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With spin-offs ahead, DuPont predicts $12.4 B sales for 2024

Katie Tabeling August 27, 2024

WILMINGTON — DuPont is forging ahead with the long work of spinning out two divisions into their own companies while its materials company reports that business is trending up in a large part due to semiconductors. In late July, DuPont executives reported to investors that revenue is at $3.2 billion, or a 2% increase of

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DuPont announced it projects $12.45 billion in revenue this year, lifted by strong sales in semiconductors and AI technology. | DBT FILE PHOTO BY JACOB OWENS[/caption] WILMINGTON — DuPont is forging ahead with the long work of spinning out two divisions into their own companies while its materials company reports that business is trending up in a large part due to semiconductors. In late July, DuPont executives reported to investors that revenue is at $3.2 billion, or a 2% increase of where the multinational company stood at that point in 2023. But while sales were considered flat due to a drop in prices, DuPont CEO Lori Koch noted that semiconductor development and sales was driving the company’s success. Projections put the company at $12.45 billion in net sales for the year, according to DuPont officials. Semiconductor sales alone were up more than 20% and officials say it will continue lifting up the electronics and industrials division in 2025. “A lot of it is coming from the AI [artificial intelligence] acceleration that’s felt in both the semi and the interconnect solutions business. In total, AI is about $250 million of sales for us today,” Koch told investors on July 31. “The majority of the growth we saw within electronics was market recovery, but there was probably about $30 million sales in electronics in pre-buy, especially within Asia Pacific, as some of the new fabrications come online.” Koch added that she expects that the performance would continue to ramp up in the third quarter into the end of the year. But still, that news was offset by slower sales in water solutions in China which uses DuPont technology for filtration purposes. “We are well into the recovery phase from last year's inventory corrections in most key end markets and electronics may be setting up for a prolonged positive cycle,” said Ed Breen, the chairman of DuPont. He officially transitioned to that role from CEO earlier this summer. In the meantime, the work is gearing up to divide up the company’s $4 billion electronics business and $1.5 billion water filtration business. That would leave “New DuPont” with its portfolio of diversified industrial products that generated $6.6 billion sales last year. DuPont has set up project management teams to manage the spin offs. Right now, the company is working to stand up legal entities for the two new companies with separate IT and financials. DuPont executives and the board of directors also anticipate to appoint executives for the electronics and water divisions, as well as standing up its own board, by early 2025. The company is also weighing considerations on how to best design the capital structure of the three companies, including how it may handle the current debt load including potential payouts for the “forever chemicals” lawsuits. Last year, DuPont, Chemours and Corteva settled a lawsuit on contamination of drinking water of Perfluoroalkyl and polyfluoroalkyl substances (PFAS) for as much as $1.18 billion. Financial analysts have been cautious about DuPont’s spin off, but Koch said that each of the DuPont spin-offs would share in the lawsuit settlement that was outlined with Corteva. Last year, the company paid out $400 million to a water district settlement fund. However, DuPont still faces 3,000 personal injury claims from firefighters in South Carolina who were exposed to PFAS in firefighter foam. Breen said that DuPont’s share of the liability with Chemours is small, as the company was not the manufacturer. “I don’t expect a settlement this year, but we’re working hard to settle as much as the rest of the PFAS claims as we can by the time of spin off to get them out clean,” Breen said. DuPont also redeemed $650 million in bonds with a maturity date of 2038 to enter into an interest rate swap to hedge against risk on the rates on longer-termed bonds. In June, the company entered into an agreement for a fixed-to-floating interest rate, converting one bond of $2.15 billion to a floating rate based on the secured overnight financing rate until 2048. The other agreement converted $1 billion in bonds on similar terms until 2038. “To the extent that it becomes necessary to repay these bonds, the new swaps hedge the risk of higher debt repayment costs that would occur in a lower interest rate environment,” Breen said. After the announcement of the spin-offs, credit rating agencies Standard & Poor’s and Fitch Ratings placed DuPont on a negative credit watch, while Moody’s Investor Service considered the company to have a negative outlook. Bond ratings are important because higher grades translate into lower interest costs in repayment of the bonds. The agencies look at a variety of criteria, including a company's finances, management, debt load, long-term costs and other factors. Companies analysts believe better weather recessions or economic downturns are in turn seen as safer risks and awarded higher ratings. Standard & Poor’s and Fitch have set long-term ratings of BBB+ - DuPont is now considered to have “adequate capacity to meet financial commitments” but is more subject to economic conditions than other companies. Moody’s issued a long-term score of Baa1, meaning it considers DuPont to be subject to moderate risk.

With spin-offs ahead, DuPont predicts $12.4 B sales for 2024

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