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 September 30, 2024 of $3.2 billion, up 4 percent from $3.1 billion for the three months ended September 30, 2023, due to a 5 percent increase in volume and a 2 percent increase related to portfolio actions partially offset by 2 percent declines in local price and product mix and 1 percent unfavorable currency impacts. The increase in portfolio actions was mainly attributable to the acquisition of Spectrum in August 2023, and the acquisition of Donatelle Plastics in July 2024. The volume increase in Electronics & Industrial (up 11 percent) was partially offset by Corporate & Other (down 4 percent). Local price and product mix declined slightly across all regions. Currency was down 1 percent compared with the same period last year driven by most regions.

Net sales for the nine months ended September 30, 2024 and 2023 were approximately $9.3 billion and $9.2 billion, up 1 percent. The slight increase was due to a 3 percent increase related to portfolio actions and a 1 percent increase in volume partially offset by a 2 percent decline in local price and product mix, and a 1 percent unfavorable currency impact. The portfolio actions are primarily related to the Spectrum Acquisition. The volume increase in Electronics & Industrial (up 7 percent) was partially offset by Water & Protection (down 5 percent) and Corporate & Other (down 2 percent). The local price and product mix decrease was primarily driven by 2 percent declines in both Asia Pacific and EMEA. Currency was down 1 percent compared with the same period last year, driven by Asia Pacific (down 2 percent).

Cost of Sales

Cost of sales was $2.0 billion for both the three months ended September 30, 2024 and 2023. Cost of sales remained relatively flat for the three months ended September 30, 2024 primarily due to higher cost of sales from increased sales volume and the incremental impact of the Spectrum Acquisition, offset by decreases in cost of sales related to increased productivity and lower raw material costs.

Cost of sales as a percentage of net sales for the three months ended September 30, 2024 was 63 percent compared with 64 percent for the three months ended September 30, 2023. The slight decrease as a percentage of sales for the three months ended September 30, 2024 as compared with the same period of the prior year was primarily due to lower raw material costs and increased productivity partially offset by the incremental impact of the Spectrum Acquisition.

Cost of sales was $5.9 billion for the nine months ended September 30, 2024, down slightly from $6.0 billion for the nine months ended September 30, 2023. Cost of sales decreased for thenine months ended September 30, 2024 primarily dueto increased productivity and lower raw material, logistics and energy costs offset by the incremental 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 nine months ended September 30, 2024 was 64 percent compared with 65 percent for the nine months ended September 30, 2023. The slight decrease as a percentage of sales for the nine months ended September 30, 2024 compared to the prior periodwas primarily dueto increased productivity and lower raw material, logistics and energy costs offset by the incremental impact of the Spectrum Acquisition and raw material inventory write-offs in connection with the 2023-2024 Restructuring Program.

Research and Development Expenses ("R&D")

R&D expenses totaled $134 million in the third quarter of 2024, up from $128 million in the third quarter of 2023. R&D as a percentage of net sales was consistent period over period at 4 percent for the three months ended September 30, 2024 and 2023.

R&D expenses totaled $393 million in first nine months of 2024, up from $380 million in the first nine months of 2023. R&D as a percentage of net sales was consistent period over period at 4 percent for the nine months ended September 30, 2024 and 2023.

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

SG&A expenses were $387 million in the third quarter of 2024, up from $360 million in the third quarter of 2023. SG&A as a percentage of net sales remained consistent at 12 percent for the three months ended September 30, 2024 and 2023. The increase for the three months ended September 30, 2024 as compared with the same period of the prior year was primarily due to higher variable compensation, higher personnel-related expenses and the incremental cost from the Spectrum Acquisition.

For the first nine months of 2024, SG&A expenses were $1,189 million up from $1,058 million in the first nine months of 2023. SG&A as a percentage of net sales increased period over period at 13 percent and 12 percent for the nine months ended September 30, 2024 and 2023, respectively. The increase for the nine months ended September 30, 2024 as compared with the same period of the prior year was primarily due to higher variable compensation, incremental costs from the Spectrum Acquisition and an increase in legal expenses.

Amortization of Intangibles

Amortization of intangibles was $149 million in the third quarter of 2024, down from $155 million in the third quarter of 2023. In the first nine months of 2024, amortization of intangibles was $449 million, relatively consistent from $448 million in the same period of the prior year. The decrease for the three months ended September 30, 2024 as compared with the same period of the prior year was primarily due to the absence of amortization in 2024 from fully amortized assets.

Restructuring and Asset Related Charges - Net

Restructuring and asset related charges - net were $21 million in the third quarter of 2024, up from $8 million charges in the third quarter of 2023. The activity in the third quarter of 2024 is primarily related to the 2023-2024 Restructuring Program, while the activity in the third quarter of 2023 is primarily related to the 2022 Restructuring Program.

In the first nine months of 2024, restructuring and asset related charges - net were $68 million up from $39 million charges in the same period last year. The activity in the first nine months of 2024 is primarily related to the 2023-2024 Restructuring Program, while the activity in the first nine months of 2023 is primarily related to the 2022 Restructuring Program.

See Note 6 to the interim Consolidated Financial Statements for additional information.

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 $43 million and $9 million for the three months ended September 30, 2024 and 2023, respectively. In the first nine months of 2024, acquisition, integration and separation costs were $51 million, up from $15 million in the same period of the prior year. For the three and nine months ended September 30, 2024, these costs were primarily associated with the Intended Business Separations, while the three and nine months ended September 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 $14 million in the third quarter of 2024, up from $11 million in the third quarter of 2023. In the first nine months of 2024, the Company's share of the earnings of nonconsolidated affiliates was $49 million, up from $40 million in the first nine 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, interest rate swap net interest settlement and certain litigation matters. Sundry income (expense) - net in the third quarter of 2024 was $199 million of income compared with $55 million of income in the third quarter of 2023. The three months ended September 30, 2024, included a $191 million gain related to interest rate swap activity including mark-to-market adjustments. Interest income was $14 million and $34 million for the three months ended September 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 September 30, 2024 included a $19 million net foreign exchange loss while the three months ended September 30, 2023 included a $17 million net foreign exchange gain.

In the first nine months of 2024, sundry income (expense) - net was income of $150 million compared with income of $112 million in the first nine months of 2023. The first nine months of 2024 included a $152 million net gain related to interest rate swap activity including mark-to-market adjustments and $55 million of interest income partially offset by a $74 million loss on debt extinguishment and a $19 million loss on foreign currency exchange. The first nine months of 2023 included interest income of $132 million, partially offset by foreign currency exchange losses of $31 million.

See Notes 7 and 19 to the interim Consolidated Financial Statements for additional information.

Interest Expense

Interest expense was $87 million and $102 million for the three months ended September 30, 2024 and 2023, respectively, and $282 million and $295 million for the nine months ended September 30, 2024 and 2023, respectively. The decrease in interest expense from the prior year is primarily due to the absence of interest expense on the $300 million floating-rate long-term senior unsecured notes that matured in November 2023 and the partial redemption of $650 million aggregate principal amount of the 2038 notes during the second quarter 2024, partially offset by a reduction in capitalized interest.

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 third quarter of 2024 was 18.1 percent, compared with an effective tax rate of 28.7 percent for the third quarter of 2023. The decrease of the effective tax rate for the third quarter of 2024 compared to the third quarter of 2023 was primarily driven by certain discrete tax benefits, including the settlement of an international tax audit in the quarter.

For the first nine months of 2024, the effective tax rate on continuing operations was 27.0 percent, compared with 25.6 percent for the first nine months of 2023. The higher effective tax rate in 2024 thus far was driven by the geographic mix of earnings offset by the U.S. taxation of foreign operations as well as certain discrete tax expenses, including the settlement in the second quarter of an international tax audit for which the Company is partially indemnified.