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DuPont announced financial results for the second quarter 2021.
“Continued positive momentum in almost all of our key end-markets, including semiconductor, smartphones, automotive, and residential construction, enabled us to deliver strong second quarter results ahead of expectations with year-over-year and sequential growth in all three reporting segments,” said Ed Breen, DuPont Executive Chairman and Chief Executive Officer. “Our teams’ intense focus on working closely with customers and suppliers during an environment of global supply chain and logistics challenges and escalating raw material costs was critical to our second quarter results.”
“In addition to solid financial performance, we continue to shift our portfolio and investments toward higher growth and higher margin businesses,” Breen continued. “We closed the divestiture of the Solamet® business at the end of June and on July 1st, we completed the acquisition of Laird Performance Materials which strategically complements our Electronics & Industrial segment. It also further strengthens our ability to address key innovation needs for high frequency connectivity, high performance computing and advanced mobility with sustainable offerings that customers and society demand. Additionally, in line with our balanced capital allocation approach, we de-levered our balance sheet by paying down $2 billion of bonds in May and returned $800 million of capital to shareholders during the quarter through share purchases and dividends.”
Second Quarter 2021 Results
Net sales totaled $4.1 billion, up 26 percent versus the year-ago period as reported and up 23 percent on an organic basis. Sales were up double-digit percent in all three reporting segments driven most notably by the ongoing recovery in key end-markets adversely impacted by the COVID-19 pandemic in the year-ago period such as automotive, construction and industrial, along with continued strength in areas such as semiconductor and smartphones. On a regional basis, organic sales growth was 20 percent or greater in all regions.
GAAP EPS from continuing operations totaled $1.04 on GAAP income from continuing operations of $564 million, versus GAAP EPS from continuing operations of $(3.26) on a GAAP loss from continuing operations of $(2.4) billion in the year-ago period. The improvement is driven mainly by the absence of a prior year goodwill impairment charge, higher segment earnings and a significantly lower share count.
Operating EBITDA(1) was $1.06 billion, up 53 percent versus operating EBITDA(1) in the prior year. The improvement was driven by the ongoing recovery in key end-markets impacted by the COVID-19 pandemic in the year-ago period, most notably automotive, and the absence of approximately $150 million in charges recorded in the year-ago period associated with temporarily idling certain facilities to align supply with demand, which were partially offset by the absence of a $64 million gain recorded in Corporate in the year-ago period associated with a joint venture customer settlement. Operating EBITDA improvement drove 460 basis points of operating EBITDA margin expansion. Adjusted EPS(1) was $1.06, up about 240% versus adjusted EPS(1) in the year-ago period due to higher segment results, a significantly lower share count, and lower interest expense partially offset by a higher base tax rate.
Operating cash flow for the quarter was $440 million and included working capital headwinds of about $140 million led by higher inventories and higher accounts receivable balances on increased sales. Capital expenditures of $216 million resulted in free cash flow(1) of $224 million.
Second Quarter 2021 Segment Highlights
Electronics & Industrial
Electronics & Industrial reported net sales of $1.3 billion, up 19 percent from the year-ago period. Organic sales were up 17 percent on a 17 percent increase in volume. Currency was a 2 percent tailwind.
Sales gains were led by Industrial Solutions, up mid-twenties percent versus the year-ago period, reflecting broad-based demand most notably in displays, electronics, healthcare and automotive markets. Interconnect Solutions also delivered growth over 20 percent driven by continued demand for higher content in premium, next-generation smartphones, along with improvement in industrial markets. Continued strength in Semiconductor Technologies resulted in double-digit volume growth driven by new technology ramps in advanced nodes within logic and foundry and higher demand for memory in servers and data centers.
Operating EBITDA for the segment was $424 million, an increase of 26 percent from operating EBITDA of $336 million in the year-ago period driven by volume gains. Operating EBITDA margins increased 190 basis points from the year-ago period.
Third Quarter and Full Year 2021 Outlook
The Company is changing its treatment of intangible amortization expense for non-GAAP reporting. Beginning third quarter 2021, DuPont’s adjusted EPS(1) will exclude all amortization of intangible assets and will no longer differentiate based on the origin of the intangibles. The Company’s outlook for adjusted EPS(1) provided below has been updated to reflect this change in non-GAAP reporting, including the retroactive impact of the change on first half 2021 results. For comparative purposes, a recast of historical periods is included beginning on page 14 of this release.
“As a result of our strong first half of the year, our expectations of continued momentum within our key end-markets, and confidence in our team’s ability to navigate through global supply chain constraints, we are raising our guidance for the year for net sales, operating EBITDA and adjusted EPS,” said Lori Koch, Chief Financial Officer of DuPont. “In addition, we are adjusting our guidance to reflect the July 1st acquisition of Laird Performance Materials, the divestiture of the Solamet® business at the end of June and the impact of the retroactive reporting change that we are making for adjusted EPS. For full year 2021, we now estimate net sales to be between $16.45 billion and $16.55 billion and operating EBITDA between $4.21 billion and $4.26 billion. Our outlook for full year adjusted EPS on the new basis is now in the range of $4.24 to $4.30 per share, and includes a full year benefit estimated at $0.27 per share related to the amortization reporting change.”
“We estimate third quarter 2021 net sales to be between $4.18 billion and $4.23 billion, operating EBITDA between $1.06 billion and $1.08 billion and adjusted EPS on the new basis between $1.11 and $1.13 per share.”