $1,338; restricted cash was $409, largely associated with the water-system settlement fund. Cash, cash equivalents and marketable securities totaled $1,338, compared with $4,964 at year-end 2022.
- Total debt was $8,215, versus $8,074 at December 31, 2022; balance-sheet short-term borrowings were $475 and long-term debt was $7,740. DuPont reported $706 of unused uncommitted credit lines and a new $1 billion 364-day revolving facility with no drawdowns through quarter-end.
- Continuing-operations net working capital was $3,070, down from $6,392 at year-end, and the current ratio was 1.86 versus 2.78. Management said cash generation and access to capital markets should provide sufficient liquidity, while noting uncertainty about macroeconomic impacts.
- DuPont paid $495 in dividends in the first nine months and repurchased $2,000 of stock under its accelerated repurchase program during Q3. The Q3 dividend was $0.36 per share; a fourth-quarter dividend of $0.36 was declared after quarter-end.
Material changes, outlook and risks
- Macroeconomic conditions: Management reported continued consumer-facing demand declines, channel inventory destocking and slower industrial demand in China. It did not provide numerical full-year guidance in the supplied filing text.
- Acquisition and divestiture: DuPont acquired Spectrum Plastics Group on August 1 for approximately $1,792; Spectrum contributed $77 of sales through September 30. On November 1, DuPont sold an 80.1% interest in Delrin for approximately $1,280 in cash proceeds plus a $350 note receivable, retaining a minority equity interest. The Delrin sale is a subsequent event, not a transaction completed by quarter-end.
- PFAS and water-system settlement: DuPont recorded a $401 liability, including interest, related to its share of a $1.185 billion settlement with defined U.S. public water systems. Its approximately $400 contribution, plus interest, was held as restricted cash at quarter-end. Court preliminary approval had been granted; final approval and potential opt-outs remained outstanding. The filing warns that additional PFAS costs could exceed accrued amounts and that a possible excess loss range could not be estimated.
- Other environmental exposure: Accrued environmental obligations were $300, with potential exposure above accruals estimated at $362. Management noted uncertainty from site conditions, regulation, legal standards and remediation technologies. Other litigation liabilities were $17.7; management considered a material adverse impact from those other matters remote.
- Goodwill: The Protection reporting unit’s estimated fair value exceeded carrying value by less than 5% in the October 1 annual assessment. Continued weak markets, interest-rate changes or delayed recovery could lead to a future non-cash impairment charge.
- Other notable items: Nine-month discontinued operations included a $357 loss, mainly reflecting MOU/PFAS-related activity, compared with $723 income in 2022, which included substantial tax benefits associated with prior divestiture-related restructurings. The 2023 restructuring program was expected to be substantially complete by year-end. The company reported effective disclosure controls and no material changes in risk factors from its 2022 Form 10-K.
Important facts for investors to verify
- Whether the water-system settlement receives final court approval, the level of opt-outs, and the resulting treatment of restricted cash and the accrued liability.
- Potential PFAS, indemnification and environmental liabilities beyond recorded accruals, including the effects of pending litigation and remediation obligations.
- Whether weakness in electronics, construction and China-related markets persists, and how volume, production rates and pricing affect segment margins.
- The completed Delrin transaction’s final accounting, proceeds and retained-interest valuation, and the final Spectrum purchase-price allocation.
- Liquidity and leverage following acquisition spending, settlement funding and share repurchases, including cash availability and future debt obligations.