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10-Q: DUPONT DE NEMOURS, INC.

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(EDGAR Online via COMTEX) -- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's discussion and analysis of financial condition and results of operations is provided as a supplement to, and should be read in conjunction with, the interim Consolidated Financial Statements and related notes to enhance the understanding of the Company's operations and present business environment. Components of management's discussion and analysis of financial condition and results of operations include:

Recent Developments

Overview

On February 1, 2021, DuPont completed the separation and distribution of the Nutrition & Biosciences business segment (the "N&B Business"), and merger of Nutrition & Biosciences, Inc. ("N&B"), a DuPont subsidiary formed to hold the N&B Business, with a subsidiary of International Flavors & Fragrances Inc. ("IFF"). The distribution was effected through an exchange offer (the "Exchange Offer") where, on the terms and subject to the conditions of the Exchange Offer, eligible participating DuPont stockholders had the option to tender all, some or none of their shares of common stock, par value $0.01 per share, of DuPont (the "DuPont Common Stock") for a number of shares of common stock, par value $0.01 per share, of N&B (the "N&B Common Stock") and which resulted in all shares of N&B Common Stock being distributed to DuPont stockholders that participated in the Exchange Offer. The consummation of the Exchange Offer was followed by the merger of N&B with a wholly owned subsidiary of IFF, with N&B surviving the merger as a wholly owned subsidiary of IFF (the "N&B Merger" and, together with the Exchange Offer, the "N&B Transaction"). In connection with and in accordance with the terms of the N&B Transaction, prior to consummation of the Exchange Offer and the N&B Merger, DuPont received a one-time cash payment of approximately $7.3 billion, (the "Special Cash Payment"), which is subject to post-closing adjustment pursuant to the terms of the N&B Separation and Distribution Agreement. The company used a portion of the proceeds to retire its $3 billion term loan facilities on February 1, 2021 and used the proceeds to fund the redemption, in accordance with their terms, of the $2 billion May 2020 Notes issuance. See discussion below and within "Liquidity and Capital Resources" for more information.

DWDP Merger and DWDP Distributions

DowDuPont completed a series of internal reorganizations and realignment steps in order to separate into three, independent, publicly traded companies - one for each of its agriculture, materials science and specialty products businesses. DowDuPont formed two wholly owned subsidiaries: Dow Inc. ("Dow", formerly known as Dow Holdings Inc.), to serve as a holding company for its materials science business, and Corteva, Inc. ("Corteva"), to serve as a holding company for its agriculture business.

On April 1, 2019, the Company completed the separation of the materials science business through the spin-off of Dow Inc., including Dow's subsidiary TDCC (the "Dow Distribution"). On June 1, 2019, the Company completed the separation of the agriculture business through the spin-off of Corteva including Corteva's subsidiary EID, (the "Corteva Distribution and together with the Dow Distribution, the "DWDP Distributions").

Following the Corteva Distribution, the Company holds the specialty products business as continuing operations. On June 1, 2019, DowDuPont changed its registered name from "DowDuPont Inc." to "DuPont de Nemours, Inc." doing business as "DuPont" (the "Company"). Beginning on June 3, 2019, the Company's common stock is traded on the NYSE under the ticker symbol "DD."

Table of Contents

2021 Segment Realignment

RECENT DEVELOPMENTS

Divestitures

Dividends

On June 17, 2021, the Company announced that its Board of Directors declared a third quarter dividend of $0.30 per share payable on September 15, 2021, to shareholders of record on July 30, 2021.

Table of Contents







        RESULTS OF OPERATIONS
        Summary of Sales Results                                           Three Months Ended    Six Months Ended June
                                                                                June 30,                 30,
        In millions                                                         2021        2020       2021        2020
        Net sales                                                        $  4,135    $ 3,289    $  8,111    $ 6,959
        The following table summarizes sales variances by segment and geographic region
        from the prior year:
        Sales Variances by Segment and Geographic Region
                                                       Three Months Ended June 30, 2021                                             Six Months Ended June 30, 2021
        Percentage change from    Local Price &                                                               Local Price &
        prior year                 Product Mix      Currency        Volume     Portfolio & Other    Total      Product Mix      Currency        Volume     Portfolio & Other    Total
        Electronics & Industrial            -  %            2  %         17  %              -  %        19  %          (1) %            3  %         16  %              -  %        18  %
        Water & Protection                  -               3            11                 -           14              -               3             6                 -            9
        Mobility & Materials               13               6            42                 -           61              6               4            22                 -           32
        Corporate                           7               3             2               (20)          (8)             3               2            (1)              (24)         (20)
        Total                               3  %            4  %         20  %             (1) %        26  %           2  %            3  %         13  %             (1) %        17  %
        U.S. & Canada                       3  %            -  %         21  %             (3) %        21  %           1  %            -  %          7  %             (3) %         5  %
        EMEA 1                              -               9            27                 -           36             (2)              8            12                 -           18
        Asia Pacific                        5               3            15                 -           23              3               3            17                 -           23
        Latin America                      (1)              4            57                 -           60              3              (2)           22                 -           23
        Total                               3  %            4  %         20  %             (1) %        26  %           2  %            3  %         13  %             (1) %        17  %
        


1.Europe, Middle East and Africa.

The Company reported net sales for the three months ended June 30, 2021 of $4.1 billion, up 26 percent from $3.3 billion for the three months ended June 30, 2020, due to a 20 percent increase in volume, a 4 percent favorable currency impact, and a 3 percent increase in local price and product mix offset by a 1 percent decline in portfolio actions. Volume increased across all operating segments, Mobility & Materials (up 42 percent), Electronics & Industrial (up 17 percent), and Water & Protection (up 11 percent). Volume increased significantly across all regions. Currency was up 4 percent compared with the same period last year, driven primarily by EMEA (up 9 percent), Latin America (up 4 percent) and Asia Pacific currencies (up 3 percent). Local price was up 3 percent with the same period last year driven by Mobility & Materials (up 13 percent). Portfolio and other changes partially offset sales growth with a 1 percent decrease which impacted Corporate (down 20 percent).

Net sales for the six months ended June 30, 2021 were $8.1 billion, up 17 percent from $7.0 billion for the six months ended June 30, 2020, due to a 13 percent increase in volume, a 3 percent favorable currency impact, and a 2 percent increase in local price and product mix offset by a 1 percent decline in portfolio actions. Volume increased across all operating segments, the most notable volume increases were in Mobility & Materials (up 22 percent), Electronics & Industrial (up 16 percent) and Water & Protection (up 6 percent). Volume grew across all geographic regions. Currency was up 3 percent compared with the same period last year, driven primarily by EMEA (up 8 percent) and Asia Pacific currencies (up 3 percent). Local price and product mix was up 2 percent with the same period last year. Local price increased across all regions except EMEA (down 2 percent). Portfolio and other changes decreased 1 percent primarily due to the sale of businesses within Corporate (down 24 percent).

Cost of Sales

Cost of sales as a percentage of net sales for the three months ended June 30, 2021 was 64 percent compared with 70 percent for the three months ended June 30, 2020.

For the six months ended June 30, 2021, cost of sales was $5.2 billion, up from $4.6 billion for the six months ended June 30, 2020. Cost of sales increased for the six months ended June 30, 2021 primarily due to increased sales volume, currency impacts, and higher raw materials and logistics costs partially offset by approximately $150 million of charges in the prior year associated with temporarily idling several manufacturing plants to align supply with demand due to COVID-19.

Table of Contents

Research and Development Expenses ("R&D") R&D expenses totaled $148 million in the second quarter of 2021, down slightly from $153 million in the second quarter of 2020. R&D as a percentage of net sales was 4 percent and 5 percent for the three months ended June 30, 2021 and 2020, respectively.

For the first six months of 2021, R&D expenses totaled $304 million, down from $326 million in the first six months of 2020. R&D as a percentage of net sales was 4 percent and 5 percent for the six months ended June 30, 2021 and 2020. The decrease for the six months ended June 30, 2021 as compared with the same period of the prior year was primarily due to productivity actions and cost reductions related to COVID-19.

Selling, General and Administrative Expenses ("SG&A") SG&A expenses were $459 million in the second quarter of 2021, up from $414 million in the second quarter of 2020. SG&A as a percentage of net sales was 11 percent and 13 percent for the three months ended June 30, 2021 and 2020, respectively. The increase for the three months ended June 30, 2021 as compared with the same period of the prior year was primarily due to currency fluctuations and higher personnel related expenses.

For the first six months of 2021, SG&A expenses totaled $915 million, up from $896 million in the first six months of 2020. SG&A as a percentage of net sales was 11 percent and 13 percent for the six months ended June 30, 2021 and 2020, respectively. The increase for the six months ended June 30, 2021 as compared with the same period of the prior year was primarily due to currency fluctuations and higher personnel related expenses.

Amortization of Intangibles

Restructuring and Asset Related Charges - Net Restructuring and asset related charges - net were $10 million in the second quarter of 2021, down from $24 million in the second quarter of 2020. The activity in the second quarter of 2021 is due to a $10 million charge related to the 2020 Restructuring Program. The activity in the second quarter of 2020 included a $21 million impairment charge related to indefinite-lived intangible assets in the Mobility & Materials segment, a $14 million charge related to the 2020 Restructuring Program, a $13 million credit related to the 2019 Restructuring Program and a $2 million charge related to the DowDuPont Cost Synergy Program.

In the first six months of 2021, restructuring and asset related charges - net were $12 million, down from $422 million in the same period last year. The activity for the six months of 2021 is related to the 2020 Restructuring Program. The charges in the same period of 2020 included a $270 million impairment charge related to long-lived assets in Corporate, a $21 million impairment charge related to indefinite-lived intangible assets in the Mobility & Materials segment, a $119 million charge related to the 2020 Restructuring Program, a $5 million charge related to the 2019 Restructuring Program and a $7 million charge related to the DowDuPont Cost Synergy Program.

See Note 4 to the interim Consolidated Financial Statements for additional information.

Goodwill Impairment Charge

Integration and Separation Costs

Equity in Earnings of Nonconsolidated Affiliates The Company's share of the earnings of nonconsolidated affiliates was $25 million in the second quarter of 2021, down from $102 million in the second quarter of 2020. In the first six months of 2021, the Company's share of the earnings of nonconsolidated affiliates was $51 million, down from $141 million in the first six months of 2020. The decrease is primarily due to the sale of the HSC Group in the third quarter of 2020.

Sundry Income (Expense) - Net

In the first six months of 2021, sundry income (expense) - net was income of $162 million compared with income of $201 million. The first six months of 2021 included benefits related to the sale of assets within the Corporate and Electronics & Industrial segment of $140 million and $24 million, respectively, and income related to non-operating pension and other post-employment benefit credits of $25 million, partially offset by miscellaneous expenses of $17 million and foreign currency exchange losses of $17 million. The first six months of 2020 included benefits related to the sale of the Compound Semiconductor Solutions business unit of $197 million, income related to non-operating pension and other post employment benefit credits of $19 million and miscellaneous income of $6 million, partially offset by foreign currency exchange losses of $21 million.

Interest Expense

Provision for Income Taxes on Continuing Operations The Company's effective tax rate fluctuates based on, among other factors, where income is earned and the level of income relative to tax attribute. The effective tax rate on continuing operations for the second quarter of 2021 was 21.1 percent, compared with an effective tax rate of (0.3) percent for the second quarter of 2020. For the first six months of 2021, the effective tax rate on continuing operations was 14.2 percent, compared with (3.6) percent for the first six months of 2020. The effective tax rate for the first six months of 2021 was principally the result of a $59 million tax benefit related to the step-up in tax basis in the goodwill of the Company's European regional headquarters legal entity. The effective tax rate for the second quarter and for the first six months of 2020 was principally the result of the non-tax-deductible goodwill impairment charge impacting Corporate.

Table of Contents SEGMENT RESULTS

Effective February 1, 2021, DuPont changed its management and reporting structure. The reporting changes have been retrospectively reflected in the following discussion of segment results for all periods presented. See Note 22 to the interim Consolidated Financial Statements for additional information.

Table of Contents ELECTRONICS & INDUSTRIAL







        Electronics & Industrial                                           Three Months Ended                  Six Months Ended
        In millions                                                 June 30, 2021     June 30, 2020     June 30, 2021     June 30, 2020
        Net sales                                                  $    1,320       $        1,111    $        2,620    $        2,226
        Operating EBITDA                                           $      424       $          336    $          860    $          663
        Equity earnings                                            $       10       $           10    $           19    $           19
        Electronics & Industrial                         Three Months Ended   Six Months Ended
        Percentage change from prior year                  June 30, 2021       June 30, 2021
        Change in Net Sales from Prior Period due to:
        Local price & product mix                                       -  %              (1) %
        Currency                                                        2                  3
        Volume                                                         17                 16
        Portfolio & other                                               -                  -
        Total                                                          19  %              18  %
        


Electronics & Industrial net sales were $1,320 million for the three months ended June 30, 2021, up 19 percent from $1,111 million for the three months ended June 30, 2020. Net sales increased due to a 17 percent increase in volume and a 2 percent favorable currency impact. Volume growth was led by Industrial Solutions reflecting broad-based demand most notably in displays, electronics, healthcare and automotive markets. Within Interconnect Solutions, volume growth was driven by higher material content in next-generation smartphones, broad based electronics demand and recovery in industrial applications. Continued strength in Semiconductor Technologies was driven by new technology ramps at advanced nodes within logic and foundry and increased memory demand in servers and data centers.

Operating EBITDA was $424 million for the three months ended June 30, 2021, up 26 percent compared with $336 million for the three months ended June 30, 2020 driven by strong volume growth offset by higher raw materials and logistics costs.

Aug 04, 2021

COMTEX_390926774/2041/2021-08-04T10:10:10

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