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

Welcome to the 2025 DuPont Investor Day. Please give a warm welcome to Ann Giancristoforo.

Good morning, everyone, and welcome to DuPont's Investor Day 2025. We are thrilled to have you here with us whether in person or virtually as we embark on a day of insight, vision and strategy. For those of you in the room, we hope you had the opportunity to spend some time this morning with our products and displays. What you will hear consistently throughout the day today is a theme around transformation, innovation and acceleration. These words reflect not only our ambition, but the momentum we are building as we reshape DuPont for the future. Before we begin, during today's presentation, we will make forward-looking statements regarding our expectations for the future because these statements are based on current assumptions and factors that involve risks and uncertainties, our actual results may differ. Please refer to our SEC filings for a description of these risks. From a financial perspective, the basis for today's presentation will be the new DuPont on a pro forma basis, giving effect to the spin-off of Community and the recently announced divestiture of our Aramids business. We have included a description of our non-GAAP measures in the appendix of today's presentation, which has also been filed on our Investor Relations website. DuPont is entering a new chapter, one that is defined by focus and agility. Following the spin-off of Qnity and the separation of the Aramids business, we are sharpening our portfolio around health care and water technologies and diversified industrials, which will be our reporting segments going forward. You will hear from the community management team later today, but just a brief reminder on the time line that we expect the spin-off to occur on November 1 and the divestiture of the Aramids business to be completed in the first quarter of 2026. Now to today's agenda. You will hear from Lori Koch, our CEO, who will share her strategy and vision for the New DuPont and how we are activating change in order to maximize value. Jeroen Bloemhard, President of our Healthcare & Water Technologies business will highlight the key secular trends driving growth within these markets and how we are well positioned to win. Beth Ferreira, President of Diversified Industrials will give a deeper dive into these business and the markets we serve as well as our overall growth strategy. Antonella Franzen, our CFO, we'll bring this all together with a comprehensive financial overview, including our medium-term targets. We'll wrap with closing remarks from Lori and [Audio Gap]. [Presentation]

Please welcome our Chief Executive Officer, Lori Koch.

Good morning, everyone. Thank you for joining us today. I'm excited to be here with you to share how we are continuing to reshape DuPont into a more agile, focused and high-performing company that is driving decisive and aggressive actions to firmly establish ourselves as a premier multi-industrial. Alongside me this morning are a few members of our leadership team, many of which are new to DuPont. Since I became CEO, I've been highly focused on ensuring that we have the right talent to deliver on our strategy, and I'm thrilled with the optimal balance of internal and external talent that we've assembled to take us to the next level. Our team is energized to continue to drive value from a strong set of businesses and build a culture focused on driving growth and continuous improvement every day. Our goal for the day is to build momentum for the New DuPont and prove that we have the right leaders, the right strategy and the right vision to continue to drive value for you, our shareholders. With that, let's get started. To guide our discussion and show how we will deliver, I will focus on five key messages. First, we are executing a transformation at DuPont. Both from a portfolio perspective as well as an operational one. We've made a lot of moves over the past decade to drive simplification and reduce cyclicality. We're excited about the portfolio we have today and recognize that there is still opportunity to optimize. Second, we are focused on excellence and are codifying our long-standing innovation excellence, our recent success in OpEx and the beginnings of a commercial excellence framework into an overall business system that will not only advance these key pillars but build the important fundamentals and cultural elements that will be critical to our success. Third, we are poised for growth acceleration. We have been intent on driving to a more focused portfolio while also ensuring that all of our businesses are well positioned to compete and drive growth. Today, about half of our businesses are well positioned in end markets that are growing above GDP, and we'll continue to differentially invest in these areas to ensure that we are maintaining our leading positions. All of our businesses will lean on strong innovation engines and deep customer relationships to win. Fourth, we will continue to drive a disciplined capital allocation model, one that will focus on delivering strong returns for our shareholders. And finally, we will enhance our culture, building on the strong foundation of our core values of safety and respect and enhancing it with a focus on driving growth and continuous improvement. Our portfolio evolution tells a powerful story. We are adept at executing transactions and have never been hesitant to tackle difficult issues. This best owner mindset has enabled us to be a much simpler, more focused and less cyclical company today. This is highlighted by our recent decision to divest our Aramids business, which not only instantly increases our revenue growth by about 50 basis points and expands our margin by about 90 basis points, but we'll also generate about $1.2 billion at closing and cash proceeds that we will, of course, deploy in a manner that creates value. You can be confident that we are constantly assessing our businesses from a shareholders' perspective and determining whether we have the scale differentiation and capabilities to drive value for every asset in our portfolio. DuPont for centuries has been synonymous with innovation, and we are a leading advanced solutions provider. Our innovations are crucial to our customers' growth and delivery of their technology pipelines. We are truly viewed as trusted partners based on decades of deep engagement and constant collaboration. We rely on a local presence to work side-by-side with our customers to solve their technical challenges, and our global scale ensures that we are capitalizing on market trends. You've heard us talk for quite some time about our industry positioning and how our portfolio and our performance near that of a multi-industrial. This slide puts an exclamation point on that message. Our revenue growth EBITDA margins and free cash flow conversion sit firmly with the multi-industrial peer set. We have strategically repositioned the company, divesting many of our chemical and cyclical assets. and have proven that we have the portfolio and the performance aligned with our multi-peers. Our leadership team is focused on ensuring that we are making the right shifts in both capabilities as well as the way we operate in order to drive strong growth and consistent performance. We have taken significant complexity out of the portfolio and are driving a robust differential investment model to ensure that all of our capital is being invested in the highest return opportunities. We also continue to drive accountability and push full P&L responsibility down into the business. This decentralized approach allows our businesses to act with more speed and agility as well as ensuring full ownership of results. We have been driving a standardized approach to innovation, operational and commercial excellence. And the next step is codifying this into a business system. I'll get deeper into this in a few slides, but I can tell you that aside from driving growth, this is personally one of the areas that I'm most excited about. I'm confident that having a consistent framework, rigorous tracking of our core KPIs and a relentless focus on continuous improvement is key to driving a high-performance culture and ultimately, achievement of our financial goals. Let's dive a little bit deeper into our businesses and end markets. We are strategically positioned in 3 core businesses. Healthcare, representing about 25% of our sales is a comprehensive portfolio of med device, med packaging, biopharma and protective garments. We are a trusted partner and over 90% of the top 25 U.S. med device companies rely on DuPont technologies to power their most advanced innovations. From biopharma to protective garments, our solutions are critical to performance and safety. Water, also representing about 25% of our sales, is a leading global filtration player with the most comprehensive technology portfolio and is critical to solving our customers' needs. Our expansive reach not only highlights our exceptional reputation, but also cements our position as a partner of choice, setting the benchmark for innovation and excellence. And diversified industrials, comprising the remaining 50% of our portfolio is our broadest segment and primarily serves the construction, automotive, including EV and aerospace end markets. We have long tenured and valuable partnerships with our customers, and these relationships truly set us apart as evidenced by our Vespel parts being used in over 97% of the aircraft flown today. These proof points are not just statistics. They are a testament to our innovation, customer trust and industry expertise. Let's talk about market opportunity and growth on this slide. As shown, we are a key player in a combined addressable market of more than $40 billion. The majority of our portfolio is aligned to where the growth is with about half our sales coming from end markets that are outgrowing GDP. And we expect to outperform in these end markets, driven by a combination of share gains as well as being favorably positioned in subsegments that are outgrowing the market average, subsegments like critical care components in the med device space and ultrapure water in the semiconductor space. Underpinning these strong growth rates are a key focus on sustainability and a growing population. Jeroen and Beth will dive deeper into their businesses and focus on why we are uniquely positioned to win and continue to drive value for our customers and our shareholders. Innovation has always been core to DuPont and will continue to be a key competitive advantage for us. Our customers rely on us to develop solutions that allow them to deliver their technology road maps and grow their businesses. This approach allows us to realize a high return on our investment as evidenced by our robust vitality index of 30%, which has been steadily improving. Our investments are focused on both top line growth as well as ensuring that the base stays intact and competitive. Ensuring this balance between grow and renew is critical. Today, our new product sales are about 40% growth and 60% renew, and we have plans in place to shift more towards growth to ensure that we're meeting our top line commitments. Also impactful from our R&D investments is the solid improvement in product margins that we realized from our new product sales. This stems not only from better pricing on our newer developments, but also a targeted effort by our technical teams to qualify new raw materials, leading to procurement savings and a strong focus on value engineering, leading to overall a reduction in product costs. Our commitment to commercial excellence is a cornerstone of our strategy to drive sustainable growth. We are in the early phases of building a robust framework and the foundational elements are now in place. We are actively scaling our approach to ensure long-term impact across commercial enablement, sales effectiveness and strategic marketing. For commercial enablement, delivering a seamless customer experience is critical. We're optimizing order entry, leveraging AI and focusing on returns, quality and on-time delivery to ensure that every customer interaction reinforces trust and reliability. For sales effectiveness, we are driving better allocation of resources and improving account, pipeline and distributor-oriented to not only ensure that we are capturing demand and driving pricing, but also expanding our share of wallet and driving repeat business. For strategic marketing, we are capitalizing on market opportunities by optimizing our route to market design to ensure that our innovations reach the right customers through the right channels with the right value proposition. We're also actively looking for new applications and seeking new markets for existing products in order to expand our TAM and drive above-market growth. A great example of this is the DLE opportunity in our Water business, which Jeroen will discuss. As we continue to implement the overall framework, we are focused on 3 priority areas to see short-term gain. They are pipeline discipline, performance management and customer and product optimization. As we continue to focus on our operating culture, we have a clear vision of building a world-class operating model with a performance scorecard and culture to match. This requires building on the strong foundation that we've laid out the past few years and expanding our efforts to create a sustainable flywheel of continuous improvement. We see clear opportunities to accelerate performance by continuing to invest in key capabilities while also bringing a renewed focus on lean fundamentals and increased rigor around our management standards. The foundation that we are building over the next 12 to 18 months will be critical as we think about our full transformation and inflecting our performance across our key focus areas of safety, quality, supply chain, manufacturing and reliability. As we look to implement our overall business system, it is critical that we're not thinking about the individual excellence frameworks in isolation, but rather as a holistic system of continuous improvement that defines our culture and more importantly, how we operate. This will allow us to drive a much more focused improvement engine and enable us to see opportunities and act on them with more speed and agility. Our leadership team sees this effort as a core element of our transformation. A critical first step will be a refreshed set of management standards aimed at driving performance across our core set of KPIs. These standards will serve as a baseline for how we measure our own performance against industry benchmarks and provide a platform for us to access a constantly expanding toolkit. These improvements are being driven today and will take shape over the coming months with full support from all layers of the organization. We have a proven capital allocation model that enables both consistent investments and high-return organic opportunities as well as bolting on to existing businesses with M&A to enable even greater returns. Low leverage is a priority for us. We've consistently been at or below 2x, and we'll continue to target that level. In order to drive growth and ensure that we are delivering for our customers, we will reinvest in our businesses. We'll stay in line with our current metric with respect to R&D as a percent of sales and aim to reduce CapEx over time to be more in line with our multi-industrial peers. We will continue to target a dividend payout ratio of 35% to 45% as shareholder remuneration will continue to be a centerpiece of our model. We believe our business model is designed to generate strong, stable cash flow. And after servicing our dividend, ensuring a strong balance sheet and investing in our businesses, we anticipate having sizable excess cash, and we'll continue to target a balanced approach to buybacks and M&A. With respect to M&A, we have a robust pipeline of targets and are actively scouting new opportunities. Our sweet spot is in adding additional capabilities in order to take advantage of outsized growth opportunities and extend our value proposition to new and existing customers. The Spectrum and Donatelle acquisitions were great examples of that. We'll continue to be disciplined with our approach and search for targets which offer accretive growth, low capital intensity and low cyclicality. And of course, a clear opportunity to drive scale and capture synergies will be key to ensuring a strong return. Throughout this presentation, you've heard me talk about the need to build a culture focused on growth and continuous improvement. Critical to our success is ensuring that we have the right talent in place to take us to the next level, and I couldn't be happier with who we have on the field today. Soon, you'll get to meet 2 of our newer members, Jeroen and Beth. I'm confident that their excellent history with driving growth and transformation, coupled with great experiences at very well-run companies will enable us to achieve our goals. I'm also really excited about the addition of Dave Koch, no relation, by the way. As we progress on our journey to build a robust business system, his experience from spending 15 years at Danaher in both the business system office as well as ops leadership roles will prove invaluable. The team has really gelled and I look forward to helping each leader enable their organizations to reach their full potential. Putting this all together, I am confident in our ability to deliver a 3% to 4% organic growth CAGR and drive margin improvement, leading to margin expansion of 150 to 200 basis points by 2028 and grow our EPS by 8% to 10%. Driving a culture that puts this as the expectation is the centerpiece of our new leadership team. Over the next 3 years, consistent delivery of these targets will enable a top line of about $8 billion and an EBITDA margin profile of 25% to 25.5%. Altogether, this will yield an attractive 8% to 10% EPS growth CAGR. And it's important to note that all of these targets are without the additional upside from capital deployment. I'll wrap up on this slide as it summarizes well the key value drivers of the new DuPont. We have successfully repositioned ourselves and have a streamlined portfolio of leading businesses. We have opportunities for margin improvement and much of our portfolio is aligned to secular end markets, which will drive strong organic growth. A strong foundation in OpEx, implementation of a business system and a refreshed culture will enable us to realize our full potential. We will continue to enhance shareholder value through disciplined capital decisions and, of course, consistent delivery of growth and margin expansion. We are a leading advanced solutions provider, and our commitment to excellence will continue to drive value for our employees, our customers and you, our investors. So now we're going to transition to the business reviews, and we'll get started with a quick video on Healthcare & Water Technologies. [Presentation]

Please help me welcome Jeroen Bloemhard, President of the Healthcare & Water Technologies business.

Good morning, everybody, and thank you for joining us here today. I'm excited to speak about the Healthcare & Water Technologies segment. A segment that is truly at the forefront of solving some of the world's most pressing challenges. Maybe as a brief background to myself, I joined DuPont in 2018 coming from Dow Corning, the global silicon technology leader. And while I was at Dow Corning, I led specialty growth businesses where innovation at the intersection of material science and application engineering created competitive advantage. And that's exactly what we're doing in the Healthcare & Water segment as well. Our intent for this segment is very clear, capitalize on the growth that the health care and water industries offer through both organic and inorganic opportunities. And having recently led the Water business myself, I'm extremely excited about the position that we have in the industry today and the growth that is still in front of us. And now also more deeply looking into the health care business, I'm excited about the position that we have already built for the business, how much we can still expand upon it and then the growth that, that will deliver for the company. In Healthcare & Water, we hold leadership positions as trusted partners of choice for our customers, delivering solutions that are critical to the growth of our customers. And let me highlight why we are so excited to be in this space and more importantly, why we think we are uniquely positioned to deliver on those challenges our customers have. First of all, the Water and Healthcare industries are very large and very attractive from an opportunity size perspective, but also from a market growth rate perspective. And the megatrends that we see in these industries align very well with the portfolio of offerings that we have for these industries. Second, our innovation leadership is central. Our ability to create differentiated technology to meet today's and tomorrow's performance requirements, coupled with in-depth application expertise makes our customers choose us to develop their next-generation products with. And third, we have a very strong global presence, being able to serve our customers wherever they are. We have people and development centers on the ground to work side-by-side with our customers and help them be successful in their technology advancements. So these 3 elements together create our winning formula for the Healthcare & Water Technologies segment. [Audio Gap] The operating EBITDA margin is very healthy, expected to come in at about 30% for the year. Overall, we are expecting the Healthcare & Water segment to grow above market in the mid-single-digit range. The Healthcare business offers specialized materials, product design, prototyping and manufacturing services for high-growth markets where continuously advancing technology matters and where quality and performance can never be questioned. And those are the 2 things that we excel at. The Water business is a pure-play filtration and separation provider with strong secular growth drivers, a best-in-class portfolio [Audio Gap]. So let's dive a little deeper into these businesses, starting with the Healthcare business. This is a $1.7 billion business with a strong presence in medical devices, biopharma and pharma through our Spectrum, Donatelle and Liveo businesses and in sterile packaging and PPE through our Tyvek business. Our broad set of offerings, including design, specialty materials, application expertise and precision manufacturing capabilities set us up extremely well to deliver value to our customers. Leading medical device OEMs choose to work with us for exactly those reasons, allowing us to capture that innovation-driven growth. More and more OEMs are looking for suppliers who can provide end-to-end services covering design, material selection, rapid prototyping and manufacturing scale-up, and our portfolio is unique in that respect. Whether that is through our Spectrum and Donatelle CDMO offering, our Tyvek medical packaging offering or our Liveo silicones and elastomers, our expertise is deep, and that's why we are the partner of choice for these OEMs. And let me focus on 2 examples from this slide here. The design, material selection, prototyping and precision molding and assembly capabilities of our Spectrum and Donatelle businesses are at the heart of why medical device OEMs want to work side-by-side with us because they know that we are uniquely capable to cover that end-to-end process entirely with them. Our Tyvek technology as a second example, is extremely well known for the protection and sterility requirements necessary for the packaging of medical devices. In fact, Tyvek is used in packaging market [indiscernible] and are excited about high-growth therapeutics like electrophysiology, neurovascular and structural heart. And with minimal invasive surgery procedures on the rise, these medical devices are becoming smaller and smaller and becoming more and more complex. And that trend towards miniaturization and the use of higher performance materials create a sweet spot for our offering in the health care business. And in addition, the aging global population and the rising prevalence of chronic disease, coupled with the increased penetration of single-use systems, create an exciting opportunity for us in the biopharma and pharma space, where we have recently increased our relevance by combining the Spectrum CDMO and our Liveo Materials business, focusing on the development of custom tubing opportunities that is contributing already now to the growth of our Liveo business. In Healthcare, we are experiencing consistent mid-single-digit growth driven by increasing demand for advanced medical devices and through our increased penetration in biopharma markets with single-use systems. We have made strategic investments in this space already by acquiring Spectrum and acquiring Donatelle as well as making selective investment in expanding capacity in our network. These investments have significantly broadened our offering to the industry and will help us deliver on the opportunities of growth that we see in front of us. And to give you another example of that, we've been able to leverage Spectrum's injection molding and tooling expertise to accelerate the development of our innovative ultra-low temperature over mold assemblies in the Liveo business. And these over mold assemblies are used in cold storage single-use systems. Our ongoing commitment to developing new technology, along with a focus on application development will ensure our above-market mid-single-digit organic growth rate. Here's a great example of how this in-depth customer collaboration leads to new growth [indiscernible] their partner of choice to help them overcome these challenges. And so we were able to come in and to rapidly design and scale a manufacturing process, triple the throughput and improve final yield quality by 55%, enabling cost savings for the customer as well as allowing them to meet their global demand. This strong customer collaboration led us to being awarded a next-generation program and also earned us the recognition of one of their top suppliers. We were able to accomplish this because we have the strength of capability. We have an in-house design team. We have rapid prototyping capabilities, and we have the manufacturing expertise to scale quickly from small trial volumes into large commercial volumes without jeopardizing quality. And this is why customers select to work with us, and it's key to our leadership position in the industry. We are broadly recognized for our differentiated technology, and we are deeply embedded in our customers' growth and innovation cycles. Our best-in-class material science and device manufacturing know-how allow us to meet stringent customer specifications and enable us to provide full-service solutions to our customers. We are deeply committed to customer collaboration. Top medical device OEMs and leading biopharma companies want to partner with us because they know together, we can effectively link their development needs with our expertise in product and applications. And our own R&D and manufacturing footprint is carefully designed to be near the R&D and manufacturing hubs of our customers. This local presence ensures that we can deliver our innovative solutions wherever our customers need them to be. Lastly, our commitment to innovation and quality has made us a recognized leader in the design, manufacturing and protection of complex medical devices. It has earned us the trust of our customers and makes them come back to work with us on their next-generation opportunities. So by leveraging these strengths and with continued focus on innovation, we are uniquely positioned to deliver long-term value for our customers and for our investors. Now let's transition to Water. We are the clear leader focused on the most attractive part of the industry with technology and capabilities that we have built over the last 80 years. This is now a $1.5 billion filtration and separation business, primarily focused on the industrial, municipal and life sciences markets. Our multi-technology portfolio is the broadest in the industry and includes reverse osmosis, ultrafiltration and ion exchange resins as our key pillars. We have industry-leading brands with best-in-class technology and deep application expertise. And our innovations have had real impact solving the world's most pressing water challenges already for decades and decades. And the great part of this business is that it has a very large portion of recurring revenue through the replacement of our current installations. I will discuss the breadth of our technology participation in this slide as it enables our position being the partner of choice for our customers. And having access to a broad technology portfolio matters because most water plants use a variety of filtration techniques as part of their total water management system. And our ability to participate in more than one step is an advantage to our customers as they specify and design their plants. In fact, more than 60% of our revenue comes from customers who buy 2 or more of our technologies for their projects. So first of all, our MABR and MBR technologies are at the forefront of biological processes and are critical in the wastewater management space. We've been in the MBR space for more than 40 years. Next, our ultrafiltration systems are designed to filter particles and macro molecules, and these systems are crucial for a variety of industrial and municipal applications. We have a leading position in the UF market. Our nanofiltration and reverse osmosis technology is the most effective in removing organic and inorganic molecules as well as bacteria and viruses. This technology is widely used in desalination and in industrial applications where high-purity water is required. We are the clear leaders in the RO industry, and we have 60 years of experience advancing RO performance. Lastly, our ion exchange resins are designed for the most advanced purification steps, and we can selectively remove metals and ions amongst other contaminants. Same as for RO, we are the technology leader in IER, and we participated in this space for 80 years. So this portfolio is the broadest in the industry, and our products are known to be the premium offering that our customers select not only for their performance benefits, but also for their durability in use. In Water, we are leaders in a $7 billion addressable market where global water demand is rising, driven by industrial needs, aging infrastructure and a growing population. Water scarcity and the increasing regulatory requirements governing wastewater present the most -- the 2 most favorable macro trends in the industry, and our portfolio lines up perfectly to serve those. And these trends play out in both the industrial and in municipal markets. And without our specialized high-performance filtration solutions, these trends cannot be met. But also an aging population and a desire for healthier lifestyles create growth opportunities in our life science and specialty segment of the business. Think about healthy sugars or drug delivery carriers that are enabled through our IAR technology. And there's more to come. The increasing demand for lithium driven by the growth in electric vehicles opens up an exciting opportunity in direct lithium extraction for us. Our NF membranes are designed to prefilter and to concentrate the brine that contains the lithium and our ion exchange resins selectively extract that lithium from that brine. So we are extremely well positioned to capitalize on that DLE opportunity. Today, our water business is driving consistent mid-single-digit growth, enabled by a large replacement business, contributing over 70% of our revenue annually. Continued constraints on water availability and increasing regulatory requirements drive the need for more and higher performance filtration and drive our inherent growth. We are investing in advancing membrane technology for even higher performance -- even higher filtration performance at lower energy consumption, creating clear performance differentiation from competition and offering new benefits to our customers. We also invest in continued capacity expansion for our ion exchange resins that are used to create ultrapure water used in the semiconductor fabrication process. And as the semiconductor industry grows, the demand for our ion exchange resins will grow as well. And as I said earlier, our filtration technologies are also being used to address challenges in food and beverage, dairy, pharma and bioprocessing, adding to our opportunity for above-market growth. Here's an example of how increased regulatory requirements drive new opportunities of growth for us. Industrial customers face increasingly stringent regulations on the amount of [Audio Gap] in RO performance has allowed us to introduce 15 new products since 2017, specifically designed to meet these challenges of minimal liquid discharge. Our reputation for durability in use and for continuous innovation has been a key differentiator in the market and has earned us the recognition of the market's total solution provider. And between 2017 and 2024, the revenue from these MLD products has grown by approximately 10x underscoring the broad customer adoption of these technologies, and we continuously innovate for this application on an ongoing basis. So let me recap why we are the partners of choice for our customers and why we are so well positioned to win in the water industry. We are known to have the highest performance products in the industry and have thousands of touch points across the value chain that give us early access to new projects and allow us to understand the diverse needs of our customers. Our application expertise is based on decades of participation in the industry and exceptional testing capabilities. This ensures that we can provide high reliable and high-quality solutions that we know will work for our customers because we have pretested them. Our long-term and deep customer relationships are a clear testament to our commitment to the water industry, and we are able to serve our customers wherever they are located in the world. Our trusted reputation in the industry is built around category-leading technologies and brands, our thought leadership in the industry and our continued external recognition that we are receiving for our technologies and the inventions that we bring forward to the market. We are very well positioned to grow above market rates. We have the leading position today. We have the required capabilities and most importantly, the critical customer relationships to win, and I'm excited to continue to deliver that growth for us. Thank you for your attention. [Presentation]

Hey everyone. I'm thrilled to be here to showcase the Diversified Industrial segment. Perhaps a little bit about me to start. I've had the privilege of leading businesses and some great companies. Most recently at IMI, I led a customer first transformation to unlock growth. At ITW, either in the power of 80/20 and simplification. And at Belden, I manage businesses in a really strong lean framework. And I also currently serve on the Board of SKF. These experiences have taught me how to unlock speed, drive accountability and improve margins across a quite diverse mix of businesses. I joined DuPont just 12 weeks ago, and I've spent that time immersing myself in the diversified industrials businesses, listening, learning and walking the floor with the teams who know it best. What I've discovered is a great portfolio of products that are all around us. They are found in the walls of our homes in our cars and even the engines of planes, all playing essential parts in our daily lives. And today, I'll show you how we're delivering value in diversified industrials and why this strong foundation and our renewed focus on execution gives me confidence in our ability to deliver value for DuPont. So we're well positioned to succeed. Our brands are trusted. Our technologies are proven, and our teams are deeply committed. You can see our leadership in the way we work across our different sectors. Our commitment to innovation means that we're often the first to bring new energy-saving solutions to the table. And we'll enhance these efforts with rigor and operational excellence and simplification and commercial discipline to ensure margin expansion. These are key principles that have guided the businesses that I've led in the past, and I think it's a great opportunity for this business. So I'll give you a snapshot. Diversified Industrials is a $3.6 billion business with 22% operating margin. We operate in 2 main sectors, building technologies and industrial technology. We're leaders in construction, and we're deeply embedded with OEMs across automotive, aerospace, industrials and printing and packaging. We work side-by-side with customers to solve their toughest challenges from delivering fast and easy-to-install construction solutions to assisting in the development of next-gen EV batteries. I'll share more on these shortly. So today, I'll show you that the underlying drivers in our markets are solid. We're positioned to drive margin expansion through disciplined execution and a focus on what we can control. I bring a new perspective into DuPont built around my experience deploying performance models like 80/20 and lean. And by streamlining the way we work, we can cut complexity and give our teams the ability to make decisions and drive outcomes because I've seen firsthand that these principles consistently deliver real measurable results. This is the opportunity for Diversified Industrials. With our market leadership and customer-driven innovation, together with simplification and rigorous application of the excellence frameworks that Lori outlined, we can assure growth and more importantly, expand margins. Our approach isn't about waiting for the market to improve. It's about sharpening our edge and delivering consistent performance. I'm really excited to work with our team on this because I believe that combining these proven principles with our disciplined strategy will really generate value for DuPont. So our Building Technologies business has about $1.6 billion in sales, and we serve all aspects of construction, nonresidential, residential and repair and remodel. Our integrated systems improve energy efficiency, durability and comfort. What really sets us apart and positions us to win is the trust that we've built with our customers, along with our focus on performance and technical expertise. We're confident that our scale and strong relationships with our customers will position us well for future growth. So imagine a contractor walking on to a job site with fewer skilled workers than expected, rising material costs and a tight deadline. That's the reality for many of our customers. In fact, 80% of construction firms in the U.S. report difficulty filling open roles. In this environment, builders are seeking products that make installation faster and less complex. And at the same time, the housing supply gap continues to widen. New inventory isn't keeping pace with demand. So the need to upgrade and improve existing buildings is only accelerating. I actually got to experience some of these challenges personally in my family's recent move back to the U.S. with DuPont. Not only did I see the lack of available housing, but I'm seeing firsthand how sharply costs have risen as we to renovate our home. At DuPont, we're responding with solutions that meet these converging needs, making construction simpler, more cost effective, safer and more attractive, all while helping our customers succeed in this challenging and changing market. So across Building Technologies, we continue to lead with solutions that [indiscernible] in their category. On this slide, you can see examples of where we participate in the nonresidential space. Our products are designed to endure the full life of the structure. Continuous insulation helps cut thermal leaks, wall systems reduce mold risk and our interior finishes are ultra hygienic and flexible, perfect for health care and high-traffic spaces. You would see a similar view to this in houses as well. On the residential side, our insulation and air sealing solutions are powerful tools that can reduce heating and cooling costs by an impressive 30%. We really stand out with our expertise in sustainability. Our insulation and weatherization systems are recognized in customers' sustainability reports, including Builders FirstSource and White Cap. That kind of visibility reinforces our relevance and shows that our leadership in the market is not just legacy, it's active and its value. At the heart of our approach is a deep commitment to understanding and solving our customers' problems, and this is a great example. Insulation pros told us that they wanted the coverage of 2-component foam with the simplicity of our great stuff product. So we listened. We integrated their feedback into our innovation process using lean innovation techniques and 3D printed prototypes. And this effort led to the creation of a fast portable spray foam that exceeds their expectations. Our product launched successfully at Lowe's, selling 25,000 units in just 2 months, and now we're expanding into Home Depot. What's more, a spray foam is fire-rated, it cures in just 24 hours and is easily painted or sanded, providing practical solutions for professionals. By addressing real issues, we're not only enhancing the efficiency of their work, but we're also fostering long-term loyalty and driving repeat business. Now let's shift into Industrial Technologies with about $2 billion in revenues. We serve a diverse set of industries with core strengths in automotive and aerospace, alongside established leadership in printing, packaging and other industrial markets. Our segmentation reflects where our technologies deliver the most impact from enabling lighter, safer, more energy-efficient vehicles to supporting next-gen aircraft performance and reliability. We have over $100,000 of opportunity per commercial aircraft with Vespel, Tedlar and Molykote offerings. For example, Vespel is featured in critical applications and engines that power planes such as the Airbus A320neo, the Boeing 737 and China's COMAC C919. In automotive, our adhesives and thermal management solutions are critical to electrification from hybrids to full battery electric. So in today's industrial landscape, megatrends like electrification, automation and sustainability are transforming our end markets. In the automotive sector, the transition to electric vehicles is significant. OEMs need to stay competitive in performance, safety and cost, and our Battery Adhesives like BETAFORCE can help improve battery performance and reduce cost by simplifying EV battery design. Our Battery Adhesive offerings are 100% incremental to our base automotive business, and they've grown at a 65% CAGR over the last 5 years. Aerospace is also evolving with a focus on high-performance durable materials. Our offerings improve engine efficiency and enhanced safety and air travel by reducing friction, wear and the risk of component failure. In packaging, our Cyrel FAST technology has achieved a 98% reduction in emissions and our Artistri water-based inks enable customers to reach their sustainability goals while maintaining quality and vibrancy. As these trends evolve, they drive growth and innovation in our end markets, and we are at the forefront of this change. As the auto industry shifts toward electrification, we're really well positioned to grow. Our technology span the vehicle from body and interior to battery systems. These solutions help OEMs meet the needs for lightweighting, durability, safety and range, all critical factors for the modern vehicle. We're focused on making cars easier to assemble and longer lasting. That's not just good engineering. It's our strategic advantage. Our adhesive simplified battery integration, controlled battery temperature and improve crash safety. Our wear and abrasion solutions support thermal management and reduce friction. And the growth opportunity is clear. Our content opportunity per vehicle nearly doubles from $50 to $100 in electric vehicles. And the demand for adhesive is triple that of a traditional car. As a reminder, our non-battery products are powertrain-agnostic. So even as the market shifts from ICE vehicles to EVs, they'll remain unaffected. We're well embedded in this industry, and we're already spec-ed in across many global OEMs and Tier 1s, giving us a strong foundation to expand as electrification scales. Now I'd like to focus on where we're really leaning in across diversify [indiscernible] it's durable value. Using this framework, we expect to drive continued margin improvement and unlock growth opportunities. Let's take each one in turn. First, operational excellence. We're embedding discipline, standardizing best practices, focusing on waste reduction and using daily management routines and KPIs to keep performance visible and accountable. We already see some great examples of operations excellence within our organization. For instance, our Parlin, New Jersey manufacturing team increased uptime by 17% over the last 2 years through Kaizen efforts like SMED. This allowed the plant to meet increasing market demand without the need for additional capacity investments. Likewise, our adhesives plant in China increased its overall equipment effectiveness or OEE by 10% and this year by reducing waste through value stream mapping and 5S. And as you'll see in the story that I'll tell in a moment, the integration of automation can further enhance these improvements, driving even greater efficiency and productivity. This rigor and discipline and OpEx sets us up for strong results in safety, quality, delivery and cost. For innovation excellence, we're accelerating product development by embedding customer feedback earlier and using digital tools for rapid prototyping and simulation. This means faster cycles, better alignment and more breakthrough solutions. And in commercial excellence, we're sharpening our market approach with strategic marketing, stronger sales enablement and better tools. Our teams will be equipped to deliver tailored solutions, respond faster and deepen relationships, driving growth and margin expansion. Together, these frameworks are how we will outperform, not just compete. They're how we will scale excellence and deliver consistent high-quality results across the portfolio. And here's a great example of how we're unifying these excellence frameworks to unlock new growth opportunities. Vespel has been pivotal in aerospace and defense since the Apollo missions. Renowned for its ability to withstand extreme heat and pressure without failure. Unlike metals that corrode or plastics that deform, we provide longer-lasting parts, exactly what OEMs require in demanding aerospace environments. Today, we leverage our advanced material expertise to expand high-performance solutions into higher-volume transportation and industrial applications. Our new resin ring exemplifies this innovation. It's a versatile component that meets stringent requirements. But now thanks to innovation in our operations process, it can be produced on a larger scale, in this case, 80 million pieces. By adapting technology initially developed for space, we're unlocking new growth opportunities while still preserving the quality and reliability synonymous with Vespel. So we have the right formula to win. We're trusted by our customers. Our products lead their categories. We combine global scale with local agility. And across our portfolio, you can see that we're a leader in sustainability and innovation. So where are we headed? We'll continue to lead in our markets. We'll grow by solving real problems, and we have a renewed focus on excellence to drive value creation. We'll apply the business model excellence and frameworks that we've discussed today, decentralizing for accountability, simplifying for agility and operating with excellence and rigor. With these principles and intentional focus on what drives value, we're not only poised to grow with GDP, but also expand margins, ensuring consistent performance for DuPont. We're building a portfolio that performs today and is positioned to continue to lead tomorrow. Thank you again for your time. I'm really excited to keep building with this incredible team at DuPont.

Please welcome Antonella Franzen, Chief Financial Officer.

Thank you, everyone, for joining us. Both here in person, it's really nice to see some familiar faces and via webcast. I'm excited to be here with you today to walk you through our financial overview and outlook as we enter into the next chapter of DuPont. So you may ask, what does this next chapter bring? First, our top line growth is accelerating. We now have a streamlined portfolio with about 50% of our revenue in high-growth markets. Our leadership positions, our long-standing relationships with customers that make us the partner of choice, our history of innovation and the value that our products and solutions provide will deliver an above-market 3% to 4% revenue CAGR over the next 3 years. Second, we will build upon our consistent execution. Operational excellence, coupled with a continuous improvement mindset, will deliver 150 to 200 basis points of margin expansion, bringing our EBITDA margin in 2028 to 25% plus. Our expected revenue growth, coupled with our margin expansion, will deliver an 8% to 10% EPS CAGR. Next, our bottom line results will convert to cash at greater than 90%, generating $2.7 billion to $2.8 billion of free cash flow by the end of 2028. Lastly, our disciplined capital allocation allows flexibility in managing organic investments with targeted M&A and returning cash to shareholders via increasing dividends and share repurchases. Together, these elements maximize long-term shareholder value by maintaining a strong financial profile and disciplined execution. Before we get into the details of our future financials, I want to take a couple of minutes to level set everyone on how we will report our results for the remainder of the year as well as the basis for our pro formas. First, let me be very clear. There are no changes to our underlying guidance assumptions. We are simply recasting guidance to show the impact of discontinued operations. Our Q3 results, which will be reported in early November, will include the Electronics business given the intended November 1 separation date, but will exclude Aramids, which will be classified as a discontinued operation. We have included our recasted third quarter guidance in the appendix to the slides. From a full year perspective, we have recast our guidance to reflect the impact of both Electronics and Aramids being reported as discontinued operations. So starting on the left-hand side of the slide, you can see our previous full year revenue guidance, and that is being adjusted to remove $4.6 billion of sales related to electronics and about $1.4 billion of sales related to Aramids. Bringing our recasted New DuPont sales guidance for the full year to $6.865 billion. On the right-hand side, you can see our previous EBITDA guidance, which includes business results, partially offset by corporate expense. We are adjusting our EBITDA guidance to remove the business results of Electronics and Aramids as you would currently recognize them, meaning these amounts include function costs that are allocated to Electronics and Aramids to support the business. From a reporting perspective, allocated costs that are not specifically going with the transaction or divestiture are not reported as discontinued operations and are commonly known as dis-synergies or stranded costs. These costs are included in the net disc ops adjustment of $15 million. Recasting for these reporting adjustments, we now expect 2025 operating EBITDA for the New DuPont of $1.575 billion. You're all still with me. The following slide transitions from our revised guidance to our pro forma, which adjusts corporate expense from $140 million down to $95 million. Over the past 6 months, we have been actively preparing for day 1, implementing measures to effectively rightsize our public company costs. All right. Now that we're grounded in the financials, let's take a quick look at the New DuPont. $6.9 billion in sales, $1.6 billion in operating EBITDA and a 23.6% margin. Our high-growth, high-margin Healthcare & Water segment makes up about 50% of the portfolio with the remainder in Diversified Industrials, predominantly with exposure in our auto and construction end markets. We also have a very attractive geographic mix with about half of our sales in North America and the remainder predominantly in EMEA and Asia. We're entering into this next chapter from a position of strength. Our financial profile is compelling with a strong balance sheet that gives us flexibility. We're increasing exposure to secular high-growth markets, generating solid cash flow and maintaining ample liquidity. Our balanced debt maturity, coupled with our strong investment-grade credit rating, support our growth ambitions. Our track record of consistent financial performance is a solid foundation for continued value creation. Taking a quick look back during the period of 2019 to 2025, this portfolio has delivered an organic revenue growth CAGR of 2.4%, in line with our multi-industrial peers. Our operating EBITDA has grown nearly 2x our revenue growth and our operating margin has expanded 200 basis points. These metrics set a solid trajectory for future growth. We also have a strong history of returning cash to shareholders. This chart speaks for itself. I would simply call out that we expect the metrics on this chart to continue to grow as return of capital to shareholders will remain central to New DuPont's model. I will talk more about our expected dividends and share repurchases in a few minutes. As we look forward, we're accelerating our top line growth and margin expansion. As I mentioned previously, we expect a 3-year organic revenue CAGR of 3% to 4% and 150 to 200 basis points of EBITDA margin expansion. This will result in an 8% to 10% EPS CAGR. I want to be clear that excess free cash flow deployment, whether into M&A or share repurchase, will be incremental to the 8% to 10% EPS CAGR, reinforcing our commitment to value creation. Now let's double-click into what is driving each one of these metrics. You heard from Jeroen and Beth about the specific market trends in each of our businesses and how we're positioned to win. In Healthcare & Water, these secular markets have favorable megatrends that are fueling growth, and we should grow nicely above GDP. Our Diversified Industrial segment, which includes building and industrial, should grow generally in line with GDP. Overall, we expect above GDP growth driven by growth premiums in Healthcare & Water. Moving to margin improvement. Starting with our 2025 pro forma EBITDA margin of 23.6%, we expect 110 basis point margin increase driven by 35% incrementals on revenue growth. From a stranded cost perspective, as we've been preparing for the separation, we've spent quite a bit of time benchmarking cost structures by function and designing an organization that's fit for purpose. The result of $30 million [indiscernible] expected to contribute up to 50 basis points of incremental margin expansion. The overall target is an improvement of 150 to 200 basis points by the end of 2028, resulting in an EBITDA margin between 25% and 25.5%. From an operating leverage perspective, this is a healthy 1.7x our revenue growth. Let's take a quick look at the EPS algorithm. Each percentage point of revenue growth will equate to 2% EPS growth. As a result, our 3% to 4% revenue CAGR is projected to result in a 7% EPS CAGR at the midpoint. The elimination of stranded costs is expected to add an additional percentage point of EPS growth and productivity gains above the rate of inflation may add another point, resulting in a projected overall 8% to 10% EPS CAGR. We have high confidence in our ability to deliver on this framework. Moving to cash flow. [indiscernible] billion from 2026 to 2028, representing a conversion rate above 90%, underscoring our ability to generate cash efficiently and fund growth initiatives, dividends and shareholder returns. Over the next 3 years, the cumulative cash outlay related to dividends and offsetting share dilution is about $1.3 billion, leaving about $1.5 billion to put to work in bolt-on M&A and share repurchases, which again is incremental to the 8% to 10% EPS CAGR we discussed earlier. Disciplined capital allocation. Lori mentioned this earlier, and I just want to highlight 4 key areas. Organic growth. We are differentially investing in the businesses to drive the top line. Dividend payments. As the New DuPont, we will have a healthy dividend payout ratio in the 35% to 45% range. And as our earnings grow, our dividend will also grow. M&A. We will pursue strategic bolt-on acquisitions to enhance our capabilities and market position. And lastly, share repurchases. We will continue to return capital to shareholders to drive accelerated returns. And as always, we will allocate capital through the lens of a shareholder to maximize value. The foundation of our capital allocation approach is a strong balance sheet and low leverage, which provides liquidity and financial flexibility. We expect to maintain about $1 billion of cash on the balance sheet and approximately $3.25 billion in pro forma debt. We're committed to maintaining our BBB+ credit rating and target a net debt-to-EBITDA ratio of less than 2x, which compares very favorably to our multi-industrial peers. Bringing all that you've heard together, I will leave you with 4 final thoughts. First, we are executing on a culture of continuous improvement. Second, we are well positioned to accelerate organic growth. Third, we are converting earnings to cash and generating strong free cash flow. And fourth, we are disciplined, disciplined in allocating capital, disciplined in driving consistent results and disciplined in delivering shareholder value. I will now turn it back over to Lori to wrap things up before Q&A.

Please welcome Lori Koch back to the stage.

Thanks, Antonella. As we look ahead, I want to be clear on why now is the right time to invest in our company and why I believe the future holds significant value for our shareholders. We are a leading advanced solutions provider built on a foundation of specialized technologies that set us apart. Our innovations solve complex challenges and our customers rely on us to power their most advanced innovations and grow their businesses. Over the past few years, we've taken bold steps to simplify our portfolio, strategically focusing on higher-growth markets. We are building a culture of performance and accountability and have the right team to deliver. We remain committed to a disciplined capital allocation model. Since 2019, we've returned over $14 billion to shareholders and closed $5 billion in high-return acquisitions. Both of these are a testament to our financial strength and our dedication to delivering value. Looking forward, we have a clear path to our 2028 targets and we'll deliver 8% to 10% EPS growth, and I'll say it one more time without the benefit of additional capital deployment. In closing, we are positioned for growth and are committed to continue to drive value for our shareholders. So we're going to take a quick break to turn over for Q&A, and then we'll join you on stage soon. And Dave Koch will join us for Q&A as well. So thank you very much.

Thank you, everyone. We will now take a 10-minute break as we set up for the Q&A session. We'll have a timer on the screen, so be aware of it, and please be back at 10:30. Thank you. [Break]

Ladies and gentlemen, please welcome our DuPont leaders back to the stage for the Q&A session. In addition to Lori, Jeroen and Beth, we will also have Dave Koch, who leads our operations teams join us. We have -- and Antonella. We have team members positioned around the room with microphones, so please raise your hand, and we will come to you.

It's Jeff Sprague from Vertical Research. Good to see all of you. . Maybe I'll just start with a couple on capital deployment and I hand the mic off to someone else. But first, just tactically, when you think about the separation, if there's any dislocation in the shares, what is your capacity or comfort level to step in sort of immediately with some contemporaneous share repurchase as opposed to sort of the multiyear view you gave us?

Yes. So we've proven over time that we've been very shareholder-friendly, especially when it comes to buying back our shares with proceeds from divestitures as well as using the cash that we generate to show that you kind of put our money where our mouth is and invest in our business. So we have a Board meeting coming up. We don't have an open authorization right now. We have a Board meeting in a couple of weeks where it will be a key topic around what level of authorization we get. We are very aware of the valuation disconnect that exists between where we trade today. Obviously, we don't know where we'll trade coming out and where our peer set sits. So I think with our past history, you can be confident that we're not going to be shy about taking the right steps to be able to take advantage of a dislocation.

Yes. The only thing I would add, Jeff, is given where our balance sheet is, the cash flow we expect to generate and also the proceeds related to the Aramids transaction that Lori mentioned earlier, I think we're in a really good position to do both share repurchases as well as M&A.

Yes. Then maybe just on M&A. So clearly, you made a very clear water and healthcare is the focus. Do you see those sort of deals sort of playing in the TAM as you define it for us today and strengthening that position? Or is there sort of a TAM expansion play through bolt-ons also?

Yes, I'll open it up, and I'll turn it over to Jeroen to provide more color. I would say it's both. On the healthcare side, I would say it's within the existing TAM. So we've been scouting opportunities that are similar to what we did with Spectrum and Jeroen in the CDMO space. It's very fragmented. So there's a lot of opportunities for us to continue to build on to the base that we've built as well as a lot of the assets are owned by private equity. So obviously, at some point, they have to be actionable. So it makes it a little bit easier for hill to climb. And on the med packaging side, we've also been looking to expand there as well to see what opportunities that there are for us to move beyond our flexible barrier application today into other applications. For water, it's probably more of a TAM expansion. So we obviously are key players in the water filtration space today, market leaders across the end markets that we participate in. So it could be a little bit more limiting if you're going for a technology play in the water filtration space. So we'll look to expand the remit a bit on both the filtration side as well as potentially going into other areas of water. But I'll let Jeroen fill in additional details.

Yes. So I think on the healthcare side, the CDMO space, as Lori said, is very, very fragmented. And the way that we would be looking at it is to say, what's the type of capability that we can build upon next to what we offer today. So our SAM is defined by the capabilities that we have today. So when we look at the next CDMO type of offering, we look at new capabilities in line with these 3 markets I talked about, electrophysiology, neurovascular and structural heart capabilities that we don't have today, which therefore means we're going to be able to participate in different spaces that we are not participating in. So that's where that SAM expansion will come from, right? I think on the water side, we're really going to take a very strong end market focus. So looking at markets like industrial wastewater, looking at microelectronics, looking at desalination and also looking at food and beverage, the first 3 markets obviously being very much water focused and where we think we have still opportunity for broadening our existing portfolio. But then looking at food and beverage, you start immediately looking at beyond water and what does that mean for the filtration opportunities that are participating there.

Chris Parkinson, Wolfe Research. When you take a step back and you look at your projected CAGRs for healthcare and water, what substrates within each of those businesses offer the most confidence in terms of your ability to not only grow a GDP plus rate but also your peers?

Yes. So I'll start. I think in my opening comments, I had mentioned that in the markets that are growing above GDP, so Healthcare & Water, we expect to outperform versus market. And a portion of that is gaining share and a portion of it is just being favorably positioned in subsegments that are growing above the average. So to your question within med device, the critical care components, so anything related to the heart are growing above the average, which will enable us to be able to continue to grow. And in the water space in some of the life sciences and the microelectronics space for semiconductor that we are favorably positioned there to be able to shore up the top line expectations that we have.

John McNulty, BMO. Maybe a question for Beth. You're relatively new in the seat, but you've had a little bit of chance to kind of dig through things, I guess. Can you speak to where you see some of the bigger opportunities maybe relative to your past firms, your past roles? Is it on the efficiency side? Is it on the commercialization side? How should we be thinking about that?

Yes. It's been really interesting getting to know the businesses. And I think the foundational part is that I think we have some really nice pockets for growth either with some nice growth opportunities there [Audio Gap] some of those growth opportunities there. And then to your question about kind of past experience and the opportunities for margin expansion, I definitely think that the -- we've made big steps on the decentralization. And I think that's relatively new in terms of moving operations into the businesses and getting that agility and real ownership in the businesses. And I think that will drive quite a bit along with the excellence frameworks around operations, getting that more standardized and getting the KPIs brought to the [Audio Gap] pieces around the way we work and also around the portfolio are some great opportunities for us, product portfolio. I think it will be tremendous.

James Cannon, UBS. I think if I think about the way you describe both of those segments, you talked a lot about margin improvement in the Industrial side. Do you see any opportunities to do that on the Healthcare & Water side? Or is that primarily a sales growth story?

Why don't I just start for a little bit. So just in terms of our margin expansion and where that's coming from. So as we talked about, I mean, each segment will have its own remit in terms of revenue growth and margin expansion. But I want to be clear that the margin expansion is coming from both segments as well as from corporate expense as we shed some of our stranded costs. So when you think about Healthcare & Water, that's expected to grow at the 5% growth rate. It will have a little bit of a lower leverage point. And the opposite will hold true in Diversified Industrial. It will grow at a lower rate, but have a higher leverage in terms of the margin expansion related to that.

Yes. I mean we have productivity across the portfolio. And so I'll turn it over to Dave. Obviously, as we drive a more enhanced business system and a focus on continuous improvement, it's not going to be just pointed in one direction versus the other. And so really driving all of the key components of a really robust business system. And when we were searching for new leaders, we were targeting companies specifically to be able to bring in what we knew were best practices that existed across the industry and did a really nice job of getting that with Beth and Dave's background. So obviously, the value creation lever for Diversified is going to be more on the margin side versus health care and water on the growth side that they both should see nice lift in margins. So maybe, Dave, do you want to comment just about what you've seen and how well it can work?

Yes. I mean I think the opportunity is across the board. I mean I've seen this work very well. The equation is people process performance. I think we're in a very good position at DuPont in that equation, and it's across the board. I think if we -- we've talked about it a couple of times today, but you'll keep hearing us talk about refreshed management standards, updated rigor around those management standards, core KPIs, those create a common language for us internally in a decentralized environment. That's very important. We've got a strong tool set. We're starting from a strong excellence framework, building that out more in innovation and commercial. But I think it's really about creating the need in the business to leverage those tools and build more of a pull system around that. I think we're in a really strong position to do that, and we've got the culture to back it up.

Jacob Levinson from Melius Research. There's a pretty clear emphasis on driving lean transformation and continuous improvement, but maybe you can help level set us and some of those core metrics that you talked about, product quality, on-time delivery, where you can contextualize where are we today? And what are you driving towards?

Yes. We have our 8 core KPIs identified. So they're focused across both kind of financial shareholder-driven, customer-driven and then employee-driven. And so they're a bit of a balance. There's like 4, 2 and 2. So there's 4 in the shareholder financial range and then 2 each both the employee as well as growth. So we're identifying them, and we're building the processes around them with respect to the standards that will guide the internal reviews around consistency. And it's really driving that continuous loop of where are you? What are you doing to improve it? You've improved it, all right? How are you keeping it in place and how are you starting over again. So we talked about this continuous flywheel of improvement that we need to build across the businesses. So we're really excited about it. It's obviously in the early phases. We've just completed the identification of the core KPIs and are rolling them out across the organization. But there's a lot of opportunity to be had for us. I mean we have a great company, as Antonella has shown, we have a strong foundation to build from. So our performance has been in line with the multis, and we look to step change it a bit going from where we've been in the past 5 years at about 2.5% growth and 23.5% margins to consistent 3.5% growth and then north of 25% margins, and this is a big piece of that.

That's helpful. And just maybe as a related follow-up, is there scope over time for that R&D and CapEx spend, call it, 5.5% of sales, like as refining opportunities, is there a scope for that to actually come down?

Yes. So let me start with that. So Lori mentioned in terms of the R&D spend, like right now, we're around 2.5% and our intent is to keep it at that level. But clearly, when there's opportunities to invest, we have the capacity to do that, and we will. From a CapEx perspective, we did talk about -- you may have seen on Lori's slide that our goal is to get to about 3% of CapEx as a percent of sales for our business CapEx. We're currently sitting at about 4%. We're at 4% for '25. We'll probably be close to 4% in '26 and then be making our way down to the 3%. And a couple of things that are driving that is, one, we're kind of looking at more of a capital-light structure. So using more contract manufacturing versus creating additional capacity in terms of as our sales grow from an internal basis, also just looking at where our cost structure is today and do we have options to go more towards contract manufacturing to reduce our cost structure. I think also when you look at our CapEx, we're about 40% growth, 60% maintenance, the more utilization of AI tools in terms of how you do your maintenance and more predictive maintenance, not necessarily having things set on a set schedule. And the last thing I would point out is really the business system. So CapEx is one of the areas where I would say we can very much lean in and have a more disciplined approach around it to help kind of bring that level down.

Yes. I mean you kind of just answered what I was going to ask, but I guess a little bit incremental to that. As we look at the growth trajectory in some of these markets, I was going to say, do you have the capacity to actually service what you're looking for in the case of like medical packaging and something like Tyvek, is that something where you'll be transitioning from [Audio Gap]

Completed the expansion of Tyvek, right? So a couple of years ago, we did Line 8. So we've got ample room to continue without having to like short the construction side to enable growth in the packaging side. So we're in good shape there. And generally, across the portfolio, there's not any large capital investments that we've had in the past, like a couple of hundred billion. Everything is more incremental, well under $75 million either. So there's not a big slug that's going to cause us a hiccup around a nice glide to path that 3%.

Edlain Rodriguez, Mizuho. So when you look at the portfolio right now, it's about even the split between higher growth and lower growth businesses. So as we go over the next couple of years, how do you see that split developing? And what's going to drive that? Is it going to be pruning of Diversified Industrials? Or how you see that growing over time?

Yes. So we've made a nice move with the Aramids divestiture. So before we did Aramids, we were roundly 40-60 between high growth and then growing alongside GDP. And so when we did Aramids, that moved us pretty quickly to 50-50 where we are today. And we've mentioned that we would like to be able to get to more like a 2/3, 1/3 split. So enablement of that from 50% up to 2/3 is a combination of both some M&A activities. So we had mentioned that we were going to target our acquisitions at the Healthcare & Water space to enable continued shifts in that exposure as well as just mix enrichment. So the health care and water business is consistently growing at 5% versus the diversified at 2% will lead to outgrowth and then a bigger portion of our portfolio as well. And we did mention that we have further opportunity to optimize with the businesses that we have. So we are always looking at our businesses through a shareholders' lens and determining do they fit and do we get the right value for them.

Vincent Andrews with Morgan Stanley. I just wanted to ask about your Building Products segment and the 2% revenue CAGR you're projecting. Obviously, we're kind of at the bottom of the cycle for the resi part in particular, but also non-resi. Are you just being conservative in the outlook because it's been so tricky the last few years. Obviously, we had a Fed meeting yesterday, rates are starting to come down. But I just -- how would you assess if we have a recovery in starts and renovation activity picks up, how much torque is there in that business, both in terms of what the top line could do? And what would the incrementals on that be if it winds up being a bit better than you think?

Yes. Why don't I start with that? So to your point, like we have used kind of what the current outlooks are in determining what our 3-year targets would be. But from a Buildings perspective, I would tell you that what we are using is only a 2% growth. So to your point, if there is a significant recovery or a V-shaped recovery, that would clearly be incremental to the plan that we currently have. So I would say it is relatively conservative assumptions that are built into that. I think most importantly, we are very well positioned. So when that recovery does come back to take advantage of that from both a growth perspective and then have pretty nice incrementals that would drop from that as well. But it is, again, a much more, I would say, conservative approach because I think we've all been dealing with that second half recovery probably for the last 3 to 4 years. But to your point, I mean, as we move forward, clearly, there'll be some improvement from where we're at today.

Arun Viswanathan, RBC. I guess I just had a question about the capital deployment. How do you balance the fact that you do feel that you're undervalued versus potentially going out there and doing M&A of maybe higher multiple businesses that would increase your growth profile? Said differently, would it be valuable to maybe put in maybe a couple of percent of EPS growth contribution from buybacks at this point? Why is that just more of a discretionary item?

Yes. So we obviously will continue to be balanced in our approach, and we're not going to sit on cash. We never have and we never will. So we've got the proceeds coming from the Aramids divestiture at some point in Q2 of about $1.2 billion. We'll look to put that to work. And then we've got, as Antonella had pointed over the next 3 years, around $1.5 billion of excess cash that we'll generate after we pay the dividend and invest in our businesses, and we'll put that to work as well. So we were just -- the cleanest way was to commit to the 8% to 10% and then provide upside opportunity if there's M&A activity or if there's share repurchases that could drive outperformance there. So just not knowing exactly what the pace of that looks like, not having an open authorization right now, not knowing what the share price would be. So we don't know what the share price is going to be to able to commit to a number of shares to come out through a share repurchase program. So we may have been on the conservative side, but I think we've shown time and time again our willingness to invest either in M&A or in share buybacks and not have the cash sit idly around.

Thanks. On the legal front, it seems like with some potential trials ongoing, is there a sense for the company wanting to maintain a slightly larger cash balance to be able to deal with any of those payments that might be needed or settlement payments? Obviously, this is relevant to other parts of the DuPont Dow complex. But specifically for you, do you think the $1 billion in cash that you guys are outlining embed some of that? Or would it be in surplus of that?

Do you want me to take that?

Yes.

So the $1 billion that we hold as our operating cash would not be a fund to then fund future litigation. So we're confident that we've got more than enough capacity to fund whatever future settlements may occur. We have 2 of the larger ones behind us with the state of New Jersey and the water districts. I would say, ahead of us, we've got the state of North Carolina and to a lesser extent, West Virginia and then the personal injuries and the state AGs. We've set a precedent around a couple of things that prove really well for us as we go forward. One is when it relates to firefighting foam, which is the bulk of the future settlements to be had, we're 3% to 7% as a complex of DuPont, Chemours and Corteva. And so when you break our piece down, it's even smaller. And we've seen that precedent play out in both the water district cases as well as the New Jersey settlement. And so we're confident that, that would be a marker as we go forward. Also, we set a precedent as well as 3M about putting payments over a 25-year period. So it really reduces the amount of CapEx or amount of cash that you have upfront. So those dynamics give us confidence that we will be the cash required. In fact, next year, even with the insurance settlement that we would pay as part of the Corteva agreement that we did with Chemours, we're under $200 million next year for the New Jersey piece. And then in 2026, that drops to like $30-ish million. So it gets to be a pretty small number when you can stretch it out over 25 years.

Frank Mitsch, Fermium Research. When you took this opportunity to recast the New DuPont, I'm just curious as to why you decided to keep Healthcare & water together. What are the linkages there? Why did you decide not to split those into -- and so have 3 reporting segments. And then as I think about the Healthcare & Water businesses, I mean, very strong positions, very good brands. How has your market shares been trending over the past 3 to 5 years? And what is your thoughts on gaining market share in the future in those businesses?

Yes. I'll open with the decision on why the segment structure is 2 versus 3, and then I can turn it to you, Jeroen, for the market share. So for us, it was the cleanest way to report. So the high-growth businesses, they have similar growth profiles. They have similar margin profiles. So it made sense to report them together. You'll see the revenue for each when we disaggregate revenue. So you'll see the revenue that healthcare generates and the revenue that water generates. And so we thought that was a nice way to merge the growth businesses together and then diversify the ones that were more alongside GEP. So it wasn't anything more than that with respect to just simplification of how we report. On the share.

Yes, sure on the share. So on the -- I would say on the health care side, of course, when you look at the space where we are with Spectrum and Donatelle, we've essentially acquired market share, right? We weren't there before. And so that is still all part of the integration we're doing right now. And so we see clear opportunities to expand on that share. But clearly, it's a space that we probably had recent participation in. On medical packaging, I think our share has been very strong and it's continuously strong as well, certainly now with the expansion of our Line 8 where we can actually much more Tyvek medical material packaging -- packaging materials, I think we have a lot more opportunity to expand that share even beyond where we are today because previously, we were not able to serve demand that was out there, right? So I think that's there on the healthcare side. On the water side, I think we have always been a very significant participant in the space. Certainly, if you look at RO, if you look at ion exchange, I think we have a very strong market share position there. Are there pockets where we continuously can expand share? For sure, there are. And certainly, if you look at some of the growth areas that I talked about in terms of DLE, PFAS removal and green hydrogen, these are all spaces that are very much IER oriented. And so therefore, creating new opportunity of markets for us that we can expand our total share within the IER space from as well.

Alexksey Yefremov from of KeyBanc. Wondering if you have a pace of bolt-on acquisitions in mind, like one deal every year, 2, 3 years for sort of mid- to large-sized bolt-ons?

Yes. I wouldn't say we have a numbers target. We have a dollar amount that we know we have available. We don't see right now any need to take on additional debt to do a large acquisition. We think with the proceeds that we have from the Aramids divestiture as well as the excess cash that we generate, that would be more than efficient to fund the M&A opportunities that we see in the pipeline. If we were to find an opportunity that was really high return for us and met all of our thresholds was accretive to growth, low cyclicality, low capital intensity, if we did decide we were going to take on some debt, we would be back within our normal debt range within 18 to 24 months. That would be a commitment. But for us, right now, it's more the bolt-on size. So think the size of where we were with Spectrum or layered a few years ago, really adding to our toolkit. We're not going to be adding a leg to the stool.

Maybe we'll take a quick question from the folks online. So Lori, we've obviously talked a lot about transformation today. So how do you view the New DuPont going forward? And where are you most excited about the opportunities ahead of us?

Yes. I mentioned in my opening comments, what excites me the most is just the opportunity to drive growth. And so we have a nice line of sight that Antonella nicely detailed with respect to how we'll get to the 3% to 4%. And if there's end market cooperation that's beyond that, we'll take it. But we did not assume any recovery in construction or even automotive, which is kind of in stock for the last couple of years well. So that growth piece is very exciting. And the building of the business system is the other piece that personally energizes me. So really having that discipline around driving our excellence models and coupling them with a really robust business system is going to influence not only the culture, we have a great culture at DuPont. Dave had made a cool comment to me that he was visiting the sites pretty rigorously over the last couple of weeks, and he could have mentioned what the core values were without them ever saying what they were because he felt them at the sites. And so I would -- I'm going to really build on that strong foundation with the great people and the great businesses that we have and just enhance it with a focus on growth and improvement.

Mike Sison, Wells Fargo. Lori, 3% to 4% organic sales growth would be exceptional, particularly in chemicals. Hopefully, you're not with us. But even in industrials, I think that would be a really nice achievement over the next couple of years. Just curious, if you were not to achieve that goal, why do you think that would be? Would it be macro? Would housing stay weak or with some investments, regulation competition? What would cause you potentially to miss that goal? And then if you do achieve it over the next 2 to 3 years and you don't get the multiple that you want, do we get 3 new mini DuPonts after that? Or how do you sort of get that value over time?

Yes. I mean I think with respect to the first part of your question about what would enable us to achieve the 3% to 4%, it would primarily be if the end markets don't cooperate. So if we head into some type of recession or there's further malaise in the construction and automotive spaces that would cause us to not even see just not be able to get to that 2%, that would be. There's also another small piece that we are excited about within Beth's portfolio. So she obviously brings a key competency in 80/20 work that she had when she was at ITW. And as you apply the 80/20 framework, sometimes it will come at the expense of some volume as you take complexity out that drive really nice margin growth. And so that we're ferreting out that opportunity to see where that sits, but that could be one piece that I wouldn't say it would cause us to miss the 3% to 4%, but it could factor in as a piece that we don't have in the 3 to 4 basis now. But I'm confident, assuming end market cooperation that we'll be good with the 3% to 4%. And as far as the creation of 3 mini DuPonts, right now, we're committed on running the company. We've got really great businesses, really great people, really great teams. But we are always looking for valuation and seeing where we are versus where we think we could be.

Thanks. Just a couple of other things. Maybe just touch on your businesses as it relates to China. My impression, perhaps incorrect, but correct me. So it looks like you're overrepresented in China on water and filtration I'm not sure if you're over or underrepresented in China as it relates to the Chinese EVs, which are becoming a bit of a juggernaut. This might tie a little bit into the share question as it relates to water and your geographic mix. But can you just give us your assessment of China versus DuPont and your relative position in water versus the Chinese EVs?

Yes. So we're 10%, so much more in line with the peer set with respect to total company China exposure as a percent of sales. So we went from around 20% with total DuPont down to 10% with the New DuPont. So that was nice to see. I would say I'll let Jeroen cover the water side and maybe Beth cover the EV side in more detail. With water, we are -- that is where a big chunk of our 10% exposure for total DuPont comes with roundly not quite 1/3 anymore of the China being the RO business. And then with the OEMs in China on the automotive side, our exposure -- we have nice exposure in China outside of BYD. So BYD just either uses their own adhesives or they use really low-cost models. And so if that dynamic persists with respect to BYD being the large player in the space, then we wouldn't have the opportunity to participate with them. But the majority of all the other Chinese OEMs, we are well entrenched with. In fact, some of them, we have 100% of their business and some of the -- in the higher-end models. And so we're watching closely what the BYD situation looks like to make sure that we're aware of the dynamic there. It feels like it might be flattening out a bit and others are starting to gain some traction, but I'll let Jeroen and Beth add some incremental comments.

Yes. So sure, maybe start with water. So if I look at the total water business globally, the portion that the China business has actually reduced over time. And we've seen that reduction because other regions like the PAC region [Audio Gap] and I think our market share position there has been very stable actually. And so we have not seen any major deviations there at all. So -- and so if I look then further at where the majority of the growth opportunities will play out for us looking forward, it really is going to continue to be in the Middle East because of desalination in the PAC region because of the microelectronics business, some of the microelectronics business is now emerging here in North America as well. So we're going to see that benefit there. So I think over time, we'll see actually faster growth in the other regions that will sort of reduce our further dependence on China even in water as well.

Yes. And in terms of the EV space in China, Lori is right. With BYD, we've actually not had such a strong position because they handle it a different way, but we are well positioned with others like Xiaomi and some of [Audio Gap] so it's a good opportunity. And as I mentioned earlier, we're really well positioned across EVs globally in adhesives in terms of being, I think, all the top 10 global automakers where we actually have products in their vehicles. So I'm looking forward to that in terms of the expansion in EMEA, particularly of EVs, I think we'll be really well positioned to support that as well. And then China, maybe just one other thing outside of adhesives, we're really well positioned with Molykote on all the local -- local for local Chinese auto space as well. So -- but again, that tends to be quite regional, and we support well in each of the regions.

And just one little data point. We said a couple of times that Water has high recurring revenue, but I never heard a percentage. Could you frame that for us?

70% of our annual revenue is coming from replacement cycle of existing installation.

Patrick Cunningham with Citi. Can you talk a little bit more about the opportunity for portfolio optimization within Diversified Industrials. You've obviously sold off the Aramids business here. On the one hand, it looks pretty compelling in terms of latent growth and operating leverage. Do you want to prove that out over multiple years? Or do you think there'll be opportunities to get rid of some more cyclical businesses, higher capital intensity businesses?

Yes. I mean I don't want to comment in any specificity. So we had mentioned that we have a strategic intent to continue to morph towards the higher growth spaces. There are high-growth spaces in diversified today. So we've got a really nice position in aerospace, a really nice position in EV. So I think we're just constantly assessing our perspective from a shareholders' lens and determining does it add incremental value for our shareholders and for ourselves. And so as we play out that analysis is usually what leads us to decide whether or not it fits in our portfolio. So I mean, I think to the Aramids question, that was a business that was the lowest margin profile in the company. And so that was a big factor when we were looking at the decision to divest Aramids and it was challenged, especially on the Kevlar side from a competitive perspective. We don't have any of that left. So the decisions that we make in the future with respect to portfolio optionality are going to be really more around how do we shore up that growth percentage of our portfolio.

Vincent Andrews from Morgan Stanley again. I wanted to tie together a couple of things, Antonella, on the financial forecast. We have the CAGR of the 3% to 4%. You have the margin expansion 150 to 200 over that time frame. There was a little conversation before about, hey, maybe we're going to prune some volume initially. So when we think about those CAGRs, are they linear? Or is it a little bit more loaded to the back half of that period because you've got a little work to do initially? How should we just be thinking about that starting in '26?

Yes. I think you'll start to see nice performance out of the gates. It's not expected to be all back-end loaded in the 3-year plan. And quite honestly, even from a margin perspective, you'll probably have a little bit more of a benefit in the first 2 years as that's the time period in which we will take out the stranded costs. So you'll see pretty even performance and from a margin perspective, a little more built upfront.

So maybe for our final question, we've heard from Lori about what she's excited about going forward, maybe for the rest of the leadership team, can you share your perspective about what you're excited for the New DuPont going forward?

I'll start. I think I'm really excited about the timing now with where the company is headed and the direction that we can go in. So I think the timing is fantastic along those [Audio Gap] growth opportunities with that segmentation and focus there, too. So I'm really excited about the business. And like we said, even the building space, the market needs to turn at some point. The underlying fundamentals are there. The challenges are there, and we're really well positioned for those. So beyond the EV and the aerospace [Audio Gap]

Healthcare & water industries, these are great spaces to be in, right? I think both from a size of the market are $13 billion for health care, $7 billion for water. If you look at the growth rates that come with these, very exciting spaces to be in. And certainly, if I then think about the position that we have already built for ourselves today as well as what we can still do beyond that. I think that ability -- the growth trajectory that I can see in front of us, again, both organically from what the market can do and how we participate from an innovation perspective as well as the inorganic opportunity that we have. I think that's a great opportunity, and I'm very excited to be able to deliver that growth contribution to the company.

Thanks. I would say, listen, DuPont is a great organization with a great culture, and I've had a really great experience over the last 3 years. And again, I would say the benefit of both. We have a long-standing history as DuPont, but yet a significant amount of change that allows this leadership team really the opportunity to write the next chapter of the story.

Yes. And for me, you've heard it a couple of times today. The people and the culture at DuPont are just different. When I think about what I've seen so far and I think about when we take a practical tool set, rigorous management standards and a common language, we put that together with the talent that we have on the field and the culture that already exists in this organization, I keep saying the sky is the limit. I mean we're going to be in for a really exciting couple of years here because we've got a lot of work in front of us, but we're poised to deliver on that.

Great. Maybe Lori can say final remarks.

So our goal for today was to build momentum for the New DuPont and prove to you that we have the right team, the right vision and the right strategy to drive value. So ideally, we achieved that. So thanks to everyone for your time. I'm also equally excited about the afternoon. So for those of you that are hanging around for the [ community ] session, they've got an equally impressive story. So they are the leader in the semiconductor space. They've got 2/3 of their business exposed to semiconductors, and they've got the broadest portfolio to address it. So I'm super excited to participate in that, too. So thanks, everybody.

Thank you. That concludes our morning programming. Thank you for joining us, and have a great rest of your day.