DuPont de Nemours Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 5, 2025

Key Takeaways

  • Positive Sentiment: DuPont delivered Q2 sales of $3.3 B (+2% organic), EBITDA of $859 M (+8%) and EPS of $1.12 (+15%), prompting an uplift in full-year EBITDA guidance to $3.36 B and adjusted EPS to $4.40.
  • Positive Sentiment: Electronics Co saw robust AI-driven demand with interconnect solutions up high single digits and semiconductors up mid single digits, while Healthcare and Water Technologies posted strong volume growth, offsetting construction weakness in Diversified Industrials.
  • Negative Sentiment: DuPont agreed to pay $177 M (NPV) over 25 years to settle New Jersey environmental and PFAS claims (including <1% AFFF), subject to court approval, signaling ongoing liability management.
  • Neutral Sentiment: Progress toward the November 1 spin-off of Community Electronics Company (Qunity) remains on track, highlighted by board appointments and an amended SEC registration, with an Investor Day set for September 18 to outline both companies’ strategies.
  • Positive Sentiment: Free cash flow conversion reached 93% in Q2 with $433 M generated, supporting balance sheet flexibility against a $20 M 2025 tariff headwind and encouraging margin expansion of 120 bps year-over-year.
AI Generated. May Contain Errors.
Earnings Conference Call
DuPont de Nemours Q2 2025
00:00 / 00:00

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Operator

Good morning, ladies and gentlemen, and thank you for standing by. My name is Chris, and I will be your conference operator for today. At this time, I would like to welcome everyone to the DuPont Second Quarter twenty twenty five Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

We kindly ask that you limit yourself to one question and one follow-up. Thank you for that. And I would now like to turn the conference over to VP for Investor Relations, Ann Giann Cristoforo. You may begin.

Ann Giancristoforo
VP - IR, Corporate FP&A, Strategic Finance at DuPont

Good morning, and thank you for joining us for DuPont's second quarter twenty twenty five financial results conference call. Joining me today are Ed Breen, Executive Chairman Lori Koch, Chief Executive Officer John Kemp, parent electronics business president and CEO elect of the future Community Electronics Company and Antonella Franzen, chief financial officer. We have prepared slides to supplement our remarks, which are posted on DuPont's website under the Investor Relations tab and through the webcast link. Please read the forward looking statement disclaimer contained in the slides. During this call, we will make forward looking statements regarding our expectations or predictions about the future.

Ann Giancristoforo
VP - IR, Corporate FP&A, Strategic Finance at DuPont

Because these statements are based on current assumptions and factors that involve risks and uncertainties, our actual performance and results may differ materially from our forward looking statements. Our Form 10 ks, as updated by our current and periodic reports, includes detailed discussion of principal risks and uncertainties which may cause such differences. Unless otherwise specified, all historical financial measures presented today are on a continuing operations basis and exclude significant items. We will also refer to other non GAAP measures. A reconciliation to the most directly comparable GAAP financial measure is included in our press release and presentation materials and have been posted to DuPont's Investor Relations website.

Ann Giancristoforo
VP - IR, Corporate FP&A, Strategic Finance at DuPont

I'll now turn the call over to Lori, who will begin on Slide three.

Lori Koch
CEO at DuPont

Good morning, and thanks, everyone, for joining our second quarter call. Earlier today, we reported another solid quarter ahead of our previously communicated guidance. Second quarter sales of $3,300,000,000 grew 2% on an organic basis. Operating EBITDA of $859,000,000 increased 8% year over year resulting in operating EBITDA margin of 26.4%, an increase of 120 basis points from the prior year. Adjusted EPS of $1.12 was up 15% year over year.

Lori Koch
CEO at DuPont

As a result of our strong second quarter financial performance, we are raising our full year earnings guidance. Antonella will provide further details shortly. Second quarter saw continued strength in electronics driven by AI technology demand in both interconnect solutions and semi and strong volume growth in healthcare and water. This momentum is continuing into the third quarter with order patterns remaining strong through July. Weakness in construction continued to impact our diversified industrials business during the quarter.

Lori Koch
CEO at DuPont

I also wanted to highlight that yesterday, jointly with Chemours and Corteva, we announced a settlement with the State of New Jersey to comprehensively resolve all current and future environmental claims, including PFAS, across the four current and former operating sites and statewide for PFAS claims. The settlement will be payable over a twenty five year period, and our portion of the total settlement is $177,000,000 on an NPV basis. Importantly, this settlement also includes AFFF, which was less than 1% of the total settlement amount. The settlement is subject to final court approval. Regarding our separation milestone, progress on the intended spin off of CUNY Electronics continues, and we remain on track for a November 1 separation date.

Lori Koch
CEO at DuPont

In June, we completed the composition of the CUNY board, adding two new members that bring a depth of experience and knowledge of the semiconductor sector that complements the existing diverse set of skills. The community board will be comprised of 10 members, including John Kemp. We filed a first amendment to the Form 10 registration statement with the SEC in June, which included additional pro form a financial information. This will continue to be an iterative process with the SEC as we progress towards separation. Turning to slide four.

Lori Koch
CEO at DuPont

We are pleased to announce that we will be holding an Investor Day on September 18 for DuPont and Community focused on introducing both portfolios and their respective strategies for driving value creation. I continue to be excited about what lies ahead for both future independent companies and the investment potential for each, for the new DuPont as a leading advanced solutions provider and Qunity as a pure play technology solutions leader within the semiconductor value chain. As we look forward to the new DuPont, we've assembled a highly experienced senior leadership team consisting of a healthy mix between in house and external talent who bring great experience in driving growth and margin expansion. To highlight a few of our new leaders, Yaron Blumhard currently leads our health care and water technologies business. Yaron has both internal and external experience in complex global markets with a strong focus on commercial excellence as well as a growth mindset. Beth Ferreira recently joined our team to lead our diversified industrials business. Beth brings deep experience and global perspective in the industrial space with key roles at ITW and IMI, where she successfully led transformation efforts, drove operational efficiencies, and fostered a customer centric culture.

Lori Koch
CEO at DuPont

David Cook just recently joined us from Danaher and will be our chief operations and engineering officer. Dave brings extensive knowledge and operational excellence with a proven track record of driving performance improvement and implementing business systems. The new DuPont will have a more focused portfolio highlighted by high growth health care and water end markets. With a continued emphasis on innovation and customer relationships, we are well positioned to accelerate growth through a more agile and focused organization. With that, I'll now turn the call over to John.

Jon Kemp
Jon Kemp
President - Electronics division for DuPont & CEO - Elect for the planned independent Electronics Company at DuPont

Thanks, Laurie, and good morning, everyone. As we approach our November 1 spin off, Qunity is poised to emerge as a premier pure play technology solutions partner to the semiconductor value chain. With a leading portfolio, a focused business model and global and local scale, I could not be more excited about Cunity's future. Established with decades of innovation, quality, consistency and technical know how, we are a trusted partner to the world's leading semiconductor customers and electronics industry OEMs. Our broad and uniquely positioned portfolio brings end to end solutions and competitive advantages that span the entire electronics value chain, enabling AI applications as well as high performance computing and advanced connectivity.

Jon Kemp
Jon Kemp
President - Electronics division for DuPont & CEO - Elect for the planned independent Electronics Company at DuPont

Qunity is well positioned for growth powered by a large and expanding addressable market and multiple industry tailwinds. I am equally excited about our upcoming Investor Day. At that event, I will share more about our portfolio and strategy, unique competitive advantages and innovation engine to drive long term growth. I will now turn the call over to Antonella to cover the financials and outlook.

Antonella Franzen
SVP & CFO at DuPont

Thanks, John, and good morning, everyone. I am pleased with another quarter of organic growth and margin improvement as continued volume growth across many key end markets and operational focus by our team drove strong financial performance in the quarter, including solid cash conversion. Beginning with second quarter financial highlights on Slide five. Net sales of $3,300,000,000 increased 3% versus the year ago period on 2% organic sales growth. Organic sales growth consisted of a 4% increase in volume, partially offset by a 2% decline in price.

Antonella Franzen
SVP & CFO at DuPont

Currency was a 1% benefit in the quarter. From a segment view, both segments saw organic sales growth with Electronics Co and Industrials Co, up 61%, respectively. Organic growth during the quarter was led by high single digit growth in Interconnect Solutions and Healthcare and Water Technologies, along with mid single digit strength in semi. From a regional perspective, Asia Pacific delivered 4% organic sales growth year over year. Organic sales were up 2% in Europe and 1% in North America.

Antonella Franzen
SVP & CFO at DuPont

Second quarter operating EBITDA of $859,000,000 increased 8% versus the year ago period as organic growth and productivity benefits were partially offset by growth investments. Operating EBITDA margin during the quarter of 26.4% increased 120 basis points year over year. Turning to free cash flow. We delivered transaction adjusted free cash flow of $433,000,000 and related conversion of 93 percent in the quarter. This was in line with our expected acceleration.

Antonella Franzen
SVP & CFO at DuPont

Turning to Slide six. Adjusted EPS for the quarter of $1.12 per share increased 15% from $0.97 in the year ago period. Higher segment earnings of $0.11 drove the year over year increase, along with a lower tax rate, which resulted in a $04 benefit. Turning to segment results, beginning with Electronics Co. On Slide seven.

Antonella Franzen
SVP & CFO at DuPont

Second quarter net sales of $1,200,000,000 increased 6% versus the year ago period on both a reported and organic basis due to an 8% increase in volume, partially offset by a 2% decrease in price. Currency was about flat during the quarter. At the line of business level, organic sales for semiconductor technology were up mid single digits on continued strong end market demand driven by advanced nodes and AI technology applications. Semi demand was better than expected, driven by tiny shifts of about 15,000,000 from the third quarter into the second quarter, primarily in China. Interconnect Solutions also posted another strong quarter with organic sales up high single digits, reflecting continued demand from AI driven technology ramps and benefits from content and share gains across advanced packaging solutions.

Antonella Franzen
SVP & CFO at DuPont

Operating EBITDA for Electronics Co. Of $373,000,000 was up 14% versus the year ago period as organic growth and lower legal costs were partially offset by growth investments to support advanced node transitions and AI technology ramps. Operating EBITDA margin during the quarter was 31.9%, up two twenty basis points versus the year ago period. Turning to Slide eight. Industrials.co second quarter net sales of $2,100,000,000 were up 1% versus the year ago period on both a reported and organic basis as 2% volume growth was partially offset by a 1% decline in price.

Antonella Franzen
SVP & CFO at DuPont

Currency was about flat during the quarter. For the second quarter, health care and water sales were up high single digits on an organic basis versus the year ago period with strong growth in both businesses. Diversified industrial sales were down low single digits on an organic basis due primarily to softness in construction market. Operating EBITDA for Industrials Code during the quarter of $5.00 $9,000,000 was up 3% versus the year ago period on organic growth and productivity gains. Operating EBITDA margin during the quarter was 24.4%, up 50 basis points from the year ago period.

Antonella Franzen
SVP & CFO at DuPont

Turning to Slide nine, which outlines our latest view on 2025 financial guidance. From a top line perspective, the midpoint of our full year total company net sales guidance of $12,850,000,000 remains unchanged as currency benefits are offset by volume softness, primarily due to a delayed recovery in construction end markets. We are raising the midpoint of our full year operating EBITDA and adjusted EPS guidance to $3,360,000,000 and $4.4 per share respectively, driven by our stronger second quarter performance, which more than offsets the net impact of tariffs now incorporated into the outlook. The net tariff impact assumed in the 2025 is currently estimated as a $20,000,000 headwind or $04 per share, equally split between the third and fourth quarter. Our updated guidance assumes no earnings benefit related to currency fluctuations versus the prior guide given our geographic cost base.

Antonella Franzen
SVP & CFO at DuPont

For the third quarter, we estimate net sales of about $3,320,000,000 operating EBITDA of about $875,000,000 and adjusted EPS of $1.15 per share, which includes a $02 headwind related to tariffs and a $05 year over year headwind related to tax. Our third quarter guidance assumes about 3% organic sales growth versus the prior year, led by continued growth in health care, water and electronics end markets, partially offset by continued weakness in construction end markets. Overall, another solid quarter and strong first half of the year. I want to thank our employees for delivering these results and for their ongoing support of the separation process. With that, we are pleased to take your questions.

Antonella Franzen
SVP & CFO at DuPont

And let me turn it back to the operator to open the Q and A.

Operator

And with that, ladies and gentlemen, we'll take our first question from Scott Davis of Melius Research.

Scott Davis
Chairman, CEO & Founding Partner – Multi-Industry Research at Melius Research LLC

Good morning, everyone. Laurie and Antonella.

Antonella Franzen
SVP & CFO at DuPont

Hey, good morning.

Scott Davis
Chairman, CEO & Founding Partner – Multi-Industry Research at Melius Research LLC

I just wanted to drill in a little bit on industrials because in three months, it's going to be a stand alone. The 1% price, would I assume that's mostly just due to the tieback weakness and some price you have to kind of give up in that business when material costs are down?

Lori Koch
CEO at DuPont

Yes. Scott. No. It's more related to the price that we took through the inflationary period and having to give back a little bit as the raw material environment resolved. So it really was more in the diversified industrial space.

Lori Koch
CEO at DuPont

There really wasn't anything in the in that tieback or health care space. So we look to reduce that price headwind as we go through this year just as we lap some of the concessions that started in 2024.

Scott Davis
Chairman, CEO & Founding Partner – Multi-Industry Research at Melius Research LLC

Okay. And will there be an effort to capture price to offset the tariff impacts then as well, Lori?

Lori Koch
CEO at DuPont

We do have some, but the majority of the reductions is related to supply chain moves, so we're able to move product around to avoid the tariffs. There is a little bit of surcharges that we put in to offset, but the majority of the benefit reducing the gross headwind down to the $20,000,000 net headwind is from supply chain move.

Scott Davis
Chairman, CEO & Founding Partner – Multi-Industry Research at Melius Research LLC

Okay. That's it for me. I'll pass it on. Thank you. Best of luck in the spin.

Antonella Franzen
SVP & CFO at DuPont

Thank you. Thanks. Thank you.

Operator

Alright. Next up, we have Jeff Sprague of Vertical Research Partners.

Jeffrey Sprague
Founder & Managing Partner at Vertical Research Partners

Hey. Thank you. Good morning, everyone.

Lori Koch
CEO at DuPont

Good morning, Jeff.

Jeffrey Sprague
Founder & Managing Partner at Vertical Research Partners

Hey. Good morning. Hey. On on the settlement, obviously, nice to see that done. Very interesting comment, right, that AFFF was 1% of the settlement amount.

Jeffrey Sprague
Founder & Managing Partner at Vertical Research Partners

You've made a long time argument, right, that you shouldn't really be embroiled in AFFF to a significant degree. But I just wonder how we should read that across. One could maybe guess that New Jersey was so big and complicated and there was so much going on that AFFF considerations were really way down the pecking order, but perhaps not. Would just I'd love your thoughts on how to read that 1% across the other outstanding AFFF kind of open issues that you're dealing with.

Lori Koch
CEO at DuPont

Yeah. We were definitely happy to announce the settlement and get another one behind us. And, you know, the real important piece for us was that it's paid over a twenty five year period. So the the cash flows related to the settlement will be material to the overall DuPont cash flows at any period. So But to your question, the settlement amount that was related to AFFF is in line with where we said the original Water District settlement case would be, with about 3% to 7% of the total headwind belonging to DuPont.

Lori Koch
CEO at DuPont

So if you take our portion that's related to AFFF and compare it to the three m announcement earlier in New Jersey, it's in that 5% range, so right in the middle of that three to 7%. So that was really important for us to get out there to kind of give an indication of where future settlements and states where we didn't have a site could land with respect to the overall landscape.

Executive

And, Jeff, we have one more state where we have a site where we've done significant remediation, and we continue to. So at some point, you'll probably see something there. That will be North Carolina. But every other state is a triple F and should fall, as Lori said, as this one did, in between that 3% to 7%. And then remember, the 3% to 7%, we're onethree of the three percent to 7% at DuPont.

Executive

And one of the other things we liked about this, and Lori mentioned, it was over twenty five years. So I think there's opportunities to structure things like that for the others.

Jeffrey Sprague
Founder & Managing Partner at Vertical Research Partners

Yes. That's great to hear. And then just back to the brighter side of Industrial Co. Just looking at health care and water, were they up collectively high single digits or both individually were up high single digits? But really my real question is just I would assume we're kind of through the inventory liquidations that have been weighing on those end markets.

Jeffrey Sprague
Founder & Managing Partner at Vertical Research Partners

But can you give some color on that? Have we recoupled the end demand? Anything else going on in the channel there? And just how you see, you know, the back half playing out in those businesses?

Lori Koch
CEO at DuPont

Yeah. No. They were both up nicely. So health care was a little bit ahead of water with respect to growth, but both up nicely. And as you had mentioned, they're decoupling from the lapping of the destock that happened in both RO on the water side and then in medical packaging on the tieback side.

Lori Koch
CEO at DuPont

So really starting to get to a nice position. As we look to the back half of the year, we'll continue to expect outsized growth versus the rest of the portfolio in health care and water. Really, a lot of opportunities on the water side just given the secular trends around access to clean water and desalination and on the the health care side just with the aging population. And we've also been pretty clear that we'll look to add to those pieces of the portfolio as we go forward from an m and a perspective. So really starting to try to bolster that piece today.

Lori Koch
CEO at DuPont

It's about 40% of the portfolio. We'll look to increase that as we, can advance some of our m and a activity.

Jeffrey Sprague
Founder & Managing Partner at Vertical Research Partners

We've had some people play in health care mention, know, uncertainty about, you know, Medicaid, Medicare reimbursements and the like. You're not seeing any of that sort of pressure in your business?

Lori Koch
CEO at DuPont

No.

Jeffrey Sprague
Founder & Managing Partner at Vertical Research Partners

Great. Thank you.

Antonella Franzen
SVP & CFO at DuPont

You're welcome.

Operator

Alright. Next up, we have Steve Tusa of JPMorgan.

Steve Tusa
Steve Tusa
Managing Director at JP Morgan

Hi, good morning.

Lori Koch
CEO at DuPont

Good morning Steve. Morning

Steve Tusa
Steve Tusa
Managing Director at JP Morgan

on this the electronics trends that are going on out there, there's just a lot of mixed messages.

Steve Tusa
Steve Tusa
Managing Director at JP Morgan

How do you see this cycle in totality? Are you guys at kind of like a normalized run rate of growth? Are we still like are we at a bottom in some of the consumer markets and therefore things can accelerate? Like what is the do you think the broad messaging on the electronic side?

Jon Kemp
Jon Kemp
President - Electronics division for DuPont & CEO - Elect for the planned independent Electronics Company at DuPont

Thanks, Steve. Great question. And I know there's been a lot of discussion already over the last couple of weeks as lots of industry players have reported already. What I would say is that we continue to be in a fairly mixed environment. Really, all of the growth so far for the last several quarters is really coming from AI driven applications across advanced nodes, advanced packaging and data center.

Jon Kemp
Jon Kemp
President - Electronics division for DuPont & CEO - Elect for the planned independent Electronics Company at DuPont

Most of the rest of the electronics economy kind of remains relatively weak. I think we're starting to see the green shoots of stabilization and recovery on the lagging edge parts of the market. And we expect kind of slow improvement as we move through the back half of the year for the more industrial focused, lagging edge semiconductor nodes. And then we still have a relatively weak consumer environment where consumer devices are expected to be up kind of low single digit. So we're really happy with the growth that we've seen and the position of our portfolio with advanced technologies and data centers and advanced packaging.

Jon Kemp
Jon Kemp
President - Electronics division for DuPont & CEO - Elect for the planned independent Electronics Company at DuPont

But as we go forward and we start to see broader recovery, I think there's plenty of opportunity to see continued improvement.

Steve Tusa
Steve Tusa
Managing Director at JP Morgan

And then just one follow-up to that. If you I guess there were some news around some changes in the way that they're assembling and manufacturing some of these chips with, I guess, direct to the Board type of process. I'm certainly not an expert on this. I'm not sure if you guys have heard about that or looked at it and what that would mean for kind of your content in general on some of these new chips if they change that process?

Jon Kemp
Jon Kemp
President - Electronics division for DuPont & CEO - Elect for the planned independent Electronics Company at DuPont

Yes. Steve, look, I think that those type we've said for a long time that we see convergence across the technology roadmaps between the chip fabrication and the semi roadmaps as well as the printed circuit board roadmaps. And that kind of converges mostly in the advanced packaging space. But because we have a really nice position kind of on both ends of that spectrum, we're able to sit down at the table with our customers and understand their end to end manufacturing process, their system integration and really work with them to solve problems. And to your point, we're seeing an increased number of engagements broadly with all of the industry leaders to help solve those challenges across both sides of our portfolio.

Steve Tusa
Steve Tusa
Managing Director at JP Morgan

Great. Thanks a lot. Good luck.

Operator

Alright. Next up, we have Chris Parkinson of Wolfe Research.

Christopher Parkinson
Managing Director at Wolfe Research, LLC

Great. Thank you. John, if I could just ask that question slightly differently. When I take a step back and I look at the environment heading into 2026, I think most people are aware of the kind of the node transitions. But when you think about your portfolio and where you stand and what you're seeing in terms of second half growth rates and where you think you could ultimately be, could you just quickly comment on what you're seeing across semi advanced packaging and ICS in terms of data center, HPC and hyperscalers?

Christopher Parkinson
Managing Director at Wolfe Research, LLC

It seems like there's some diverging growth rates, but things should ultimately be moving in the right direction over the next twelve months. So I'd love to hear your thoughts on that. Thank you.

Jon Kemp
Jon Kemp
President - Electronics division for DuPont & CEO - Elect for the planned independent Electronics Company at DuPont

Yes, Chris. Thanks for the question. I think you're absolutely right. The hyperscalers, the most part, seem to continue to be very robust in their investments and continuing to put in capacity. And we see ongoing node migrations to support those investments from our customers.

Jon Kemp
Jon Kemp
President - Electronics division for DuPont & CEO - Elect for the planned independent Electronics Company at DuPont

We're really excited as we get into the second half of the year on the node migrations, particularly at N2 as well as some of the HBM, whether that's 3E or four on the DRAM side. We're really well positioned with content gains on both N2 and on the HBM side. So we see that as net positive as those more advanced nodes start to scale. And then to the comment I made earlier, as we start to see a broader market recovery both in the more industrial parts of the market and the consumer parts of the market as we start to see some of those refresh cycles tick up, obviously that will be a nice plug as well. As it gets into more of 2026, stay tuned for that.

Jon Kemp
Jon Kemp
President - Electronics division for DuPont & CEO - Elect for the planned independent Electronics Company at DuPont

As we mentioned, we'll be doing Investor Day in mid September and we'll provide a lot more color on the trends that we're seeing kind of in the second half of the year and heading into next year.

Christopher Parkinson
Managing Director at Wolfe Research, LLC

Thank you for the extra detail.

Operator

All right. Next up we have John McNulty of BMO Capital Markets.

John McNulty
John McNulty
MD - Chemicals Analyst at BMO Capital Markets

Yes. Thanks for taking my question. Wanted to dig into Healthcare and Water a little bit more. The high single digit growth, certainly looks like it did better than what we saw from most in Water and actually most in Healthcare as well. I guess, can you speak to the drivers that you're seeing there?

John McNulty
John McNulty
MD - Chemicals Analyst at BMO Capital Markets

Which of them are kind of industry or end market driven? And which ones are maybe some of your own initiatives that may be helping to accelerate the growth?

Lori Koch
CEO at DuPont

Thanks. So a little bit was the recovery. So this was probably the last quarter that we would see the outsized number because of the lapping of the destock last year on the RO side and on the Medical Packaging side and then also on the Livio side. So on the biopharma side, we're seeing nice growth there. But underlying, it really just had goes back to the megatrends, and we're really well positioned to take advantage of those.

Lori Koch
CEO at DuPont

So we've got really great customer relationships. We're leading positions in really all the end markets that we compete in. We've done a really nice job on the water side to really shore up our position in China. So we had mentioned that last year, we saw a bit of a destock, especially within the distributor channels that led to negative growth in 2024, and we quickly corrected that and got us back on track to see really nice share regain within the China on the RO side. So it's really just being well positioned in a nicely growing market.

Lori Koch
CEO at DuPont

And as I had mentioned, we'll continue to try to add to that portfolio so that we can continue to drive outsized growth for the new DuPont.

John McNulty
John McNulty
MD - Chemicals Analyst at BMO Capital Markets

Got it. Okay. And then maybe just the second question, just look, splitting up a company has a lot of things to do, as I'm sure you're all seeing. I guess, does M and A and building up a list of assets for potential acquisition and the team to evaluate them, where does that fit kind of in your to do list? And how should we be thinking about that?

John McNulty
John McNulty
MD - Chemicals Analyst at BMO Capital Markets

And how are the boards thinking about that when the assets actually do split come November?

Lori Koch
CEO at DuPont

Yes. So obviously, the first priority for us is getting Unity separated. So we're well on track with that separation. We'll have the go live internally on October 1 and then, obviously, the formal separation on November 1. But our strategy organization and a lot of, you know, my time and Antonella's time is spent looking at making sure we've got the right pipeline from an MA perspective to be proactive when we have the opportunity.

Lori Koch
CEO at DuPont

So we spend a lot of time discussing this with the board around where the key components are. There's a lot of fragmentation left within the health care space that we'll look to continue to take advantage of. Obviously, we completed Spectrum and Donnatal the past couple of years that really gave us nice positions in the the med device space, and we'll look to add on there and the same in water. So, you know, making the decision early earlier this year to keep water portfolio was the right one, and we'll continue to add to it. So it's a key focus of our strategy team.

Lori Koch
CEO at DuPont

They're not really involved in the separation work that goes on, so they can obviously dedicate their full time to looking and scouting out new opportunities for us.

John McNulty
John McNulty
MD - Chemicals Analyst at BMO Capital Markets

Thanks very much for the color.

Antonella Franzen
SVP & CFO at DuPont

Mhmm.

Operator

Alright. So next up, we have David Begleiter of Deutsche Bank.

David Begleiter
David Begleiter
Director at Deutsche Bank

Thank you. Good morning. John, just in Internet Connect Solutions, sorry, organic sales growth did slow versus Q1 or the rate of growth did slow. Can you talk to why that occurred?

Jon Kemp
Jon Kemp
President - Electronics division for DuPont & CEO - Elect for the planned independent Electronics Company at DuPont

Yes. I think it's really just the year over year comp. So 2024, we were still kind of in the midst. The recovery hadn't really started yet. And so 2024 was a pretty easy comp.

Jon Kemp
Jon Kemp
President - Electronics division for DuPont & CEO - Elect for the planned independent Electronics Company at DuPont

We started to see acceleration in growth and the recovery, especially on the AI and advanced packaging side, really starting in the second quarter and then continuing through the 2024. So ICS has now posted several really strong quarters on the back of some great wins and share gains in both advanced packaging and data centers, and we expect that momentum to continue into the back half of the year.

David Begleiter
David Begleiter
Director at Deutsche Bank

Perfect. And Laurie, in the PFAS news yesterday, you're agreeing to buy rights to insurance proceeds from Chemours. Can you discuss why you're doing that and what that means for potential future support from DuPont to Chemours? Thank you.

Lori Koch
CEO at DuPont

Yeah. So together with Corteva, we did that to ensure that, you know, Chemours had the ample liquidity to be able to make the payments over the next five years, and I think they were making statements covered them through 2030. So they should be in a really nice position to be able to make those payments as they come due. And I think reiterating what we had said earlier, just the twenty five year payment schedule was really key to that announcement and sets the precedent, hopefully, for for future announcements. So that was really the reason behind it.

Lori Koch
CEO at DuPont

We, you know, we obviously had the MOU broadly governing the payments between the three parties, and I think it's been working really well for us.

Executive

Yeah. And and and we're also highly confident we're gonna recover the insurance money, so it's it's not a freebie. We'll get paid back on that.

Steve Tusa
Steve Tusa
Managing Director at JP Morgan

Thank you.

Operator

Alright. Next up, we have Josh Spector of UBS.

Josh Spector
Josh Spector
Executive Director - Chemicals Equity Research at UBS Group

Yes. Hi. Good morning. I wanted to ask a question for John about the mix in electronics. I think one of the learnings from us from the Form 10 filings was the greater share of China exposure within Qunity.

Josh Spector
Josh Spector
Executive Director - Chemicals Equity Research at UBS Group

It's about 34%, almost double where some of the peers are. And I think some of the commentary in the industry is higher exposure to leading edge nodes, which helps drive above average growth. Can you just square that view versus higher exposure in China? And why that is, I guess, good exposure in your opinion? Thanks.

Jon Kemp
Jon Kemp
President - Electronics division for DuPont & CEO - Elect for the planned independent Electronics Company at DuPont

Yes. Thanks, Josh. So when you look about China for Acunity, last year, and I think this is what's in the Form 10, we had about $1,400,000,000 It's just over 30,000,000,000 It's about a third of our total sales. When you look at that, more than half of that is really coming from the ICS part of the portfolio and the PCB assembly. And that's just a function of where that part of the market is and the preponderance of printed circuit board and assembly manufacturing in the world is taking place in China.

Jon Kemp
Jon Kemp
President - Electronics division for DuPont & CEO - Elect for the planned independent Electronics Company at DuPont

And so it's somewhat natural that our position with the technology leaders in that space would give us some outside sales in China. And then on the semi side, about nominally, it's about $650,000,000 A part of that is going to multinational companies who are manufacturing in China. And then we've seen the startup of a lot of new fabs in China over the last couple of years. And we're well positioned in the start up environment because of the quality and the reputation of our materials. So that's what's fueled a lot of the growth that we've seen specifically in China.

Jon Kemp
Jon Kemp
President - Electronics division for DuPont & CEO - Elect for the planned independent Electronics Company at DuPont

As we look forward, we've said over the last couple of quarters, we've said we expect a normalization of growth in China. I would expect that to come down to be kind of if you take kind of 2024 and the acceleration out, typically we would expect to be about 30% of sales in China and I think that's kind of where we'll normalize too. That's pretty consistent with others in the industry. And I think China is a large and growing market in electronics and we're well positioned to win in China. And we'll particularly in, like I said, in some of the circuit board and assembly technologies where we've got local teams on the ground there and we're doing a lot of local for local type strategies.

Jon Kemp
Jon Kemp
President - Electronics division for DuPont & CEO - Elect for the planned independent Electronics Company at DuPont

As supply chain shift based on kind of geopolitical or other requirements, we've got a really good global position and we'll shift with our customers as those supply chains evolve over time.

Josh Spector
Josh Spector
Executive Director - Chemicals Equity Research at UBS Group

Thanks. That's very helpful. I wanted to ask separately just if you can comment at all on if there is a process on Arimind's divestments. And if so, I guess, how how you're thinking about in the context of an Investor Day in one months? Point Is there a goal to maybe have a firm view of if that's in or not the portfolio before that happens to make an easier communication story for you on the RemainCo DuPont?

Josh Spector
Josh Spector
Executive Director - Chemicals Equity Research at UBS Group

Or is this just ongoing, and we'll see where it ends up?

Lori Koch
CEO at DuPont

Anna, thanks. I mean, no comment. Our focus right now, obviously, as I've mentioned, is getting community out the door on November 1. So no comment on the error, misspeculation. We have been pretty clear, though, that we'll look to shift the focus of the portfolio towards the the health care and the water and that we had incremental portfolio work that we would probably be doing for new DuPont.

Lori Koch
CEO at DuPont

So, know, I'll kinda leave it at that. So no incremental comments to the news out there.

Operator

Okay. Thank you. Mhmm. Next up, we have John Roberts of Mizuho.

John Roberts
John Roberts
Managing Director at Mizuho Financial Group

Thanks. Let me ask this maybe a different way. The agreement with Chemours and Corteva has a minimum EBITDA requirement. So if you do decide to further focus for main stores, how much EBITDA could you divest without going below the minimum requirement? Or does the lower leverage that you're gonna have at MainCo signal that you're gonna do acquisitions first that might give you some headroom over that minimum EBITDA requirement?

Lori Koch
CEO at DuPont

Yes. So we'll reset the minimum EBITDA between Q and A and new DuPont at separation, and that will kind of set the new minimum floor for each of those entities. So there will be a cushion in each side if there wanted to be incremental divestments to be made to be able to to morph the portfolio. So there is room there at the outset. Obviously, the intent, I think, on both organizations, if there if there were divestments, would be to redeploy the proceeds in m and a to continue to grow so that you don't run into problems with the Corteva side letter agreement.

Lori Koch
CEO at DuPont

But there will be some cushion at the outset. So, you know, today, our combined EBITDA is over, so each of them will have an over.

John Roberts
John Roberts
Managing Director at Mizuho Financial Group

Thank you.

Operator

Thanks. Mhmm. Alright. Next up, we have Alexey Yefremov of KeyBanc Capital Markets. Alexei, your line is now open. Perhaps you have us on mute, Alexei.

Antonella Franzen
SVP & CFO at DuPont

I think we can just move to the next question.

Operator

Will do. Patrick Cunningham of Citi.

Patrick Cunningham
Patrick Cunningham
VP & Senior Analyst at Citi

Hi. Good morning, everyone. Morning. You had pretty robust margin performance in Industrials and posting pretty strong incremental margins despite price down. Can you help us think about the margin progression for the second half given you've lapped the bulk of destocking and maybe have some additional mix normalization there?

Antonella Franzen
SVP & CFO at DuPont

Yes. We have had very strong margin performance, and I would say better margin performance than we initially anticipated, at the beginning of the year. And quite honestly, when you look at our updated guidance and you kinda take a look at where we're at, I would say on an overall basis, although we expect about 70 basis points of margin expansion from an underlying basis. So when you kinda put to the side the impact of tariffs and the impact of FX, it's actually more of a 100 basis points of margin expansion. So we're definitely doing better than we had originally anticipated.

Antonella Franzen
SVP & CFO at DuPont

And to your point, focusing on industrials co explicitly, you know, although our organic growth has been relatively low, the team is very focused on productivity, which is clearly helping drive the incremental margins. And particularly in the second quarter, I would say very strong incrementals in that 70% range, and we'll continue to post nice margins on the Industrial side.

Patrick Cunningham
Patrick Cunningham
VP & Senior Analyst at Citi

Got it. That's helpful. And then just a follow-up on Industrial, so on pricing. Just to clarify, we should expect less of a drag from price in the second half. And now that this will be a stand alone business, how should we think about pricing across the sub businesses in a more normalized environment?

Antonella Franzen
SVP & CFO at DuPont

Yes. So as Lori mentioned earlier so one, yes, we will continue to see pricing be less of a component, of that in terms of price going down. As Lori mentioned earlier, where we have been seeing some of the the pricing is on the diversified industrial side. Because when you take a look back at the last couple of years, we had some really strong pricing that clearly more than offset, the impact of some of the increased costs that we had. So we always take a look at the trade off between volume and price, and you always gotta look at each business individually when you're doing that from a line of business level.

Antonella Franzen
SVP & CFO at DuPont

And what's most important at the end is that we continue to grow the business from an organic perspective and continue to have healthy margins.

Patrick Cunningham
Patrick Cunningham
VP & Senior Analyst at Citi

Great. Thank you so much.

Operator

Alright. Next up, we have Michael Sison of Wells Fargo.

Michael Sison
Michael Sison
Managing Director at Wells Fargo Securities

Hey. Good morning. Just for Industrial Co, you know, volumes and EBITDA performance this year has been, you know, much more stable than my traditional chemical coverage. Anything else to point out to folks, as you as you look to maybe shift that SIC code to a to to industrials or or manufacturing versus chemicals that that you that you might highlight at your analyst day, but just give us maybe your preview of the case there, given the results this year.

Antonella Franzen
SVP & CFO at DuPont

Yeah. I think when you kinda take a look at our portfolio, it's pretty clear that IndustrialsCo is an industrial company and not a chemical company, and I think that kinda shows through clearly within our performance. So when you take a look at kind of the composition of IndustrialsCo and 40% of it being in health care and water, And then even when you look at the diversified side, although there are a couple of different components within that piece of port the portfolio, it's clearly much more akin to an industrial portfolio. And I think that that's very clear. We are continuing to progress down the path relative to to the GICS code.

Antonella Franzen
SVP & CFO at DuPont

It will be looked at, and we'll see ultimately where we land. But I think that there's no question that we're an industrials company.

Michael Sison
Michael Sison
Managing Director at Wells Fargo Securities

Great. And a quick follow-up for Electronics Co. Can you remind us, you know, kind of where we're at in terms of, how much the portfolio is is is in advanced nodes and, you know, how much AI will continue to drive the growth there, down the road?

Jon Kemp
Jon Kemp
President - Electronics division for DuPont & CEO - Elect for the planned independent Electronics Company at DuPont

Yes. Michael, so for advanced nodes, we have about 35% of our semiconductor exposure is in advanced nodes, which compares to about kinda 20% of the total industry. So nice outsized outperformance there, which is kinda contributing to us growing better than the market. On the AI side, you know, what we've said before is AI, high performance computing and data center is about 15% of our portfolio, and it's growing nicely. In the second quarter, for example, we saw growth rates above 20% in that AI data center space. So really pleased by the performance there.

Michael Sison
Michael Sison
Managing Director at Wells Fargo Securities

Great. Thank you.

Operator

And next up, we have Frank Mitsch of Fermium Research.

Frank Mitsch
President at Fermium Research

Yes. Hi. Good morning. So the Chinese investigation into Tyvek was dismissed. I was curious if you have any further dialogue with the Chinese?

Frank Mitsch
President at Fermium Research

And are there any other investigations that they may or may not be undertaking?

Lori Koch
CEO at DuPont

No. No. So we were happy to see it suspended and closed. And so it was when it first came out, news that we quickly said was related to tieback and tieback only, and now it's been suspended. So we were happy with that conclusion.

Frank Mitsch
President at Fermium Research

All right. Terrific. And then the adjustment downward of the tariff impact from $60,000,000 to 20,000,000 Can you provide any more context on the $20,000,000 And could that obviously, things are changing on a daily basis, but any context you can provide around that the expectations for the 20,000,000

Antonella Franzen
SVP & CFO at DuPont

Yes. So to your point, it does tend to change on a day to day basis. But based upon where we're at, I would tell you that what we included in our guidance is based on the ninety day pause that went into effect in May, and we are assuming that that kind of holds through the remainder of the year. There have been a couple other changes, particularly related to tariffs on the EU and India that that we've put into our number. I think the latest news that potentially came out Sunday night into Monday is not necessarily included in the $20,000,000 We continue to watch it closely as do all other companies and continue to work our mitigating actions as we move forward.

Frank Mitsch
President at Fermium Research

Thank you so much.

Operator

Next up, have Vincent Andrews of Morgan Stanley.

Vincent Andrews
Vincent Andrews
Managing Director at Morgan Stanley

Thank you and good morning. Just wanted to revisit Electronics Co. And the margins and maybe some thoughts into 3Q on the margins. You had volume up 8%. It sounds like that had some favorable mix to it as well, but price was down 2% and you still got EBITDA margins up two twenty basis points, which is obviously a robust increase.

Vincent Andrews
Vincent Andrews
Managing Director at Morgan Stanley

There was also a call out of lower legal costs. So could you just help us understand which parts of that are sustainable into where the margin in 3Q should be and how you're able to offset that negative price? Thank you.

Jon Kemp
Jon Kemp
President - Electronics division for DuPont & CEO - Elect for the planned independent Electronics Company at DuPont

Yes. Mitch. Now the price decline that we saw, it's really more of a mix issue with the strong growth that we had in ICS. ICS typically has a slightly lower margin than our semi business. So as the ICS business as a percentage of the sales is a little bit higher, it brings the margin down just a little bit, but not too much, pretty healthy levels.

Jon Kemp
Jon Kemp
President - Electronics division for DuPont & CEO - Elect for the planned independent Electronics Company at DuPont

As it relates to the overall margin potential, very similar to what Antonella commented on earlier, the teams do continue to do a really nice job of balancing the volume and price equation and then driving underlying productivity. Obviously, as we get more volume, we do see nice incrementals as we put more volume through the plant sites. And then the teams continue to drive additional productivity on top of that, giving us opportunity to continue to invest in our technology roadmaps to really sustain and fuel the organic growth of the business. So I feel good about kind of where margins are at, and I think they're in a quite healthy place for us as we look to the second half of the year. Okay.

Vincent Andrews
Vincent Andrews
Managing Director at Morgan Stanley

Thank you. And Antonella, if I could ask you on sundry expense, there's been a pretty big swing in it year to date of about 137,000,000 How much of that is stuff that sort of was onetime items and was excluded versus stuff that is actually in the numbers? And where do you think that they'll wind up being for the full year? They just sort itself out through the course of the year? And is there some way we can tease it out of the guidance that's on, I think, it's slide 14 that you have the the below the line stuff?

Antonella Franzen
SVP & CFO at DuPont

Yeah. So when you look at our sundry expense, one of the big things in there is the market to market on the swap. So that's really what's driving the number within that line item, and that is excluded from our underlying results that we report on.

Vincent Andrews
Vincent Andrews
Managing Director at Morgan Stanley

Okay. Great. Thanks very much.

Operator

Alright. And with that, our final question for today will come from Aaron Viswanathan of RBC Capital Markets.

Analyst

Hi. This is Adam on for Arun. Thanks for taking my question, and congratulations on a great quarter. You guys have already spoken at length about the reasons for the cancellation of the water spend previously. But, you know, looking past the community spend November, are you looking at the water business as as core to the new DuPont?

Analyst

Or do you think you could potentially revisit that in the future?

Lori Koch
CEO at DuPont

No. Thanks for the question. Yes. We definitely see it as core to the new DuPont. So the decision to keep and shore up the growth portfolio and then do DuPont was the right one.

Lori Koch
CEO at DuPont

So we've got roundly 40% of our revenue today in health care and water, and we'll look to add to that to to bolster it and get it increased in the future. So no intent to do anything but grow and invest in the business.

Analyst

Great. Thanks for that. And if I could slip in one more, just to dig a little bit more into the tariff comments. You mentioned that you're taking a lot of mitigating factors. Is that mostly from moving volumes around your network, changes in procurement?

Analyst

I think you also mentioned local for local strategy, or is it a combination of all that? Any additional color on that would be helpful. Thanks.

Antonella Franzen
SVP & CFO at DuPont

Yeah. So I would say about more than 90% of it is really related to supply chain movements. And then as Lori mentioned earlier, there is a small piece related to surcharges.

Analyst

Thank you.

Operator

And with that, ladies and gentlemen, this does conclude our Q and A session. So I'll turn things back over to Anne for concluding remarks.

Antonella Franzen
SVP & CFO at DuPont

Great. Thank you, everyone, for joining our call. For your reference, a copy of our transcript will be posted to DuPont's website. This officially concludes today's call. Thank you.

Operator

Alright, ladies and gentlemen. This does conclude your call. You may now disconnect your lines, and thank you again for joining us today.

Executives
    • Jon Kemp
      Jon Kemp
      President - Electronics division for DuPont & CEO - Elect for the planned independent Electronics Company
Analysts
    • Ann Giancristoforo
      VP - IR, Corporate FP&A, Strategic Finance at DuPont
    • Lori Koch
      CEO at DuPont
    • Antonella Franzen
      SVP & CFO at DuPont
    • Scott Davis
      Chairman, CEO & Founding Partner – Multi-Industry Research at Melius Research LLC
    • Jeffrey Sprague
      Founder & Managing Partner at Vertical Research Partners
    • Executive
    • Steve Tusa
      Managing Director at JP Morgan
    • Christopher Parkinson
      Managing Director at Wolfe Research, LLC
    • John McNulty
      MD - Chemicals Analyst at BMO Capital Markets
    • David Begleiter
      Director at Deutsche Bank
    • Josh Spector
      Executive Director - Chemicals Equity Research at UBS Group
    • John Roberts
      Managing Director at Mizuho Financial Group
    • Patrick Cunningham
      VP & Senior Analyst at Citi
    • Michael Sison
      Managing Director at Wells Fargo Securities
    • Frank Mitsch
      President at Fermium Research
    • Vincent Andrews
      Managing Director at Morgan Stanley
    • Analyst
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