DuPont de Nemours Inc (DD) — Q1 2020 Earnings Call Transcript

Thanks, Leland, and good morning, everyone, and thank you for joining us. This is obviously an unprecedented time, and I hope you're all safe and well. Today we will walk through the disciplined plan we are executing as we navigate the current environment, including our overall approach to protecting the health and safety of our employees and maintaining our supply chains and operations. We will also detail a number of actions we quickly implemented to strengthen our liquidity, protect our balance sheet and generate cash. Because of these swift actions, we are on solid footing and are well prepared to handle the uncertain times ahead. We will also provide comments on the first quarter results, overall market dynamics in April, as well as our current assumptions for the next few months. Since the outset of this pandemic, our priorities have been clear, beginning with the safety and well-being of our employees. We have taken aggressive steps to protect our employees, are restricting access to our sites, implementing enhanced cleaning protocols, performing contact tracing among our employees, administering quarantines where needed and implementing work-from-home protocols where possible. I want to acknowledge the tremendous efforts across our organization in overcoming the challenges created by the pandemic. The determination of our employees from across the globe to maintain business continuity has enabled us to continue to be a reliable supplier for our customers, and a vast majority of our plant sites have been deemed essential in their local jurisdictions and have continued to operate. As a result, many of our manufacturing and other necessary personnel deserve particular recognition. Their extraordinary dedication in this incredibly challenging environment has enabled us to keep our sites and supply chains operating; our second priority for managing in these difficult times. In fact, we have been successful in maintaining our operating base during the global pandemic with only a handful of our manufacturing locations shut down by local restrictions over the past few months; and currently, operations are restricted at only two of our 170 manufacturing sites. We have begun long-term planning for an eventual return to work for non-manufacturing employees, which will be done in accordance with all relevant government requirements, and continued emphasis on health, safety, and the overall well-being of our employees, customers, and communities. Our third area of focus has been bolstering our already strong balance sheet by enhancing our liquidity position and implementing plans to generate and preserve cash. We will provide more detail on these actions in a moment. Lastly, we continue to do our part to help combat this pandemic. We have donated over 140,000 Tyvek garments, and thousands of gallons of hand sanitizer to healthcare and other frontline workers. We have also used our 3D printing capabilities to make face shields for local hospitals that were experiencing shortages and partnered with Cummins to use DuPont filtration technology to help augment the supply of N95 respirator masks. We have also announced a number of initiatives to increase the supply of protective garments by more than 15 million per month since the start of the pandemic, including the increased production of Tyvek garments by more than 9 million per month, primarily by shifting production away from non-healthcare markets. And launching the TyvekTogether campaign, which enables the production of 5 million to 6 million additional garments per month for the rapid development of a safe, easy-to-use version of Tyvek and by empowering others to join DuPont in protecting frontline responders with free access to our designs and usage instructions. These are unprecedented times, and I am personally engaged in the day-to-day work to respond quickly to the changing environment. We take our designation as an essential business very seriously and are committed to doing all we can to support our employees, our customers, our partners, our shareholders, and the communities in which we operate. Slide 3 details the series of actions we have been operating against since the pandemic spiked in mid-March. The senior leadership team and I are on top of these items daily to ensure we remain well-positioned. We have analyzed a number of stress case scenarios and are confident we are making the right decisions to ensure we are favorably positioned to weather an unlikely steep and prolonged downturn, while also being equipped to return to growth when the market recovers. Our playbook for this environment is straightforward: Improve cash generation through working capital improvements and deferral of certain capital expenditures, strengthen our liquidity position and optimize the cost structure of the company. We will provide more color on how we are driving success in each of these areas. Our scenario planning was broad and simulated severe downturn cases to ensure we can protect the company. We're also staying keenly focused on the downside risk in automotive, aerospace, oil and gas, and other industrial markets. With nearly 15% of our sales connected to the automotive industry, this is the largest area of exposure for us, particularly within our Transportation & Industrial segment. The numbers are unprecedented with global auto builds down 24% in the first quarter, and the latest estimate suggests the global auto builds will be down more than 40% in the second quarter. In light of this, we developed a plan in the first quarter to begin slowing and idling certain facilities in our network, primarily factories in our Transportation & Industrial segment in order to align our supply with market demand. Taking these actions will provide significant working capital improvement through inventory reductions over the course of the year that will translate into near-term earnings headwinds, as fixed costs that would otherwise be absorbed in inventory will now flow directly to earnings. For T&I, a very weak top-line driven by the expected decline in auto builds, as well as year-over-year price declines, coupled with the charges associated with plant shutdowns is expected to result in decremental margin in T&I of approximately 55% to 65% in the second quarter. These are not easy decisions, but the confidence to react quickly and decisively is critical, and we will continue this mindset as we move forward.

Thanks, Ed. Slide 4 highlights our strong liquidity position. We have always valued a strong balance sheet and that mindset led our actions as the severity of the downturn came into focus in mid-March. We saw the certainty of access to liquidity, as well as a firm plan for refinancing our November 2020 bond maturities by simply putting the wheels in motion to obtain bank financing as commercial paper and credit markets were initially constrained. In short order, we were able to secure a new $1 billion 364-day revolving credit facility, which replaced the $750 million facility that was set to expire in June. While we expect it to remain untapped, extending and enlarging this facility provides greater certainty to meet our general business needs. We also obtained a $2 billion delayed-draw term loan to ensure we had a path to pay off the November maturity, and have since replaced the bank commitment with a short-dated bond, which I will discuss on the next slide. With these new credit facilities in place, and our strong cash position, we feel very comfortable with our liquidity. We also have opportunities ahead of us for further cash generation through working capital improvements and proceeds from divestitures. We have identified working capital as a key area for improvement and expect to deliver more than $500 million of working capital improvement in the year and we are off to a nice start in the first quarter by reducing our use of cash by $300 million versus the prior year. Each of our businesses have a series of targeted focus areas to deliver our working capital improvement, including inventory reductions through initiatives such as SKU rationalization and shifting from a make-to-stock model to a make-to-order model in certain businesses. Within accounts receivables, our teams have increased their focus on pass-through accounts and across both accounts receivable and accounts payable, we continue to optimize terms with our customers and vendors. In the quarter, we closed the sale of our Compound Semiconductor Solutions business generating over $400 million in gross proceeds. We are also taking prudent action to pull back on certain CapEx, reducing our spend by about $500 million versus the prior year. We elected in mid to late March to pause share buybacks after we had repurchased approximately $230 million in the quarter. While shareholder remuneration remains a critical component of our financial solvency, this was a tactical action at the time in order to conserve cash. Lastly, our Board recently approved the second quarter dividend of $0.30 a share. We remain committed to our dividends and are confident that we will be able to maintain it through these challenging times.

Thanks, Lori. Slide 10 shows the progress we have made since announcing the N&B and IFF transaction last year. I remain very excited to bring these two businesses together to create a global leader. Since the announcement of the transaction in mid-December, teams have been hard at work. As I told you in January, the executive steering team and leaders for key work streams including separation and integration, our financials, IT separation and stand-up, legal entity work and talent selection are in place, and things are progressing as planned. In fact, as of March, we have received antitrust clearance here in the U.S. and our draft EU filing was submitted on April 20th. And we are now working with the European Commission to formally notify the transaction and opinion by trust clearance. We will file our initial registration statement with the SEC in the coming days. Also, the new leadership team will be announced later this month and IFF intends to hold a shareholder vote in September. In summary, the teams are energized and all the critical milestones remain on track for a Q1 2021 closing. Let me wrap up a few comments on what we saw in April, as well as our expectations for the second quarter. We are seeing robust demand continuing within several key end markets such as water filtration, food & beverage, probiotics, electronics, and protective garments. There’s some increased demand in these markets as a result of the pandemic, but these businesses are market leaders in their space, and there is undoubtedly underlying growth driving these results as well. However, as we have highlighted, these areas of strength are expected to be more than offset by the well-known softness in automotive, aerospace, oil and gas, and other industrial markets. In April, our sales were down low to mid-teens percent versus last year. Earlier I mentioned the actions we’re taking to run our T&I business for cash through this period of significant demand weakness. These actions will result in near-term earnings headwinds as fixed costs otherwise would have run through inventory will flow directly to earnings. Likewise, actions to pull back production will lead to lower utilization in several industrial businesses within the S&C segment. All in, we expect our second-quarter decremental margins to be in a range of 45% to 55% on lower volume, nylon pricing pressure, lower utilization, and costs associated with idling facilities. Excluding our decision to idle facilities, our decremental margins would be in a range of 35% to 40%. While it is still impossible to predict timing, our markets will eventually stabilize and return to growth, and we will be well positioned for the recovery. In the interim, we will continue to prioritize the safety and health of our employees, safely maintain our operations, strengthen our balance sheet, and partner with other industry leaders to combat this pandemic. I'll now turn it over to Leland to open up for Q&A.

A lot of companies are calling out large temporary cost savings. 3M talked about $350 million, $400 million or something in the second quarter alone. Honeywell talked about like $1 billion. I see kind of the structural cost which is positive obviously because that kind of carries forward. Can you maybe frame anything that may be temporary that can kind of defend the margins in the near-term?

Yes, Steve, thanks for the question. And obviously, we spent a lot of time on this topic. So, as you know, we upped our structural cost savings in the last month or so from $90 million to $180 million. In addition to that, remember that we have another $165 million that is a structural change to the cost of the business. That's coming out from the DowDuPont merger and putting those businesses together. So in total, we have about $330 million give or take coming out of the system permanently. On top of that, we have about another $80 million to $100 million of what I would call opportunities that are T&E reduction, external contractor spend at our facilities. And we've eliminated the merit increases, we’ve frozen hiring. So things that were in our plans, there's about another give or take $80 million to $100 million that won't get spent that was baked into the plan. So when you kind of sit back and look at it, we have benchmarked every function in the company, every business in the company and we are getting the G&A expenditures to best-in-class benchmarking with the best companies out there. Remember that four years ago, when I arrived, we took about $1 billion of structural costs out of DuPont and during the DowDuPont merger, we took another $1 billion of structural costs out of the business on top of what we're now presently doing. So I think if you look at it, we're going to benchmark very, very well through this. And again, I wanted to really attack the structural flaws so that they're permanent in the business. Another point, though, that I would make, we did not touch the growth programs in the company. We left all of our sales organizations totally intact and we left all of our R&D spend, which is 4% of sales $900 million totally intact. And by the way, I think we're running our R&D machine very, very well. We’ve benchmarked every single program, what's the return going to be on the program, are we spending what we said, is the timing the timing we said it would be? So we're going to come out of the downturn, I think, in a very strong position. We're still cranking out a lot of new products through this. So I think we’ve balanced this thing very well.

I was encouraged by that comment on April down low-teens. And I guess my question, I was hoping you could give us some granularity on perhaps by segment on what those numbers were. Because does sound like a pretty good result versus what we're hearing from others so far, at least?

Thanks, Scott. So, as we mentioned on the call, April was down kind of low to mid-teens. It was a similar result that we saw in Q1 kind of carry into April. So we saw continued strength in E&I, continued strength in N&B. The strength in E&I is primarily coming again from semiconductors as we see increased usage in the data and server space. T&I and S&C were down more than what they were down in Q1, in line with what you would expect with what's going on in automotive. Automotive right now, we expect it to be down about 45% in Q2, versus down 25% in Q1. And S&C continued strength in Tyvek within the garment space, as the garments alone, which are about a third, historically at Tyvek have kind of come up now to almost half of Tyvek. We're up about 65% in the quarter. So really nice shrink there. And we've announced some capacity expansion to enable that to continue to grow into Q2. But the headwinds that we're seeing in aerospace and oil and gas are more than offsetting that as well as construction with all the stay-at-home orders. So net-net, April down. As we mentioned about low to mid-teens with very similar end market results that we saw in Q1.

Maybe just a follow-up on the Transportation & Industrials. You said builds were down 24% in Q1, but your volume is only down 8%. Was that sort of trade loading of some sort, does that have to reverse in the second quarter such that your auto performance would actually be much worse than that 40% that you're seeing in decline in global auto builds?

So I think, so underneath the 12% down, the 8% volume that we've recorded in T&I. So there was strength that we saw in the Healthcare segment that offset some of the weakness that we saw in Mobility Solutions. So mobility would have been down more than the results that we reported for the quarter. Having said that, we continue to expect to see our performance outpacing auto builds just driven by the content per vehicle, so we've given a number in the past of about 1.5 times that we would look to exceed auto build just driven by the material content that we have as we see branch towards light-weighting as well as electric vehicles. So that's kind of what led to our results to outpace. There is a little bit of a time lag between when you see auto builds decline and when you see back to chain where we primarily sell into with our polymers. So we did see a little bit of acceleration in Q1 as people were loading their supply chains in advance of the downturn. So I think our results in Q2 will more mirror what you're seeing from an end market perspective.

And just add on to that, just to make it clear, this is a business in T&I that we are truly running for cash performance in this period of time. So, we purposely are hurting our earnings by $90 million to $100 million if we kept running the facilities as they do, for instance, in the semiconductor industry, our earnings would literally be $90 million to $100 million better. But we're going to draw down the supply chain here and generate $200 million to $250 million of cash performance in the company. So, we will be temporarily shutting down about 50% of our polymer capacity in the business and I think it's the right decision, a smart decision to do that. And we'll come out of it stronger and have a better uptick when things return a little bit more to normal.

I appreciate the near-term focus on these urgent issues like coronavirus. I just wondered if that impacted any progress you made on your PFAS liabilities. Didn't hear much about that and just want to know whether or not you could give us an update on that. The arbitration with Chemours, the litigation of the Ohio MDL and any movement towards getting a little more collaborative on this front?

Thank you for the question, Steve. Regarding the PFOA situation, we have gone through two trials for the few remaining cases, and I believe there will be a settlement. We'll put the Ohio cases behind us, and I'm quite confident that will happen. The judge ruled in our favor for arbitration with Chemours, although they have appealed. However, the law is strongly in our favor, so arbitration will take place. I prefer the arbitration process because it's faster than court proceedings, and we feel optimistic about it. I think a settlement with Chemours is likely and will involve renegotiating our agreement with them. There are key terms in any new agreement that are important to us. We will not agree to an uncapped deal, and it would span over many years since I don't foresee significant liabilities from PFOA in the near term. However, there will be liabilities that develop over time as we carry out remediation at certain sites. It's also worth noting that while we are mentioned in several firefighting foam cases, we never manufactured firefighting foam; we only provided one surfactant used for a decade during a 70-year period. We're a very minor player in that area, and it’s essential for DuPont to resolve those cases. The remaining PFOA issues are largely tied to a few manufacturing sites where it was used. This will unfold over the next year, but I expect some progress shortly with both the Ohio cases and the Chemours situation.

You have a strong reputation as a deal maker. However, I think people often forget that you gained valuable experience in operations at Motorola. How have you and Lori managed to achieve significantly more cost savings compared to the previous management in just a few short weeks? Typically, companies that take on substantial restructuring initiatives, such as in financial services and various sectors, discover that there is often more they can accomplish without compromising core operations, productivity, or quality. Are you finding similar opportunities as you progress through these processes, or is it still too early to determine?

Thank you for the question, John. Lori, feel free to jump in shortly as well. I appreciate your mention of our focus on cost and operations, which is truly my favorite aspect of this role, even if it's not always viewed that way. I am passionate about running our businesses efficiently. I'm a strong advocate for benchmarking and maintaining a lean general and administrative cost structure. Throughout COVID-19, I've conversed with a number of CEOs and believe we are discovering new avenues for structural cost savings within the company. I'm quite impressed by how effectively we’re operating, especially under the stay-at-home guidelines for most of our non-manufacturing staff. I think we will learn valuable lessons regarding our real estate needs as we progress. We always planned to identify and eliminate more costs. It’s essential to reduce our G&A cost structure as N&B exits the portfolio so that we stay competitive even when we lose that revenue and EBITDA. We've conducted extensive benchmarking to assess our position post-N&B transaction. Additionally, we are thoroughly reviewing every single SKU in the company to identify rationalization opportunities. I have implemented this strategy in my previous roles, and there's typically significant potential for improvements. We've already achieved this in our water business, where we increased margins by 1,000 basis points, largely due to SKU rationalization. Lori and I are currently focused on this path, and I believe we'll continue to uncover opportunities. Lori, would you like to add anything?

Yes, I think, our next area of focus is obviously around a lot of COGS over the last few years. So we're looking and shifting the focus towards COGS. So there are definitely areas of opportunities in COGS. We will spend about $13 billion, $14 billion there. There's opportunities to increase our reliability, increase our uptime, increase our yield. So that's definitely an excellent area of focus for us that will help us to continue to expand margins.

Just kind of thinking about the trajectory of this thing. Obviously, a lot of your businesses are fairly short cycle. So it's unclear how much visibility you have. But do you see April being the low watermark in terms of kind of sales declines or are we looking at kind of the possibility that auto stays weak and some of the pockets of strength like electronics maybe soften up a bit? And maybe as part of that answer Ed, you made a comment about planning for kind of unlikely steep and prolonged downturn. Obviously, none of us have a crystal ball here, but would appreciate your perspective on really what you think this does look like and kind of the path back up and out of this current drawdown?

Let me start with the high-level scenario planning we undertook. I appreciate the question, and I want to emphasize that I have experience in this area, having been the CEO during the '08 and '09 crisis. I led Tyco in 2002 when it was close to bankruptcy, so I've faced significant scenario planning before, though I never expected to have to do it again. We created two scenarios for ourselves and presented them to our Board of Directors. I want to stress that I don’t anticipate this situation occurring, but it was important for us to plan. One scenario considered a revenue decline of 30% for at least a year, factoring in a 20% drop in volume and a 10% decrease in price. While the outcome seemed dire, we conducted the analysis to project how our profit and loss statement would take shape and assess our cash position. The outcome showed that we would manage through a situation like that. We also came up with another scenario that was even worse than the 30% decline, which we shared with our Board as well. I firmly believe in being realistic about the challenges of prolonged tough conditions and ensuring the company remains healthy during such times. I feel very confident about our current position and the liquidity we've built through this planning exercise. When the N&B/IFF merger is finalized, we will gain $7.3 billion in cash. As mentioned earlier, we plan to allocate $5 billion of that to reduce debt, positioning us well for normal operations. Our debt situation will improve compared to current conditions at DuPont, and we will still have $2.3 billion in excess cash from that total to use as needed. Overall, we will be in an excellent position moving forward. Lori, would you like to elaborate further?

Yes. So I think to your question on the second quarter, so we do at this point or we see the second quarter as the lowest through the year. So, as we see it now, Q2 should be a low point.

Yes. I think also, you mentioned the E&I business. I could see the semi business obviously downturn a little bit going maybe into the third quarter. It's been running very robust in the first quarter. It is running robust in the second quarter, but all indicators are that that will turn down a little bit. So I could see that happening. But as Lori just said, I think mid-teens down revenue is probably the bottom, but what we're seeing based on what we know, as of today.

Lori, regarding the CapEx reductions, can you clarify what types of projects are being cut back? I assume these are temporary deferrals of growth projects. Are we nearing maintenance levels with the current CapEx guidance targets? Thank you.

Thank you for the question, David. Last year, we invested $1.5 billion in capital expenditures and had planned for $1.3 billion this year. We are above our depreciation and amortization, as we had a few significant growth projects starting simultaneously that we are optimistic about. That's why we spent $1.5 billion last year and are aiming for $1.3 billion this year. However, we've reduced our spending to $1 billion this year. To clarify, the projects we've delayed are simply postponed, not canceled, as we intend to resume them when the time is right. Among the major projects we scaled back on was Tyvek line 8, which is our largest capital expenditure initiative, exceeding $400 million. We invested a considerable amount last year, and that project will be operational in a couple of years. The demand for Tyvek remains critical, especially for medical supplies. Additionally, we have temporarily reduced our cap-on expansion and slightly slowed some maintenance capital expenditures, leading to the $1 billion figure. Importantly, we did not reduce spending on any of our safety programs at our facilities, which we have maintained at 100%. We also chose to delay some of our ERP software implementations. While these programs may enhance efficiency, their delay is manageable. Overall, those summarize the main adjustments we made. As conditions improve, we plan to resume spending on our growth initiatives.

Yes, if I can just quickly comment on the Tyvek line 8 that we had to pause due to some regulations in Luxembourg where the construction is taking place. We did mention in our prepared remarks, so just to reiterate, that we were able to put in place an incremental capacity expansion to be able to meet the current Tyvek demand. So we not only added, in the first quarter alone we usually had about 15 million garments, we went up to 25 million garments and that was through a combination of incremental capacity, now in our current asset as well as pulling products for non-healthcare markets. In the second quarter, we announced our TyvekTogether campaign, which will allow us to add another 5 million to 6 million garments. So we've got new capacity coming online even though we delayed the startup of the new line because of the regulations going on in Luxembourg.

I was wondering about your cash use, your buybacks. At what point would you feel comfortable assuming the buybacks again? I'm not really asking for a specific week, but like how are you thinking about it?

I haven't considered it in a week yet, but we completed about $230 million in buybacks during the first quarter, purchasing 6.1 million shares at a favorable price. I feel positive about that. We’ve suspended the buyback program, but we haven’t canceled it. If conditions improve in the second half of the year, we will reevaluate the buybacks. As I mentioned earlier, our balance sheet is strong, and we expect to receive cash from the IFF/N&B transaction at the start of next year, putting us in a good position to discuss this with the Board. For now, we’re being cautious to ensure things don’t worsen. I believe the second quarter will be our lowest point, with hopes for improvement into the third quarter as that cash from the deal comes in. Regarding the N&B and IFF situation, we are in excellent shape. I speak with the CEO of IFF weekly, and the teams are on track with all necessary tasks. We have received U.S. antitrust approval and are currently moving through the EU process, with no major antitrust issues expected. Everything is on schedule, which is impressive given the current work-from-home policies at both companies. We anticipate closing on February 1, with a shareholder vote set for September. I'm optimistic about this, especially since we have a shareholder who holds about 23% to 24% of the shares supporting the deal, putting us in a strong position.

With some economies starting to reopen, can you discuss whether you're seeing any additional demand? Also, earlier in the call, you mentioned some inventory to manage, both yours and your customers' in the automotive sector. Can you provide insight into the overall inventory situation and what you're observing in the channels, as well as how long it might take to address this?

I'll let Lori address the second part of your question. Let me briefly touch on the first part, John. Here’s an interesting data point: the Chinese economy is recovering first. It's notable that within three weeks of resuming operations in China, all our production facilities were operational after the New Year, including one in Wuhan. We're now close to full capacity with our 13 production facilities in China. To provide more detail, in the first quarter, our sales in China declined organically by 1%, which was surprising given we were shut down for a few additional weeks. However, in April, our sales grew by 6% to 7% in China, indicating a strong recovery. Although conditions aren't completely back to normal, moving from a decline of 1% to an increase of 6% or 7% is quite significant. For further details, E&I has shown double-digit growth, N&B has also increased by double digits, particularly in probiotics which are performing well. In contrast, T&I and S&C are relatively flat. As economies reopen and people return to their normal activities, these are the trends we're seeing in the Chinese market. Lori, would you like to add anything?

Yes, I think, the inventory discussion is best had within T&I and E&I as you had mentioned. The T&I, we talked a bit in the call, potentially, there was a little bit of pre-buy in Q1 into the polymer chain that caused our results to be a little bit better than where the auto builds were. One of the key initiatives that we look at in China is the vehicle alert index, it measures kind of inventory in the chain at the dealer level. And we did see some normalization as we got towards the end of 2019. And into January and then it spiked to a pretty high amount, I think in the 80s in February. And then came back down nicely in March. And so I think, right now as we see it, there's not a lot of excess inventory in the auto chain. Obviously, we're just having issues with demand with auto, with expectancy down 45% in Q2. On the E&I side, I would say there is some of the customers building their supplies to ensure that they have adequate safety stock that benefited Q1, probably benefiting a little bit of Q2, especially within the semi chain. So, those are kind of the landscape of inventories, probably about more, there were some spikes in Q1 in T&I, actually normal and probably a little bit elevated in E&I.

I am curious about the net price mix being flat. Could you provide some insight on the petrochemical backbones in T&I and S&C? What does the raw material cost look like for the first quarter? Additionally, if we're still experiencing some softness in nylon and other areas, how do you anticipate the price mix developing as we move into the middle of the year?

Yes, so the majority of our benefit from lower raws within the oil dynamic would be within T&I and S&C. So from a full-year perspective, we do expect if oil prices kind of stay where it is about a $200 million benefit in raws, primarily in those two segments. We're actually seeing some raw headwinds within N&B and some of it’s in base ingredients. So pricing in T&I in Q1 was down 4% that's primarily nylon. It was actually a little bit better than what we would have thought just given demand was a little bit lower. And we had a better mix of nylon sales. So the last quarter when we did earnings we talked about pricing headwinds being from two components: one, actual nylon price decreases; and two, unfavorable nylon mix as we sell more of the opportunistic nylon. So, in Q1 we actually didn't sell as much opportunistic volume so that benefited the price a little bit. Within S&C we continue to do really well at deriving value and pricing. We continue to see price lift within S&C in Q1, we expect that dynamic to continue into Q2. Back to T&I real quick, so sequentially we do see nylon price declining, again into Q2. We see a similar kind of down mid-single-digit price overall in T&I in Q2 sequentially. I think the most headwinds will be mainly behind us as we get through Q2 and as we go to the back half of the year we should be about flat from a nylon price perspective.

Ed, the T&I segment was originally part of new Dow. And then it was moved to DuPont after it was thought to be a better fit with DuPont. Just could you revisit the thinking on that and is there anything tax-wise that would preclude you from reopening discussions with Dow?

Yes. We did transfer a significant segment of the T&I business to Dow, as it aligned better with their operations. We retained the part that constitutes 60% of T&I, which is automotive, where DuPont has a strong presence not only in T&I but across the automotive market as well. Strategically, that alignment is optimal for us. However, the remaining 40% of T&I includes other valuable markets, such as medical, which has performed exceptionally well during this period. Overall, I am pleased with DuPont's portfolio. We maintain flexibility within our portfolio and are aware of various scenarios. If an opportunity arises that could deliver significant value, like the N&B/IFF situation, we will certainly consider it. We are not confined to maintaining things as they are; our primary focus is to enhance shareholder value over the long term. Presently, Lori, the team, and I are concentrating on business operations and cash generation. On the deal front, it’s noteworthy that the value of the N&B deal is nearly where it was when we announced it at $26.2 billion. The stock price is currently trading around $25.5 billion, which is not surprising given that N&B had a strong first quarter with 3% organic growth. Such businesses are expected to perform well in varying economic conditions, warranting a healthy multiple in their sector. Additionally, many of you have noted the significant disconnect in how DuPont is valued compared to its potential, presenting a substantial opportunity for our shareholders in the coming year.

Lori, as it pertains to the safety in construction segments, just given the differential current growth rates across the sub-segments, can you just offer some additional framework on how we should be thinking about the mix effects and the potential for decremental margins? And then also just any insights on just how you're still thinking about the longer-term margin profile of that business?

So we had posted really strong margins in Q1 as we had mentioned, so 28.8%. I mean, a piece of that was a favorable mix that we're seeing, so Tyvek at the high end of our segment margins when you compare it across the different businesses in S&C. The highlights within S&C continue to be Tyvek and our water solutions business. So really nice growth, I think 6% organically 14% as reported with the benefits of the water acquisition that we made at the end of the quarter. The headwinds are obviously within Shelter which is in the low end of the margin for the business. So it would be below segment margins, as well as where we sell into oil and gas and aerospace. So the decremental margins in S&C for the quarter would be a little worse than what we've mentioned underlying for the company really primarily as some slowing down from production sites. So we had mentioned within T&I that we're actually taking idle mills is about $90 million to $100 million that are flowing directly into COGS in the quarter versus going through inventory. In S&C, we're not taking production down to the point where we need to take idle mills, but therefore, we are having a lower volume run across our plants causing higher unit rate, which are what are causing the decrementals to be a little bit worse than what we said for the total company. But continue to see longer term the ability to drive those 28%, 29% segment margin for S&C.