Executive Summary / Key Takeaways

• DuPont is undergoing a significant transformation, strategically focusing its portfolio on high-growth, technology-driven markets like Electronics, Healthcare, and Water, culminating in the planned spin-off of its Electronics business (Qnity) by November 1, 2025.
• The company's differentiated technology, particularly in advanced semiconductor materials, water filtration, and specialized industrial products, provides quantifiable performance advantages and underpins its competitive positioning and growth strategy, especially in high-demand areas like AI and advanced computing.
• Recent financial performance, highlighted by a 5% net sales increase and 16% Operating EBITDA growth in Q1 2025, demonstrates solid execution and leverage from volume recovery, particularly in ElectronicsCo, despite headwinds in some Diversified Industrials markets.
• Management maintains its full-year 2025 guidance, anticipating continued organic growth driven by ElectronicsCo (6-7%) and IndustrialsCo (3-4%), while actively mitigating potential tariff impacts estimated at $60 million net for the year.
• Navigating legacy PFAS liabilities and macroeconomic uncertainties remains a key focus, with ongoing legal proceedings and environmental remediation efforts potentially impacting financial condition and cash flows, although significant settlements have been reached.

A Century of Reinvention: Forging a Focused Future

DuPont de Nemours, Inc. stands at a pivotal juncture in its long and storied history, actively reshaping its portfolio to concentrate on high-growth, technology-driven markets. From its origins, the company has evolved, notably through the significant separations of Chemours (CC) and Corteva (CTVA), which redefined its core operations and allocated substantial legacy liabilities. More recently, strategic divestitures like Mobility Materials and Delrin have simplified the structure, while targeted acquisitions such as Laird, Spectrum, and Donatelle Plastics have bolstered its presence in key areas like advanced electronics, thermal management, and medical devices. This deliberate portfolio optimization strategy is now culminating in the planned separation of the Electronics business, aiming to unlock distinct value propositions for investors.

At the heart of DuPont's strategy lies its differentiated technology. The company is not merely a materials supplier but a provider of advanced solutions embedded in complex value chains. In ElectronicsCo, this includes proprietary materials for semiconductor fabrication (CMP pads and slurries, photoresists) and advanced packaging, offering quantifiable benefits like enhanced processing speeds and higher yields crucial for advanced nodes and AI applications. For instance, management highlights that their exposure to advanced nodes and AI drives growth 200 to 300 basis points above the general semiconductor market index (MSI) due to the higher material content required per chip. Innovations like the Ikonic 9000 semiconductor polishing pad are designed for efficiency and productivity, offering high removal rates and longer lifespans. In IndustrialsCo, the Water business leverages technologies like Reverse Osmosis, Ion Exchange, and Ultrafiltration, essential for addressing global water scarcity and purification needs in diverse applications from municipal water to microelectronics manufacturing and potential future opportunities like Direct Lithium Extraction (DLE) and PFAS cleanup. The Safety Solutions business, featuring brands like Kevlar and Tyvek, provides advanced materials for worker protection, with products like Kevlar EXO offering 30% higher strength than standard aramid fibers for ballistic protection. This technological depth allows DuPont to command premium positioning and work closely with customers on next-generation applications.

The competitive landscape for DuPont is varied, reflecting its diverse portfolio. In advanced materials, it competes with large, diversified chemical companies like Dow Inc. (DOW) and BASF SE (BAS), as well as more specialized players like 3M Company (MMM) and others in specific niches. Compared to Dow and BASF, which often leverage scale and cost efficiency, DuPont differentiates through performance and innovation. While Dow and BASF may offer materials at lower upfront costs, DuPont's products aim to provide superior performance metrics, such as higher efficiency or durability, which can translate to lower total cost of ownership for customers. For example, DD's semiconductor materials are noted for enabling higher efficiency in chip packaging, a critical factor for performance-driven customers, even if they come at a higher initial price. In areas like water filtration, DuPont's comprehensive technology portfolio (all four key filtration technologies) provides a breadth of solutions that some competitors may lack. However, competitors like 3M, with strong brand recognition and distribution, pose challenges in certain industrial and safety markets. Financially, DuPont's focus on high-performance, R&D-intensive materials often results in higher R&D spending (around 4-5% of net sales in Q1 2025) compared to some peers, which supports its technological edge but can pressure operating margins relative to companies focused purely on cost leadership. The planned separation of ElectronicsCo is intended to create a pure-play entity (Qnity) that can be more directly compared to and valued alongside other specialized semiconductor and electronics materials providers, potentially attracting an investor base more attuned to the dynamics and valuation metrics of that specific industry.

Performance Reflecting Strategic Momentum

DuPont's first quarter 2025 results demonstrate the impact of market recovery and strategic execution. Net sales increased 5% year-over-year to $3.066 billion, primarily driven by an 8% increase in volume. This volume growth was notably strong in the ElectronicsCo segment, which saw sales jump 14% to $1.118 billion, fueled by robust demand in Semiconductor Technologies (advanced nodes, AI applications, and strong China demand) and Interconnect Solutions (broad-based recovery, AI ramps, content and share gains). This performance underscores the benefits of DuPont's exposure to secular growth trends in electronics.

IndustrialsCo, the segment encompassing the retained businesses, saw net sales remain flat at $1.948 billion. Volume gains in Healthcare & Water Technologies (up low-teens organically, driven by broad-based Healthcare growth and Water strength, particularly in reverse osmosis) were offset by volume declines in Diversified Industrials (down mid-single-digits organically due to softness in construction and automotive markets). This highlights the mixed macroeconomic environment impacting different parts of the portfolio.

Despite the flat top-line in IndustrialsCo and a significant increase in acquisition, integration, and separation costs ($125 million in Q1 2025 vs. $3 million in Q1 2024, primarily for the Electronics Separation), DuPont delivered a 16% increase in Operating EBITDA, reaching $788 million, with the margin expanding to 25.7%. This strong operating leverage reflects the impact of volume growth in ElectronicsCo, increased productivity, and savings from prior year restructuring actions, particularly benefiting IndustrialsCo's profitability despite flat sales. Cost of sales as a percentage of net sales improved to 63% from 65% in the prior year, indicating better operational efficiency and product mix.

The reported net loss of $582 million in Q1 2025, compared to net income of $197 million in Q1 2024, was significantly impacted by a non-cash goodwill impairment charge of $768 million related to the Aramids reporting unit within the IndustrialsCo segment. This impairment, triggered by the 2025 Segment Realignment and the resulting change in reporting unit composition, highlights the sensitivity of carrying values established during prior large-scale transactions like the DWDP Merger to subsequent portfolio changes and market conditions. Excluding significant items, adjusted EPS increased, reflecting the underlying operational strength.

Liquidity remains a focus, with $1.762 billion in cash and cash equivalents at March 31, 2025.

Cash provided by operating activities from continuing operations was $382 million in Q1 2025, down from $493 million in the prior year, primarily due to increased cash used by net working capital and higher transaction costs, partially offset by higher earnings.

The company maintains access to debt capital markets and revolving credit facilities, including a new 364-day facility expected in May 2025 and an amendment to its 5-year facility, providing financial flexibility. Total debt stood at $7.174 billion at March 31, 2025, with $1.849 billion due within one year.

The company is considering potential debt actions in connection with the Electronics separation.

Outlook and the Path Ahead

DuPont is maintaining its full-year 2025 financial guidance, projecting net sales between $12.8 billion and $12.9 billion, Operating EBITDA between $3.325 billion and $3.375 billion, and adjusted EPS between $4.30 and $4.40 per share. This outlook assumes mid-single-digit organic sales growth for the total company, with ElectronicsCo expected to lead with 6% to 7% organic growth, driven by continued strength in semi (AI, advanced nodes) and Interconnect Solutions. IndustrialsCo is projected for 3% to 4% organic growth, supported by acceleration in medical devices, stabilization in medical packaging and biopharma, and a strong year for Water.

Management acknowledges potential headwinds, notably the estimated net cost impact of tariffs, currently projected at $60 million for 2025 (approximately $0.10 per share), primarily affecting the second half. While this is excluded from the formal guidance range due to ongoing mitigation efforts and implementation uncertainty, it represents a factor to watch. The company is actively pursuing mitigation actions, including production shifts and sourcing alternatives, aiming to substantially offset the estimated $500 million annualized gross exposure.

A significant element of the forward outlook is the planned Intended Electronics Separation, targeted for November 1, 2025. This separation is expected to create two more focused companies: Qnity (ElectronicsCo) and the new DuPont (IndustrialsCo). Management is making progress on key separation workstreams, including legal entity standup, IT separation, and talent selection, and expects to announce executive leadership and board appointments for the future Electronics company by the end of Q1 2025. The separation is intended to be tax-efficient and is subject to customary conditions.

However, the path forward is not without risks. Macroeconomic conditions, including potential shifts in demand in construction and automotive markets, remain a factor for IndustrialsCo. Geopolitical risks, particularly concerning trade disputes and export controls involving China (a significant market representing ~19% of 2024 consolidated net sales), could impact sales and supply chains. The ongoing investigation by China's State Administration for Market Regulation into the Tyvek business, while currently assessed as having limited financial exposure (<1% of sales), highlights the potential for regulatory challenges.

Furthermore, managing legacy liabilities, particularly related to PFAS, continues to be a material consideration. While significant progress has been made through settlements like the Water District Settlement and the Ohio MDL/State settlements, numerous other legal matters and environmental remediation obligations remain. The company has accrued $277 million for probable environmental costs, but inherent uncertainties mean that actual costs could exceed accrued amounts, potentially impacting financial condition and cash flows, although the MOU limits Qualified Spend under that agreement.

Conclusion

DuPont is executing a clear strategy to transform into a more focused, higher-growth specialty materials company. The planned separation of the Electronics business is a major catalyst expected to unlock value by creating two distinct entities aligned with specific market dynamics and investment profiles. The company's core strength lies in its differentiated technology across Electronics, Healthcare, and Water, providing quantifiable performance advantages that support its competitive position, particularly in high-demand areas like AI and advanced computing. Recent financial results demonstrate solid operational execution and leverage from volume recovery, especially in the ElectronicsCo segment. While macroeconomic headwinds in certain industrial markets and the ongoing management of legacy PFAS liabilities and tariff impacts present challenges, management's maintained full-year guidance reflects confidence in continued organic growth and the ability to mitigate risks. For investors, the story is one of strategic evolution, leveraging technological leadership, and the potential for value creation through portfolio optimization, making DuPont a compelling case to watch as the separation date approaches.