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 June 30, 2024 of $3.2 billion, up 2 percent from $3.1 billion for the three months ended June 30, 2023, due to a 4 percent increase related to portfolio actions and a 2 percent increase in volume partially offset by 2 percent declines in local price and product mix and unfavorable currency impacts. The increase in portfolio actions was attributable to the acquisition of Spectrum in August 2023. The volume increase in Electronics & Industrial (up 10 percent) was mostly offset by Water & Protection (down 4 percent) and Corporate & Other (down 4 percent). Currency was down 2 percent compared with the same period last year, driven by Asia Pacific (down 3 percent). Local price and product mix declined slightly across all regions.

Net sales for both the six months ended June 30, 2024 and 2023 were approximately $6.1 billion. The six months ended June 30, 2024 remained flat when compared to the six months ended June 30, 2023, due to a 4 percent increase related to portfolio actions offset by a 2 percent decrease in volume, and 1 percent declines in local price and product mix, and unfavorable currency impacts. The portfolio actions are related to the Spectrum Acquisition. The volume decrease in Water & Protection (down 7 percent) was partially offset by Electronics & Industrial (up 5 percent). The local price and product mix decrease was driven by 2 percent declines in Asia Pacific and EMEA. Currency was down 1 percent compared with the same period last year, driven by Asia Pacific (down 2 percent) slightly offset by EMEA (up 1 percent).

Cost of Sales

Cost of sales was $2.0 billion for both the three months ended June 30, 2024 and 2023. Cost of sales remained relatively flat for the three months ended June 30, 2024 primarily due to a decrease in cost of sales driven by lower logistics, raw material costs, and increased productivity offset by an increase in cost of sales related to the impact of the Spectrum Acquisition.

Cost of sales as a percentage of net sales for the three months ended June 30, 2024 was 63 percent compared with 66 percent for the three months ended June 30, 2023. The decrease as a percentage of sales for the three months ended June 30, 2024 as compared with the same period of the prior year was primarily due tolower logistics cost, raw material costs and increased productivity offset by the impact of the Spectrum Acquisition.

Cost of sales was $3.9 billion for the six months ended June 30, 2024, down slightly from $4.0 billion for the six months ended June 30, 2023. Cost of sales decreased for thesix months ended June 30, 2024 primarily due to lower raw material, logistics and energy costs offset by the impact of the Spectrum Acquisition and raw material inventory write-offs in connection with the 2023-2024 Restructuring Program.

Cost of sales as a percentage of net sales for the six months ended June 30, 2024 was 64 percent compared with 66 percent for the six months ended June 30, 2023. The decrease as a percentage of sales for the six months ended June 30, 2024 compared to the prior periodwas primarily due to lower raw material costs offset by the impact of the Spectrum Acquisition.

Research and Development Expenses ("R&D")

R&D expenses totaled $134 million in the second quarter of 2024, up from $125 million in the second quarter of 2023. R&D as a percentage of net sales was consistent period over period at 4 percent for the three months ended June 30, 2024 and 2023.

R&D expenses totaled $259 million in first six months of 2024, up from $252 million in the first six months of 2023. R&D as a percentage of net sales was consistent period over period at 4 percent for the six months ended June 30, 2024 and 2023.

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

SG&A expenses were $418 million in the second quarter of 2024, up from $358 million in the second quarter of 2023. SG&A as a percentage of net sales was relatively consistent period over period at 13 percent and 12 percent for the three months ended June 30, 2024 and 2023, respectively. For the first six months of 2024, SG&A expenses were $802 million up from $698 million in the first six months of 2023. SG&A as a percentage of net sales increased period over period at 13 percent and 11 percent for the six months ended June 30, 2024 and 2023, respectively. The increase for the three and six months ended June 30, 2024 as compared with the same periods of the prior year was primarily due to higher personnel-related expenses, an increase in legal expenses and incremental costs from the Spectrum Acquisition.

Amortization of Intangibles

Amortization of intangibles was $151 million in the second quarter of 2024, up from $146 million in the second quarter of 2023. In the first six months of 2024, amortization of intangibles was $300 million, up from $293 million in the same period of the prior year. The increase for the three and six months ended June 30, 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 $8 million in the second quarter of 2024, down from $17 million charges in the second quarter of 2023. The activity in the second quarter of 2024 is primarily related to the 2023-2024 Restructuring Program, while the activity in the second quarter of 2023 is primarily related to the 2022 Restructuring Program.

In the first six months of 2024, restructuring and asset related charges - net were $47 million up from $31 million charges in the same period last year. The activity in the first six months of 2024 is primarily related to the 2023-2024 Restructuring Program, while the activity in the first six months 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 $5 million and $6 million for the three months ended June 30, 2024 and 2023, respectively. In the first six months of 2024, acquisition, integration and separation costs were $8 million, up from $6 million in the same period of the prior year. For the three and six months ended June 30, 2024, these costs were primarily associated with the Spectrum Acquisition while the three and six months ended June 30, 2023 were associated with the execution of activities related to strategic initiatives, including the Spectrum Acquisition.

Equity in Earnings of Nonconsolidated Affiliates

The Company's share of the earnings of nonconsolidated affiliates was $23 million in the second quarter of 2024, up from $14 million in the second quarter of 2023. In the first six months of 2024, the Company's share of the earnings of nonconsolidated affiliates was $35 million, up from $29 million in the first six months of 2023. The increase in 2024 is due to higher earnings in the underlying nonconsolidated 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, losses on debt extinguishments and assets, non-operating pension and other post-employment benefit plan credits or costs, interest rate swap mark-to-market adjustments and certain litigation matters. Sundry income (expense) - net in the second quarter of 2024 was $87 million of expense compared with $28 million of income in the second quarter of 2023. Interest income was $21 million and $52 million for the three months ended June 30, 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 June 30, 2024, included a $74 million loss on debt extinguishment and $39 million loss of interest rate swap mark-to-market adjustments. The three months ended June 30, 2024 included a $4 million net foreign exchange loss while the three months ended June 30, 2023 included a $28 million net foreign exchange loss.

In the first six months of 2024, sundry income (expense) - net was an expense of $49 million compared with income of $57 million in the first six months of 2023. The first six months of 2024 included a $74 million loss on debt extinguishment and $39 million loss of interest rate swap mark-to-market adjustments, partially offset by interest income of $41 million. The first six months of 2023 included interest income of $98 million, partially offset by foreign currency exchange losses of $48 million.

Interest Expense

Interest expense was consistent at $99 million and $98 million for the three months ended June 30, 2024 and 2023, respectively, and $195 million and $193 million for the six months ended June 30, 2024 and 2023, respectively.

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 second quarter of 2024 was 40.5 percent, compared with an effective tax rate of 24.4 percent for the second quarter of 2023. For the first six months of 2024, the effective tax rate on continuing operations was 36.2 percent, compared with 23.9 percent for the first six months of 2023. The higher effective tax rates in 2024 were driven by the geographic mix of earnings offset by the U.S. taxation of foreign operations as well as certain discrete tax expenses, including an international statutory tax settlement for which the Company is partially indemnified.