DuPont de Nemours, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Dollar amounts are in millions unless otherwise stated. The filing presents the Mobility & Materials businesses being divested as discontinued operations; segment and continuing-operations comparisons reflect the company’s revised presentation.
Financial performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Net sales | $3,317 | $3,199 | $9,913 | $9,320 |
| Income from continuing operations, net of tax | $359 | $259 | $956 | $1,040 |
| Diluted EPS from continuing operations | $0.69 | $0.48 | $1.80 | $1.86 |
| Operating EBITDA | $856 | $817 | $2,503 | $2,400 |
| Cash provided by operating activities | Not separately provided for the quarter | $714 | $1,660 |
- Q3 sales increased 4%: price and product mix rose 8% and volume 3%, partly offset by 4% unfavorable currency and 3% from portfolio and other changes. Nine-month sales increased 6%.
- Q3 cost of sales was 63% of sales, compared with 64% a year earlier; for the nine months it was 64%, versus 63%. Higher raw-material, logistics and energy costs were noted.
- Q3 net income attributable to DuPont common stockholders was $367 million, or $0.73 diluted EPS. Nine-month net income attributable to common stockholders was $1,642 million, or $3.24 diluted EPS. These totals include discontinued operations.
- Nine-month operating cash flow fell to $714 million from $1,660 million, primarily reflecting greater working-capital use and tax-related items. Cash used for investing was $185 million; cash used for financing was $480 million.
- At September 30, cash and cash equivalents were $1,785 million; total debt was $11,851 million, including $1,287 million of short-term borrowings and $10,564 million of long-term debt. Continuing-operations net working capital was $1,995 million and the current ratio was 1.43, down from $3,121 million and 1.89 at year-end 2021. DuPont reported $3,488 million available under committed credit facilities and compliance with its debt covenant.
Segments and changes versus prior period
- Electronics & Industrial: Q3 sales were $1,511 million, up 3%; Operating EBITDA was $473 million, roughly flat. Nine-month sales rose 12% to $4,574 million and EBITDA rose 7% to $1,429 million, including the Laird PM acquisition.
- Water & Protection: Q3 sales rose 10% to $1,534 million and EBITDA rose 8% to $382 million. Nine-month sales increased 8% to $4,460 million, while EBITDA increased 1% to $1,071 million. Pricing gains were partly offset by input costs, currency and product mix.
- Corporate & Other: Q3 sales declined to $272 million from $335 million, mainly reflecting business divestitures. Nine-month sales were $879 million versus $1,096 million.
- Q3 continuing-operations income improved year over year, while nine-month continuing-operations income declined. Prior-year comparisons are affected by tax benefits and portfolio changes.
Outlook, transactions, risks and unusual items
- Management said cash, operating cash generation and access to debt markets were expected to provide sufficient liquidity for continuing operations. It did not provide a clear numerical earnings or revenue forecast in the supplied filing text. Management cited inflation, supply-chain disruption, higher interest rates, foreign-exchange effects and uncertainty over semiconductor export rules affecting China.
- After quarter-end, on November 1, 2022, DuPont completed the sale of most of its historic Mobility & Materials business to Celanese for $11.0 billion in cash, subject to adjustments. DuPont was pursuing a separate Delrin divestiture; no completed sale was reported in this filing.
- After quarter-end, DuPont terminated its planned Rogers acquisition because required regulatory clearance had not been obtained timely and paid a $162.5 million termination fee on November 2; the fee was expected to be recorded in Q4 2022.
- On November 7, the board authorized up to $5 billion of additional share repurchases, alongside $250 million remaining under the existing program. The company intended to enter accelerated repurchase agreements for approximately $3.25 billion. It also intended to redeem $2.5 billion of notes due 2023 by year-end using divestiture proceeds. These were post-quarter announcements, not completed actions as of September 30.
- Q3 included approximately $59 million of Employee Retention Credit benefit for earlier payroll taxes; DuPont expected to receive a refund in 2023. Nine-month results also included a $94 million impairment charge on an equity-method investment and gains on asset sales. A new restructuring program approved in October was expected to cost up to $125 million, primarily severance and asset-related charges, through completion expected by the end of 2023.
- PFAS-related matters remain a significant contingency. DuPont accrued $184 million of liabilities under the cost-sharing MOU at September 30; total accrued environmental obligations were $260 million. The filing states additional eligible PFAS and environmental costs could exceed accruals and affect results or cash flows. Management considered the MOU’s cost-sharing terms and caps, but outcomes remain uncertain.
- Nine-month discontinued-operations income was $723 million in 2022 versus $5,249 million in 2021. The 2021 amount included a $4,940 million non-taxable gain from the N&B transaction; 2022 results included M&M-related income and a substantial tax benefit from internal restructuring. These items make headline net-income comparisons less representative of continuing operations.
Investor verification priorities
- Review the Celanese transaction’s final proceeds, adjustments, tax consequences and stranded or reimbursable costs, and the status and terms of any Delrin sale.
- Assess PFAS and other environmental exposures, including the assumptions behind accrued liabilities and potential costs above accruals.
- Track operating cash flow, working capital, commercial-paper borrowings, liquidity and planned debt redemption after the divestiture.
- Evaluate whether planned repurchases and restructuring costs remain consistent with capital needs and the company’s outlook.
- Separate continuing results from discontinued operations and one-time tax, divestiture, impairment and credit items when comparing periods.