DuPont de Nemours Inc

RESULTS OF OPERATIONS

The following table summarizes sales variances by segment and geographic region from the prior year:

1. Corporate & Other includes activities of the Retained Businesses and previously divested businesses.

2. Europe, Middle East and Africa.

The Company reported net sales for the three months ended March 31, 2024 of $2.9 billion, down 3 percent from $3.0 billion for the three months ended March 31, 2023, due to a 5 percent decrease in volume, a 1 percent decrease in local price and product mix, and a 1 percent unfavorable currency impact, partially offset by a 4 percent increase in portfolio actions. The volume decrease was primarily driven by Water and Protection (down 10 percent). Currency was down 1% compared with the same period last year, driven by Asia Pacific (down 2 percent) and slightly offset by EMEA (up 1 percent). Local price and product mix declined slightly in Asia Pacific (down 2 percent) and EMEA (down 1 percent) but was slightly offset by Latin America (up 2 percent). The increase in portfolio actions was attributable to the acquisition of Spectrum in August 2023.

Cost of Sales

Cost of sales was $1.9 billion for the three months ended March 31, 2024, down slightly from $2.0 billion for the three months ended March 31, 2023. Cost of sales decreased for the three months ended March 31, 2024 primarily due to decreased sales volume, lower raw materials, logistics and energy costs and a favorable currency impact partially offset with the impact from the Spectrum Acquisition and $25 million of raw material inventory write-offs in connection with the 2023-2024 Restructuring Program.

Cost of sales as a percentage of net sales for the three months ended March 31, 2024 was 65 percent compared with 66 percent for the three months ended March 31, 2023. The decrease as a percentage of sales for the three months ended March 31, 2024 as compared with the same period of the prior year was primarily due to lower raw material, logistics and energy costs offset by sales volume and the impact of the Spectrum Acquisition.

Research and Development Expenses ("R&D")

R&D expenses totaled $125 million in the first quarter of 2024, down from $127 million in the first quarter of 2023. R&D as a percentage of net sales was consistent period over period at 4 percent for the three months ended March 31, 2024 and 2023.

Selling, General and Administrative Expenses ("SG&A")

SG&A expenses were $384 million in the first quarter of 2024, up from $340 million in the first quarter of 2023. SG&A as a percentage of net sales was relatively consistent period over period at 13 percent and 11 percent for the three months ended March 31, 2024 and 2023. The increase for the three months ended March 31, 2024 as compared with the same period of the prior year was primarily due to higher expenses driven by the impact from the Spectrum Acquisition and personnel related expenses.

Amortization of Intangibles

Amortization of intangibles was $149 million in the first quarter of 2024, up from $147 million in the first quarter of 2023. The increase for the three months ended March 31, 2024 as compared with the same period of the prior year was primarily due to the amortization of the intangible assets acquired in the Spectrum Acquisition in the third quarter of 2023, partially offset by the absence of amortization in 2024 from fully amortized assets.

Restructuring and Asset Related Charges - Net

Restructuring and asset related charges - net were $39 million in the first quarter of 2024, up from $14 million charges in the first quarter of 2023. The activity in the first quarter of 2024 is primarily related to the 2023-2024 Restructuring Program, while the activity in the first quarter of 2023 is primarily related to the 2022 Restructuring Program.

Acquisition, Integration and Separation Costs

Acquisition, integration and separation costs primarily consist of financial advisory, information technology, legal, accounting, consulting and other professional advisory fees. The Company recorded $3 million for the three months ended March 31, 2024 and recorded no cost related to continuing operations for the three months ended March 31, 2023. For the three months ended March 31, 2024, these costs were primarily associated with the Spectrum Acquisition.

Equity in Earnings of Nonconsolidated Affiliates

The Company's share of the earnings of nonconsolidated affiliates was $12 million in the first quarter of 2024, down from $15 million in the first quarter of 2023. The decrease is due to loss from equity earnings from Derby, partially offset by higher equity earnings across other affiliates.

Sundry Income (Expense) - Net

Sundry income (expense) - net includes a variety of income and expense items such as foreign currency exchange gains or losses, interest income, dividends from investments, gains and losses on sales of investments and assets, non-operating pension and other post-employment benefit plan credits or costs, and certain litigation matters. Sundry income (expense) - net in the first quarter of 2024 was $38 million compared with $29 million in the first quarter of 2023. Interest income was $20 million and $46 million for the three months ended March 31, 2024 and 2023, respectively. The decrease in interest income period over period is due to the decreased cash balance in 2024. The three months ended March 31, 2024 included a $4 million net foreign exchange gain while the three months ended March 31, 2023 included a $20 million net foreign exchange loss.

Interest Expense

Interest expense was $96 million and $95 million for the three months ended March 31, 2024 and 2023, respectively. The increase in interest expense from the prior year is primarily due to the reduction in capitalized interest related to a reduction in capital expenditures, partially offset by the absence of interest expense on the $300 million floating-rate long-term senior unsecured notes that matured in November 2023.

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 first quarter of 2024 was 31.5 percent, compared with an effective tax rate of 23.3 percent for the first quarter of 2023. The higher effective tax rate for the first quarter of 2024 was driven by the geographic mix of earnings offset by the U.S. taxation of foreign operations as well as certain one-time discrete tax expenses, including an international statutory tax assessment received for which the Company is indemnified.