Chigusa Katoku

Chigusa Katoku asked about the potential upside to the 0-50 basis points productivity target from the Analyst Day margin bridge, and if the company was tracking ahead of plan. She also inquired about initial thoughts on capital deployment for the $1.2 billion pre-tax proceeds from the Aramids divestiture.

Answer

Antonella Franzen, CFO, indicated a strong start, with at least 20 basis points of margin expansion from productivity embedded in the 2026 guidance. Lori Koch, CEO, confirmed the Aramids divestiture closing around Q1, yielding about $1 billion after-tax. She noted that half of the proceeds were already deployed via a $500 million ASR and that the company remains shareholder-friendly, actively exploring M&A opportunities, particularly in healthcare, targeting strong returns.

Chigusa Katoku, representing JPMorgan Chase & Co., inquired about the potential upside to the 0-50 basis points productivity target from the analyst day margin bridge, given current execution. She also asked for initial thoughts on capital deployment for the $1.2 billion pre-tax proceeds from the Aramids divestiture.

Answer

CFO Antonella Franzen confirmed that DuPont is starting strong, with at least 20 basis points of margin expansion from productivity embedded in the 2026 guidance, driven by ongoing organizational activities. CEO Lori Koch stated that the Aramids divestiture is expected to close around Q1 end, yielding about $1 billion after-tax. She noted that $500 million has already been deployed via an ASR, and remaining proceeds will be deployed shareholder-friendly, with M&A opportunities being explored, particularly in healthcare, targeting strong returns.

Chigusa Katoku, on behalf of Steve Tusa, asked about the cadence of orders translating into sales and which specific businesses are expected to drive sales in the second half to support the full-year guidance, given the encouraging order trends and increased backlog.

Answer

Lal Karsanbhai, President and CEO, stated that the backlog phasing is very supportive of hitting second-half sales, translating into the guided mid-single-digit growth and 6% EBITDA growth. He noted that the trailing 12-month orders (6%) and the $7.9 billion backlog (up 9%) substantiate this, with the backlog build being broad-based across control systems and software (Power, DeltaV), final control, and the Sensor business.

Chigusa Katoku, on behalf of Steve Tusa, asked about the cadence of orders translating into sales, given the encouraging order trends and increased backlog. She specifically asked which businesses are expected to drive sales in the second half to support the full-year guidance.

Answer

Lal Karsanbhai, President and CEO, Emerson, stated that the backlog phasing is very supportive of hitting second-half sales, translating into the mid-single-digit growth and 6% EBITDA growth guided. The $7.9 billion backlog, up 9%, phases into the second half of 2026 and the first half of 2027. The backlog build is broad-based, including control systems and software (power, DeltaV), final control, and sensors.

Chigusa Katoku, on for Steve Tusa, asked for more detail on the AEC segment's margin pressure and the need for additional labor investment, and questioned the confidence in the full-year guidance which implies a significant second-half EBITDA ramp.

Answer

President & CEO Gunnar Kleveland clarified that the AEC margin pressure and EAC adjustment are primarily driven by the complex CH-53K program, where overhead costs were underestimated for the ramp. He stated that confidence in the full-year guidance is based on expected higher sales and returns in H2, driven by Heimbach synergies in Machine Clothing and growth across commercial and defense programs in AEC.

Chigusa Katoku, on for Steve Tusa, asked for the source of management's confidence in the Machine Clothing segment's expected acceleration for the rest of the year, given weaker-than-expected Q1 organic growth and tougher comps. She also asked about any signs of order pull-forwards.

Answer

President and CEO Gunnar Kleveland explained that the Q1 revenue decline was partly due to planned divestitures of a business and certain product lines. He expressed confidence in the full-year outlook because the segment's order backlog is very strong, indicating a healthy second and third quarter. Kleveland also confirmed that the company has not seen any pull-forward of orders from customers.

Chigusa Katoku of JPMorgan Chase & Co. asked about expectations for free cash flow conversion in 2025, whether the AEC segment will remain a cash user, and the key drivers for the strong margins in the Machine Clothing (MC) segment.

Answer

Robert Starr indicated that while the current high cash conversion rate may not be sustainable long-term, the company is focused on strong cash generation, with AEC expected to become less of a cash user. President and CEO Gunnar Kleveland attributed the strong MC margins to successful Heimbach integration efforts and excellent operational execution and cost management.