2024 Earnings Outlook
Q: What drives your confidence in the earnings growth outlook for 2024?
A: We anticipate earnings growth in the second half of 2024 driven by increased semiconductor fab and PC utilization rates, completion of destocking, improved factory absorption, and benefits from our cost savings program. Specifically, we expect EBITDA margins to approach 26% in Q4, with a longer-term target for total company EBITDA margins of 27-28%.

Electronics Business Recovery
Q: How will the electronics business perform in the recovery, and is it aligned with industry trends?
A: Our electronics business is closely coupled with industry trends, particularly growth in data centers and AI, which are major demand drivers. We expect semiconductor utilization rates to increase from the low 70s to the low 80s in 2024, with further upside potential in 2025. Our products are well-positioned for advanced chip applications, and we have maintained market share without decoupling from the broader electronics trends.

China Market Outlook
Q: What is your outlook for China and its impact on your business?
A: Despite a challenging market, we're seeing signs of improvement in China. In January, water orders in China were up 13%, indicating that destocking may be ending. While true demand is down 3-4%, we expect growth as we move past the destocking phase. Even if China’s structural growth rate slows, it's coming off a low base, and we anticipate benefiting from the recovery.

Unlocking Electronics Business Value
Q: What are your options to unlock value in the electronics business?
A: We recognize the significant value of our electronics business and believe that as we navigate through destocking and see earnings improve in the second half of 2024, the market will better reflect this value. We're focusing on executing our strategy and will assess the situation as we exit 2024.

Impact of Destocking
Q: How has destocking affected your business, and when do you expect it to end?
A: Destocking has significantly impacted our short-cycle businesses, but we're beginning to see signs of recovery. We expect destocking to be mostly complete in the second half of 2024, leading to volume growth and improved factory absorption. For example, water orders were up 13% in January, signaling distributor inventories bottoming out.

Cash Flow Conversion
Q: What is your expected cash flow conversion in 2024?
A: We anticipate maintaining a cash flow conversion target of around 90% for 2024. Our pension funding needs are modest at $50-60 million, and capital expenditures remain consistent with prior years. We made significant progress on inventory reduction in 2023 and aim to retain those gains.

Absorption Headwinds
Q: Can you quantify the absorption headwinds from inventory actions?
A: In 2023, we faced absorption headwinds of a little over $200 million, primarily in Electronics & Industrial (E&I), with some impact in Water & Protection (W&P) towards year-end. These headwinds are expected to continue in Q1 2024, with potential improvement as volumes increase in the second half.

Price-Cost Dynamics
Q: What are your expectations for price versus cost in 2024?
A: We foresee a 1% price decline on the top line for 2024 but expect to offset this with carryover benefits from reduced raw material, logistics, and energy costs, resulting in a neutral price-cost spread for the year. In Q4 2023, we saw a price-cost benefit of $50-75 million.

Exposure to AI and Data Center Growth
Q: How is DuPont positioned to benefit from AI and data center growth?
A: Approximately $700 million of our $2 billion semiconductor business is tied to data centers. We're well-positioned to capitalize on the growth in AI and advanced chip applications, which play to the strengths of our electronics portfolio. We typically outgrow the market by 200-300 basis points due to this positioning.

Water Business Growth Opportunities
Q: What new growth opportunities exist in your water business?
A: The lithium extraction market presents a substantial opportunity for our water business due to the high demand for filtration technologies. Additionally, we expect to maintain mid-single-digit growth rates globally in water filtration, with long-term confidence in the market's potential.

Semiconductor Fab Wins
Q: When do new semiconductor fab wins contribute to revenue?
A: Our sales process involves collaborating closely with about 10 major customers at the design stage. The location of chip processing is less relevant to us. Market share in advanced chips remains stable, and we benefit as new fabs come online to meet increasing demand in advanced semiconductors.

Shelter Solutions Outlook
Q: What is the outlook for Shelter Solutions and utilization rates?
A: We expect normal seasonal patterns in Shelter Solutions, with improvement in volumes as the year progresses. Volumes were down 4% in Q4 but are expected to be slightly up in Q1 and build to about 4% growth by year-end. The business isn't highly fixed-cost intensive, so absorption impacts are minimal.

Spectrum Acquisition Performance
Q: How is the Spectrum acquisition performing relative to expectations?
A: Spectrum is performing in line with our expectations and is ramping up nicely, particularly with the new customer win highlighted during the acquisition. We've integrated Spectrum with our Liveo Healthcare business to capitalize on commercial synergies.

Auto and EV Market Expectations
Q: What are your expectations for the auto and EV markets in 2024?
A: After a strong 2023 with high single-digit growth in the auto industry, we expect volumes to be about flat in 2024, aligning with auto build rates. While China may slow down, we remain confident in the long-term growth of EVs, with 25-30% of our portfolio now tied to electric vehicles.

Efforts to Reduce Cyclicality
Q: How do you view cyclicality in your current portfolio?
A: In normal times, our portfolio is more consistent and less cyclical. The recent volatility is due to unusual destocking events, which are rare. We believe half our portfolio should outgrow GDP and the other half should grow with GDP, leading to steady long-term growth.