DuPont de Nemours, Inc. (DD) Earnings Call Transcript & Summary

Thank you, everyone, for joining us. This is a fireside chat with DuPont and Ed Breen. Before we start, I guess I would like to remind people that if you have questions or a Pigeonhole, there's a link on the left-hand side of your browser. Click that, and a new browser window will pop up. You can ask questions or vote on the existing ones to see what bubbles up to the top. And at the end of this presentation, if you could fill out a Procensus poll on the left side, we would also much appreciate it. So with that, I'm going to hand over to Ed, now back in the driver seat as CEO of DuPont, to do some prepared remarks, and then we'll go to Q&A. Ed?

Great. Thanks, Jonas. And I'm only going to use 3 charts, just to give a little bit of an overview for everyone. And then I'll save most of the time, Jonas, for you and I to do Q&A. That would be more fun. So if we could go to the next slide. Yes. There we go. Just to give you a few highlights here kind of in this COVID environment we're in, what have we been up to. And clearly, the safety of our employees is obviously #1 for us. And just to point out because the Asia market has mostly come back, our office people are all going back to the office now. Our manufacturing sites are all running, including, by the way, the one we have in Wuhan, where all this originated from. So the 12 manufacturing sites in China, up pretty much running 100%, and again, employees back. And the only thing I would stress here is it really does appear we can do this very safely as we go back. We've had 0 COVID cases in all of Asia with all our employees for over 5 weeks now. So we're following all the distancing rules and all the procedures we've put in place, so we feel we can do it very safely. When we talk about maintaining our operations, the only thing I'd point out there, and I think we talked about this on our earnings, Jonas, but our supply chain is in very good shape. We're not having issues. Some logistics issues, we got to work around, some extra airfreight, things like that. But the global supply chain feels pretty darn good, so everything is flowing to our 170 factories around the world, not really having issues there. The one thing that Lori and I did very quickly, though, when this hit, we were going to do it anyway, but we jumped earlier is we did some refinancing here. We put a new credit facility in place for $1 billion. By the way, we don't plan on drawing on it. We just want to have it in place as a cushion, and we did a $2 billion bond deal, so we're in very good shape from a balance sheet standpoint. And we'll probably talk about that more because we have the IFF transaction coming, and that's a whole set of different opportunities for us with the cash that it's going to bring to us. And by the way, it's been great to watch the innovation in all kinds of companies. But in DuPont, we somehow figured out how to double the production of the Tyvek garments. Part of that was just taking it from other industries that were soft, anyway, like shelter, and making more garments for the first responders. But we also figured a way to produce more on one of our lines and upped production an additional 6 million garments, above the 9 million that we kind of did by shifting it to this industry. So we've doubled the output there, really, to help first responders and hospital workers and all out. We did partner with Cummins, by the way. We make some of the filtration that goes in the respirators, and we've been making hand sanitizers out of our N&B business. We switched over some lines, and we've been making face shields with our 3D printing devices in our manufacturing locations, so pretty neat to see what's been going on to help out the world here. If we go to the next slide, I'll just touch on a couple of things real quickly. This is kind of the playbook we're going with. #1 on that playbook was obviously safety, as I said, of our people; number two was get the liquidity in the company where we wanted the balance sheet where we want it, so we have no worries whatsoever. And then operationally, it's -- we're going to make $500 million improvement on working capital this year. The biggest category, obviously, is inventory, and the total opportunity for DuPont is more like $1 billion over a multiyear period, but we're going to get $500 million this year. And then we -- what we did is we deferred, and it's truly deferred. We're not canceling any CapEx, but we're taking CapEx down to $1 billion. We have budgeted $1.3 billion. Last year, we spent $1.5 billion and the reductions are basically some growth initiatives we're just delaying for a period of time, the biggest one being our Tyvek Line 8. Very important for us, we're working on the cost structure, and I really want to stress the G&A and COGS. The $180 million we've committed to take out this year is mostly G&A, and it's all structural that it's going to last. It's coming out. It's not temporary because of what's going on. So it will be a run rate, $180 million good guide. And I think when we get done that, there's always opportunities, but we benchmark, I think, that's the class from a G&A cost structure in the company. The one thing we're not doing is we're not taking down any of our growth spend opportunities in the P&L. So we're going to continue to spend $900 million on R&D, which was our plan, and that's what we spent last year. We've got all of our salespeople around the world in place. We've got all our application engineers in place around the world. So when we come out of some of this softness, I feel like we'll be in a very strong position with new product introductions. I talked about the liquidity situation, feel really good about that. The only other point I'd make on here is the shutdown, slowdown of plants. We made a decision to idle mills in our T&I business because it's mostly the auto industry, and it's obviously very soft right now. We're hurting earnings by $90 million, purposeful decision. So we can generate over $200 million in working capital improvement, and they come out of it very strong without having the inventory there as things pick up. So I think that's it on that slide. If you can move to the next, the last slide. Yes. So just to talk about a few key things here over the next kind of months. Obviously, it's -- maybe doing what we said we're going to do operationally. I feel very good. Again, the team is functioning very well while we're stay at home. We are getting ready to start going back to other facilities in Europe and the U.S., so we have a phased plan to bring people back and a safe plan to bring people back but hit our commitments as we go through the year. We're still very focused on the divestitures. There's a lot of cash sitting there that we want to get our hands on with the noncore assets. There's basically 3 assets left of any significance to sell, and we have interested parties and all. But not to be misleading, I think it's going to take us a little bit longer here in the COVID environment. It's hard for people to do due diligence. They want to visit facilities and sites and all that, and -- but we do have interested strategic parties, so we're still focused on that. And then the big event coming up for us is staying on schedule on the N&B and IFF transaction. It's going to close February 1, next calendar year. We have like 15 different work streams going on. I'm also surprised how well that's going, considering work at home, because most of the people working on it are at home. But all the work streams are right on schedule. Andreas, the CEO of IFF, and I talk every week and have a touch point with each other to make sure everything is clicking along. And we're planning the shareholder vote in September. Most of you would know, we have over 20% shareholder already contracted and saying that they're going to vote for the deal. But we're progressing well, and we have U.S. antitrust approval [indiscernible] filed our first filing with the SEC that you can all see, so everything progressing there. And key to that deal is there's $7.3 billion of cash coming over to DuPont. When that transaction occurs, we will pay $5 billion of debt down for new Remainco DuPont to put our leverage where we want it, which we want to be somewhere between $2.5 billion and $2.75 billion, and then we'll have over $2 billion of excess cash from that transaction alone. And when we pay off that $5 billion, just to highlight the situation where we have no debt payments till the end of 2023, but we're going to be in a great cash position as our operations generate cash, the cash we get from the noncore and the excess cash we get from the IFF deal So with that, why don't we go back to Jonas, and we'll go to Q&A?

Sounds good. Let's start with -- so you're back in the driver seat again. I mean you took some really kind of drastic steps in February where you replaced the both CEO and CFO. Can you talk about what changes were needed within DuPont and where you are on those changes today?

Yes. So let me just mention a couple of things from last year. Guidance was revised a few times. Working capital went backwards by $200 million or $300 million, just to point out a couple of things. And the pace of change was not what the Board was expecting. So Lori and I have now teamed up, and we're just -- we want to execute at a faster pace in the company. And you can -- I think you can see we're doing exactly that. We immediately jumped, as I said, on the liquidity piece. By the way, I feel good about where we were pre, what we just did, but we're really in great shape now. And it's going to be fun to watch because of the cash flow we're going to now have, with no debt payments in -- for a few years. And then we wanted to do a bigger restructuring. We had benchmarked -- I'm a big believer of benchmarking that type of stuff, and I want to be best in class, and there's nothing wrong with taking G&A out of the company. It's not building a product. It's not selling the product for us. And as streamlined as we can get there, we want to get there. And we have some additional ideas, even as we move forward, but we're very quickly getting that $180 million out of the company. And so that was important. And then we have just a much more rigorous program going on, on working capital so that we can stock $500 million out of that as we move forward also. So they're all kind of the key things. It's just the pace, the consistency of performance occurring month in and month out.

And you felt that these would not be executed, unless you were there to direct things?

Yes. So it wasn't happening at the pace that Board thought last year. There was more restructuring we should have done, and we didn't do it. Now we're doing it. Last year was a little bit of softer year for the whole country. And working capital, as I said, went backwards, just to give you 2 big ones. And so we just have a much more rigorous pace occurring as we move forward. And the last 2 months have been pretty incredible, all the things that we've gotten done. So even though we're work at home, we haven't lost any momentum whatsoever.

Okay. So that, I guess, brings us seamlessly to the question of it's -- we're now almost -- well, more than halfway through the quarter. Could you give us an update on how the quarter looks? And what things we're looking at as we're starting to open up again?

Yes. So we kind of told you what April did when we did earnings. Sales were down double digits, but low double digits, and we said that things we didn't think we'd get any worse than kind of mid-teens down. But to give you May so far, May is playing out almost identical to April. The same markets that were up in April are still up in May. The same ones that are down are down. So the down ones, obviously, the biggest one for us is to auto. Oil and gas is soft. Shelter is soft. So obviously, we're watching them because a lot of that's going to bounce off of a very bad bottom. But how much does it come back, we'll have to see. But construction is picking up or is going to begin to pick up here more. Auto is, this quarter, going to be down 50%, industry. So people are now coming back. Production is starting up. So again, the same ones are soft, and the same ones that were hot last -- in April still stayed good. So the electronics market still feels very good. Our order book, we look at that kind of 20 days out because it's a quicker cycle business still looks good. Semiconductor is a key part of that. That's looking good. And I'm also hearing that from other industry players, Jonas, that semis are looking good for everybody right now. Obviously, the N&B business is holding up very, very nicely, that 3% organic growth last quarter, and it's holding up. Probiotics is just really going phenomenal, double-digit growth, both China and North America. And then, obviously, our safety business with our garment, the global sales out there for first responders needing it. That's up over 50%, give or take. So that's still hot. So again, same trends. I think it will be fun now to watch the next couple of months, as things do come back up, when do we start to see some of that.

Okay. You mentioned electronics, the strength both in Q1 and now in Q2. Are you concerned that this is just a temporary restocking surge? Or how do you see this? Is it sustainable?

Yes. So we had talked about this on our earnings. We are planning that there's a little bit of downdraft in the second half of the year. Now remember, semis grew high single digits over the last few months. And I just don't think that's going to continue. So I don't think there's any big drop-off here. I just think there was some prebuy. By the way, when the semi lines get going, they will keep running it till they finish the production front. So I have to think it comes down some, but the world is getting more and more connected. I think the work at home has actually helped up the line, smaller nodes and data center usage and cloud computing and all so -- but again, we are planning that it comes down off of the levels of the line but nothing significant.

Okay. It seems that the -- from investors, the biggest area of interest here is Nutrition & Biosciences. So the first one here, is there any change to the time line of the RMT, whether from COVID or other reasons?

No. It's -- we're right on schedule. Again, there's about 15 different key work streams that are going on. One of the big ones is the IT separation and making sure it ties together with IFF, it works, just to give you one. And we track it literally daily and weekly. And no, we're right on schedule. The target -- we say the first quarter, the target date is actually February 1 to pull the trigger and do it. And again, the shareholder vote will be in September. And then you can see all the filings we've done. By the way, we also, in addition to the filings, it goes through antitrust. We announced the management teams about a week ago, and it's a nice mix of both IFF, senior management and what was the N&B of senior management team. I think it's 6 or 7 from the N&B team that are on the senior team there. So I think that was a real nice mix of global talent the way that played out. We just -- I think as part of that, Jonas, we announced a couple of Board members, John Davidson, Matthias Heinzel, going to join the Board also. So I think that's 2 new great adds from the DuPont end that we said we would pick, so half the Board would come from our side. So we're pretty far down the road. It's going to happen, and it's getting closer and closer.

Okay. So I was curious about Matthias not being on -- being part of the new company management team. As you say, he's going to be in the Board?

Yes. And by the way, this has been something Matthias and I have talked about for probably 1.5 years now. Matthias wants to be a CEO of a company. And by the way, I 110% endorsed Matthias to become a CEO of a company. He's a really talented guy, and the opportunity is not here, and that's what he wants to do. So I totally bless that, wish him well with that, but he really wanted to stay involved, and we wanted him. By the way, Andreas wanted him to stay involved, I wanted him to stay involved. And we thought he's going to be a CEO somewhere. He's got one nice Board for he's on it, and he can be a huge contributor as a Board member. So we're happy about that.

Okay. And you're going to be on the Board as well of the new company, right?

Correct. Yes. So we've now named 3 of our -- I guess, 6. You have me, Matthias, John Davidson, and we will still select a few more. By the way, just so you're here, we did a matrix between an IFF, who's going to be on the Board. Now we know 3 of ours, and we've done a matrix of the skill sets we want to look at. So we'll make sure as we name our next few that we're checking the box on what we really want to have on the Board to make sure we've got the diversity that we want on the Board, diversity, actual diversity. And so we're pursuing that, and we're actively talking to people right now.

Okay. It seems that every time we have this chat, we end up talking about Board seats. I appreciate you having new Board seats to talk about. So everything seems to be proceeding smoothly. Once you've divested N&B, the remaining business, how should we think about the dividend policy when DuPont divested or spun out Chemours? If I remember correctly, the dividend was the same but spread over 2 companies, and then Chemours immediately slashed the dividend to nothing. Should we expect a similar dividend policy for DuPont post-N&B?

Yes, yes, similar. We haven't announced it yet, but it will be in the ZIP code, yes. We're not -- no, that's not going to happen here. It's not...

I didn't imply that new IFF would slash the dividend. I'm just wondering about the dividend for DuPont

Yes. No, no. That's fine. And look, Jonas, the biggest thing, which is interesting right now, when you look at the value of IFF that we just talked about, the value of that, at least to the close of business yesterday, was actually up above where we announced the deal. So we announced the deal, a $26.2 billion value for N&B, and it was actually $26.5 billion, not that, that makes a big difference. But just to say, even with everything that happened in the COVID world and everyone's stock prices, the value of that deal is still $26 billion. By the way, that's with IFF not even trading at a multiple of where the best companies in the industry trade at by quite a bit. So I think there's a big opportunity as we show the market, hey, we can operate the company together perform. I think that company deserves the premium multiple of a top peer set because we are going to be the big company in the industry. So it is an interesting opportunity for our shareholders there alone. But then when you look at New DuPont, the multiple of new DuPont is between 7 and 8x, which is extremely low. And therein lies a great opportunity if we do the right things.

Okay. Before the N&B deals was announced, there's a lot of rumors flying around about divestitures of T&I, E&I, E&C, basically any kind of letter combination. So where are we today? Are you constrained on management capacity to do another big deal? Are you still looking at another big deal?

Yes. So right now, almost all of our attention is on all hands on deck operationally, and that's going to be the case for some months, Jonas. Having said that, we clearly have the focus on noncore, as I said. That's high priority because we want the cash from that. We clearly have opportunities that are tuck-in M&A opportunities. We've studied very hard. We know what they are, out-of-the-water deals we did towards the end of last year. And we definitely know strategically where there's potential opportunities to do something bigger like we did on the N&B deal. But I'm not -- that is not what I'm waking up in the morning focusing on right now. It's been settled down. Let's see how the fall goes with, not DuPont, but the world, make sure everything is stabilized and then coming back. And then if we want to have those strategic conversations, we know exactly what they are.

Okay. So a little bit of a lull, but you expect to come back to that. Okay. That makes sense. Speaking of the noncore, we have seen -- well, I think from my perspective, it surprised me a little actually on divesting the noncore. Some of that seems to be regulatory. The Teijin Films is still not passed, if I understood it correctly. But there are some of these sitting there in your portfolio. What's the holdup to divesting them? Are you getting the right value? Do you need to transform them first?

No. My gut is if COVID hadn't hit, 2 of the 3 remaining would have got -- would have been done by now by the time we sit here today. That has slowed the process down, so let me just leave it at that. People want to do due diligence. They want to go to locations, which you do when you buy a company. And one of them is a little bit of a financing issue it looks like right now in this environment, not that they couldn't get it done, but you want to pull the trigger till you see how the world settles out. So it's various, but there's interested strategic parties in the deals that we've been talking to. And again, we probably would had a couple done if this hadn't hit.

Okay. Are there parts of your noncore that you're reevaluating as part of your restructuring and thinking of putting in noncore?

Well, I won't say never because you watched us last year, we did divest a couple of other things that go for officially noncore that we did. For instance, I think it was earlier in the year, we did European STYROFOAM, which was a really good move to get out of that more commoditized business that we don't want to be in long term. So yes, look, we're always assessing it. There might be more on 2 other things that we would divest. We've been talking about internally but no formal decision at this point in time. But if -- it wouldn't surprise me if there's 1 or 2 other things.

Okay. So looking at the flip side, M&A, you mentioned bolt-on acquisitions. You talked about water. Can we start talking about water a little bit? What is it about water that is so exciting?

Well, it's one of the secular growth areas that we like. I mean water filtration is a hot business. By the way, the dynamic is interesting. There isn't actually that many assets out there. There's literally a handful of them. We think we know how to run them very well. By way, we've taken the margins up from the high teens to the kind of high 20s very quickly. We know how to integrate them. And we just think, secularly, it's a good growth there. It's a great growth area, and by the way, even obviously emerging markets. So it's not just a development world business, but it's an emerging market business. So it's big and -- it can be big all over the world. So we just like the secular trend in that area. By the way, if we could do any more tuck-in M&A there, we would look at it. But we -- by the way, we would look at tuck-in M&A, Jonas, on any of the secular growth areas we like. We like sectors of the electronics market, as you know. We're looking at things there also. We are look -- we look at things on the safety side. We like that secular trend, and that was pre-COVID, by the way. We like it. That whole dynamic is obviously improving right now. So yes, the M&A list, we kind of know where we want to do things if the right opportunities come up and the returns make sense.

Okay. What is your hurdle rate for returns for these tuck-ins?

The hurdle rate on the water deals was not really what I would call an issue because we were buying technology, and we were buying it fairly cheaply. So that was not an issue. But I'm not going to put a hurdle rate on M&A deals. I'm very conservative when I do them. I always look at would I rather buy my shares back than do an M&A deal? It just depends where it is, what we're buying. Is it something really small? Is it the technology? The one advantage I like on the tuck-in deals, and I don't always take this all into account. You've heard me say this before. I don't look at revenue upside all the time. But when you do a tuck-in, you really do get the revenue upside because you're blowing it out over your global footprint. And that's what we can do on the water deals where another company that might have owned it or could have been a smaller company doesn't have that access, so it depends. I look at a lot of parameters when I do it. And I'm -- I always do M&A deals and less of just a little technology play by do the numbers work based on the cost synergies? The revenue is my upside.

Okay. Outside of water, which part of the portfolio are you most excited about? You mentioned E&I. Is there anything else? Or actually, let me rephrase that. What in E&I is that you're excited about? And what, if anything else, would you say?

Well, it's -- I mean, look, we just like the secular trend in the business because it's -- the world is just getting more and more connected. Everything's getting electrified. Go back to our car conversation. We're lightweighting the car. We're electrifying the car. We're putting more content into smartphones and laptops and the data centers. So it just seems that's where the world is headed. I think that's why a lot of these tech companies are obviously trading so well. I mean it's just going there, and we're in a lot of the material behind that happening. So we love that trend. And as the auto -- you've heard us say that the numbers in the auto industry, as you go to electric vehicles or hybrid vehicles, our content really jumps up significantly. By the way, when you go to smartphones, we used to be just $0.50 in a regular kind of cell phone. We're going to go up to like in the $4 range with our -- with the 5G high-end phones with our comm con technology going. So again, just more content being driven in because of what's going on in the world. So we like that whole space. And by the way, I like our T&I space. I like what's in remaining new DuPont. It will come back. It's -- a lot of it is auto related, but it's a great business to be in, and it's going to bounce back. So there's a lot of areas that we like.

Okay. Speaking of automotive, what we've seen in China after the lockdowns ended was driving actually increased, and public transport numbers were down a lot. Is that driving increases in automotive sales as far as you can see? Or do you expect it to?

It's -- yes, Jonas, it's an interesting trend. And finally, I'm chuckling because you're up in the New York City area. I've heard a lot of people trying to figure out how they're going to drive to work up around that area, going forward, that didn't drive to work before. So it is a very interesting trend. I would not say, though, that we have seen any difference yet in our numbers through where we are in May, but I wouldn't expect we would. As the production comes up, we're going to probably lag by, give or take, 60 days, just where we are in the supply chain. So production is definitely coming up in Europe back in the U.S. You've clearly seen it come back in China. Sales have picked up in China. As you said, more driving is happening in China. So I think the next 2, 3 months are going to be really interesting to watch. Our projection, though, I think, is similar to a lot of other people. We would not expect auto sales to be back up to what I'd call historically good levels, like the high $80 millions, the $88 million, $89 million kind of for another couple of years is our -- at least the way we're planning, but we do see a gradual lift of backlog in the way we're kind of planning things.

Okay. The S&C business has some really strong pricing up until recently. What was driving that? And do you expect that to return to strong price growth?

Yes. So the pricing, Jonas, in S&C, if I had to put it in a percentage basis, it was more because we instituted discipline in the business around pricing and really put a good system in place and I'm -- starting maybe 1.5 years ago, and we were getting consistent pricing. It wasn't happening on one area. So it was pretty consistent price movement for us across the platform. So yes, I think with the discipline we put in place and as you launch new products, can we get pricing? Absolutely, we can. For instance, back to the water conversation, I think we think it's surprising there with the technologies we have. So I think we can. One thing, though, I want to clarify on pricing with COVID going on, we are not getting pricing in the safety business. And that was a corporate decision we made. The pricing is the pricing. We're not letting people do anything crazy there. By the way, we sell through distribution a lot in the safety business, and we're monitoring the distributors we sell to make sure that they're not taking advantage of pricing there. So we've been very cautious about that. But yes -- no, it's a business with the discipline we've put in place, we should be able to get pricing.

Fair enough. Sorry, 6 months ago, you wrote a note where we joked about, you can buy a Tyvek suit on Amazon for $6. And that same suit is now, I think, 10x that, but you're not getting that extra benefit.

Trust me, we're not. I personally had monitored, yes.

Fair enough. Can you provide an update on PFOA liabilities? And has there been any progress in the various court cases?

Yes. So the biggest -- well, I shouldn't say the biggest one. The one where there was some movement was the Chemours lawsuit. And the judge ruled in our favor, DuPont's favor, that, that should go to arbitration. I like the arbitration process. I was obviously pleased by that because it's just a quicker process than going through the court system, and I'd like to get it resolved. We feel very, very confident if go into arbitration, how that's going to come down. Having said that, though, we have been in conversations with Chemours for a few months now. We understand each kind of company's key principles that are important to them. And my gut is if we want to, we get to a new agreement between Chemours and Corteva, and we'll see how that plays out kind of in the near future. But the good news is the arbitration is proceeding, and we feel very good about that. There's cases up in Ohio that we would -- at some point here, we think we can get resolved. And the bigger one, Jonas, in my opinion, I know you've written about this quite a bit, and others have. We're named in firefighting foam cases, and I think getting those resolved, a resolution around that is the single biggest issue because there's so many more of those around the country because of the military bases. And the key there, when you really do the study on it, we are -- if we're a player in it all along, we're a very minor player in it because we sold a single surfactant in a 10-year window, starting in 2002 that was used in that industry. We never made firefighting foam ever. It's being made for 70 years, and all these cases are things around military bases. We didn't do anything around military bases. So I think as it plays out, it will get understood that this is not some monumental problem for us. It might be for some other companies that made firefight foam, but it certainly isn't for us.

So can you clarify one thing for me? So when -- you're being sued by state of Michigan, for example, right, for firefighting foam contamination. Who is negotiating with the state of Michigan? Is it you? Is it Chemours? Is it Corteva? Is it an unholy cluster of lawyers sitting together? How does that practically work?

Yes. So it is all 3 companies. Chemours has taken a lead on like, for instance, in Ohio and all -- but it's all 3 companies talking to each other. And by the way, we talk every week, so we're all kind of in it together. So I would say, it's a team effort.

Okay. So getting that arbitration closed then seems to be a precondition for those other court cases to get anywhere. Is that right?

No, no, no. We could -- for instance, we could potentially settle the Ohio cases. We don't need the arbitration to happen to do that. We just have to agree among ourselves, here's how we want to handle it or here's what we're willing to pay. No, we don't need to wait on anything to do that.

Okay. Talking a little bit through the various cost programs and restructuring, it feels like we have been doing cost and restructuring for, say -- when did you started DuPont, 5 years ago now? So the first question is how -- is this all going to fall straight to margin? Or will some of it disappear through inflation, other factors?

Well, Jonas, we have taken a lot of cost out, but there's a lot of cost to take out. I think when I first got to DuPont, now, again, the portfolio was a different portfolio. But we took $1 billion of cost out when we did the merger with Dow, the DuPont portion of it -- now, again, remember FMC came in, the Dow assets came in, so 40% of the portfolio was new coming in. And we took another $1 billion of cost out there and benchmarked pretty darn well at that point. And now, by the way, we're just finishing the tail end, don't forget, of that $1 billion of $165-or-so million hitting this year in that. And then on top of it, we just added $180 million that's coming out this year. And I would say, generally speaking, and that's permanent. Our goal would be, as we go into next year, if there is inflation, for instance, the salary increases, we have productivity moves that will offset that. That's the way I've always tried to run a company, have that in place, so a couple percent opportunity there. And then going forward, our bigger opportunities on the costs side are the continuation of our manufacturing footprint, the time reliability of that footprint. That's really one of the big areas we're focused on as we move forward, and then we'll get some benefit, which we're piecemealing our way through a more integrated ERP system in the company. We're not roughing some big bang here. We're doing the master data program right now that will really help us tie all the Dow and DuPont assets together when we look at procurement opportunities at all. And so we'll pick up some benefits there also. We're personally involved, the senior management in driving savings on the procurement side. So that's -- I mean, that's our biggest spend, so we got to be best in class there also. So that's the other opportunities. And the one item that I think is going to be real interesting, I think I mentioned this on earnings. We're looking at all the SKUs across all our companies. You always find great opportunities there when you look at it, [indiscernible] -- I'm shocked every time I've done it what the opportunities are. We did do it in our water business and made tremendous progress. That was part of us increasing the margins 1,000% over the last couple of years. There's a lot of opportunity there. So that's our next area is to really say, are we best in class or are we world class at the way we're doing this? And if we're not, why aren't we? And let's get into it there. That will be the next big ones.

Okay. So where do you see margins ending up for the company as a whole, post N&B divestment, post noncore divestments?

Well, if you remember, the margins ratchet up -- putting COVID aside and what's going on right now, the margins ratchet up anyway because N&B is generally our lowest margin, EBITDA margin business. Now I don't mean that negatively. We're actually the highest in the industry at, give or take, 24%, but that's below the company being kind of in the high 20s, 27% to 29%, depending where we fall. Look, the -- look, T&I is going to come back, right? And just so putting that aside, it's going to come back as the auto industry, as things pick up again. And that probably is a business that runs in the 23%, 25% range kind of normalized. There is opportunity still as we talked about in S&C because of the factory optimization program we're working on. And as you mentioned, we can get pricing in that business. So there's still opportunity there in that business. And there's a little bit of opportunity in electronics because of mix over time. And one of the things, Jonas, we are focused on is it's just so -- it makes sense. The areas we want to spend our R&D dollars are the secular growth areas we like. And if it happens to be we're going to introduce new products. Therefore, we can get pricing. And mix, over time, is one of the things that going to help up us and we actually look at. We're having that benefit right now in electronics. As semiconductor is hot, we've got a great position in it. It's one of our higher-margin businesses. In N&B, probiotics is our highest margin business, and probiotics is double-digit growth. And we like the secular opportunity in there in the next set of years for human immune health. So if we're spending the money in those right areas, mix, over time, will help us out. And obviously, the last piece I would say to that divest in noncore and you're looking at the aggregate of the company automatically improves the margin profile also.

Okay. So following the N&B divestment, you'll have higher margins, but you will be slightly more cyclical or maybe more -- much more cyclical. That's up to you to decide. What do you see the leverage being at that point, lower, higher, same as today?

Yes. You mean leverage to the bottom line?

Yes. Net debt to EBITDA.

Yes. No. Look, we've been running -- wanting to run it around 2.75. We'll probably be in the 2.5 to 2.75 range, somewhere in there, we're very comfortable with. By the way, Jonas, as I said, we're not going to have another debt payment till I think it's November of 2023, nothing. After we consummate the IFF deal, we're going to be sitting on $2.3 billion of excess cash from that. We're going to be sitting on the cash we generate from operations. Now more of that in 2021 because, this year, we're using cash with the transaction we're doing and all. And then we're going to have cash from the noncore assets, so we're sitting at a really nice spot as we kind of enter into 2021. By the way, I like the spot we're in now, but we're even in a better spot at that point in time. So we've got a fair amount of flexibility.

Well, now, if I remember you correctly, you're somewhat allergic to sitting on excess cash. So what do you think the use is here?

Look, part of that depends on where the stock price is. But with the disconnect right now that I feel is in the multiple of new Remainco-DuPont, we certainly will be looking at share repurchase. But I don't want to mislead anybody that I'm not looking at share repurchase till we get to the fall to see how the world is playing out. I'm not planning anything bad, but I don't know if there's a second coming on this thing and something occurs. So I don't want to take any chances. I think my #1 responsibility is the safety of our people. #2 is the safety of the company. And -- but look, If our multiple is 7x, I think we'd be seriously looking at share repurchase, and by the way, some bolt-on M&A where the right opportunities are there.

How much of the cash is going to be spent on restructuring and separation costs?

In total, about $500 million, and we're already into that spend. So that starts to dissipate as we're kind of getting towards, obviously, at the end of the year as the deal happens. So next year, 2021, Jonas, will be a good -- a normal year. Operations will run, and we'll generate the free cash flow from that, and it's not going into some deal or something like that. So -- yes. We're going to have a lot of flexibility. And by the way, we're going to have the shareholder vote for IFF in September. So we're going to know that we -- we already know it, but it's 100%, we're going to have the cash available as we go into next year. So we'll be reassessing around that point in time, what do we do if we're going to have this excess ability or maybe potentially share repurchase again.

Okay. Do you expect to -- the priorities for DuPont will be any different post -- well, either post-COVID or post-N&B divestment, the new DuPont, if you will?

Well, no, not really, but it depends on what path we go down. So I would say, look just overall, if I can just use the word operational excellence. I want this company and we're very capable of it. And by the way, we've been doing it the last 2, 3 months. Again, I want it operationally to run very efficiently and benchmark best in class on all the metrics that we think are important to track, by the way, including, as we've committed to improvement on ROIC year in and year out, because, in aggregate, we're not where the company could be. Our cost structure is where the company should be, and that doesn't -- we saw opportunities that I just described here, but we benchmark really well. We don't benchmark great on our working capital performance. So I just want to take all the key metrics and kind of how do we get to best in class. I'm going to say operational excellence. I want people, when they think of DuPont, to say they're really clicking along. They're really performing well. And then maybe the thing that's a little different with us is we will look at opportunities from a portfolio standpoint. I'm not wed to anything. If there's an opportunity to create value for our shareholders, we will spend that. Again, I think we know what they all are, and we'll continue to do that also, but not in this few months window we're in right now.

Okay. So we're always out of time, so I will end with the same question we asked of every CEO at this conference. So as we're looking through and beyond the pandemic, is there -- are you seeing an opportunity to reimagine how you run the company? And can any of this fall to the bottom line?

Yes. So I don't know what the other CEOs said, but I guarantee you, I probably talked to 20 or 30 of them in the last month. And we've all -- every one of us has said, yes, we can reimagine things. So a couple of the areas, obviously, our travel and entertainment expense is down to practically 0, and Lori and I have talked about why does it need to be where it was. With Zoom, with Microsoft Teams, we seem to be functioning very efficiently as a company. And every other CEO I'm talking to -- and by the way, I don't 100% agree with that. I think we're going to need to be in the office, but I think we're going to reimagine does the whole workforce need to be in the office every day. So T&E expense, my gut is our budget is very different next year. Contractor usage, I bet is down next year, and we will really -- I think one of the learnings I had out of this because we are running well is look at our real estate footprint and really see what we think there that we really need the full footprint that we have office space all over the globe, I think, is another interesting exercise. So that would be a few of them. But we've -- no. We've clearly learned out of this, I'm surprised. Maybe I've been around too long, and I like going to the office, but I'm surprised how well everything is working. And I uniformly get that from every other CEO.

I said if I had the office you're sitting in right now, I wouldn't go to the -- any other offices.

Well, I won't show you my view. That's pretty spectacular, too, Jonas.

So now, you guys are making me jealous. So with that, thank you so much, very much appreciate it. For those of you listening, thank you for joining us. If you could, please spare 60 seconds of your time, do the Procensus poll on the left. And with that, thank you, Ed.

Great. Thank you, Jonas.