DuPont reported third quarter 2025 results ahead of previously communicated guidance, with sales of $3.1 billion up 6% organically and operating EBITDA of $840 million up 6% year-over-year at a 27.3% margin. Growth was broad-based across all businesses, with strong volume in healthcare and water and electronics strength driven by AI demand, though organic growth included a $70 million benefit from order timing shifts into Q3 ahead of the Qnity separation (excluding which organic growth would have been 4%). The company completed the Qnity (CUNY) electronics separation earlier in the week, receiving about $4.2 billion of cash via a dividend to reduce DuPont debt, and announced an initial $0.20 quarterly dividend plus a $2 billion repurchase authorization with a $500 million ASR to launch imminently. Management raised full year 2025 operating EBITDA guidance to $1.6 billion and adjusted EPS to $1.66.

What went well
  • Third quarter sales of $3.1 billion grew 6% organically (7% reported including 1% currency), with organic growth across all businesses and all regions (North America and Asia-Pacific up 7%, Europe up 6%).
  • Operating EBITDA of $840 million increased 6% year-over-year, with an operating EBITDA margin of 27.3%.
  • Transaction-adjusted free cash flow of $576 million and conversion of 126%, in line with expected acceleration.
  • Electronics Co. organic sales up 10%, led by low-teens growth in interconnect solutions and high single-digit growth in semi on AI-driven technology demand and content/share gains.
  • Healthcare and water sales up high single digits organically, led by medical packaging, biopharma, reverse osmosis, and ion exchange.
  • Completed the Qnity (CUNY) separation, received about $4.2 billion of cash to reduce debt, and announced an initial $0.20 quarterly dividend and a $2 billion repurchase authorization with a $500 million ASR.
What went wrong
  • Organic sales included a $70 million benefit from order timing shifts into Q3 from Q4 due to system cutover activities; excluding this, organic growth would have been 4%.
  • Operating EBITDA margin of 27.3% was down approximately 30 basis points year-over-year due to unfavorable mix in Electronics Co.
  • Adjusted EPS of $1.09 was flat with the year-ago period as higher segment earnings of $0.09 were offset by a higher tax rate (base tax rate of 24.6% versus 19.5% prior year, which included discrete benefits).
  • Construction markets remained soft, with the Shelter business expected to be down about 4% organically for the full year and down about 3%-4% in Q4.
  • Electronics Co. operating EBITDA margin of 31.6% was down 140 basis points year-over-year, primarily due to unfavorable mix and currency headwinds.

Management Commentary

Read the Q3 2025 summary ↗
Ann Giancristoforo
Head of Investor Relations, DuPont

Good morning, and thank you for joining us for DuPont's third quarter 2025 financial results conference call. Joining me today are Lori Koch, Chief Executive Officer, and Antonella Franzen, Chief Financial Officer. We have prepared slides to supplement our remarks, which are posted on DuPont's website under the Investor Relations tab and through the webcast link. Please read the forward-looking statement disclaimer contained in the slides. During this call, we will make forward-looking statements regarding our expectations or predictions about the future. Because these statements are based on current assumptions and factors that involve risks and uncertainties, our actual performance and results may differ materially from our forward-looking statements. Our Form 10-K, as updated by our current and periodic reports, includes detailed discussion of principal risk and uncertainties which may cause such differences.

Unless otherwise specified, all historical financial measures presented today are on a continuing operations basis and exclude significant items. We will also refer to other non-GAAP measures. A reconciliation to the most directly comparable GAAP financial measure is included in our press release and presentation materials and has been posted to DuPont's Investor Relations website. As a quick reminder, on the basis of presentation for our third quarter financial results, our total company net sales, operating EBITDA, and adjusted EPS include segment results for Electronics Co. and Industrials Co., excluding results for the previously announced divestiture of the Aramid business, which is now reported as discontinued operations. I'll now turn the call over to Lori, who will begin on slide three.

Lori Koch
CEO, DuPont

Good morning, and thanks, everyone, for joining our third quarter call. Earlier today, we reported another solid quarter ahead of our previously communicated guidance. Third quarter sales of $3.1 billion grew 6% on an organic basis. Operating EBITDA of $840 million increased 6% year-over-year, resulting in an operating EBITDA margin of 27.3%. As a result of our strong third quarter financial performance and our expected operational improvements, we are raising our full-year earnings guidance for the new DuPont. Antonella will provide further detail shortly. Third quarter saw organic growth across all businesses with continued strong volume growth in healthcare and water, coupled with strength in electronics driven by AI technology demand in both interconnect solutions and semi. Today, we also announced capital allocation updates for the new DuPont, both in the form of a quarterly dividend and a new share repurchase authorization.

We declared our initial quarterly dividend under new DuPont in the amount of $0.20 per share, in line with our targeted 35%-45% payout ratio. The board of directors also approved a $2 billion share repurchase authorization, under which we expect to quickly launch an ASR in the amount of $500 million. Both of these actions underpin our commitment to a disciplined capital allocation model and are a testament to our financial strength and dedication to delivering value. Earlier this week, we announced the successful completion of the CUNY separation. As a premier pure-play technology solutions partner to the semiconductor value chain, CUNY is well-positioned to deliver growth and value creation for its shareholders. Turning to slide four, as part of Investor Day, I outlined a clear strategy for the new DuPont to drive value creation for all our stakeholders.

Our strategy is focused around driving above-market organic growth, building a robust business system, deploying a balanced capital allocation model, and consistently delivering results. We are already seeing progress against these value creation drivers. We have successfully repositioned ourselves and have a streamlined portfolio of leading businesses, the majority of which are aligned to secular end markets, which will enable strong organic growth. We saw nice growth in the third quarter, and we continue to expect 2% organic growth for the full year. Our innovation engine continues to deliver. We announced the launch of our latest technology in Tyvek garments, branded Tyvek Apex. This latest technology for PPE provides enhanced breathability while maintaining the same level of protection and durability. The launch clearly demonstrates how we collaborate with customers and deploy our application development expertise to meet their needs.

As I noted at Investor Day, we are driving towards building a robust business system, starting from a strong jump-off point with a full suite of tools that are being actively deployed. This quarter, we introduced a core set of enhanced KPIs that are focused on driving improvement for our shareholders, customers, and employees. These KPIs were embedded in a refreshed set of management standards, which has added more visibility, rigor, and structure to ensure we achieve our business objectives. On commercial excellence, we have advanced the framework across commercial enablement, sales effectiveness, and strategic marketing. A key priority was focused on pipeline discipline. We have designed a more transparent, data-driven process, which links demand generation, opportunity qualification, and conversion metrics to deliver against our growth target.

Specifically, within our water business, we have taken a regional approach to the rollout and have improved pipeline rigor in North America and Europe, leading to sizable improvement in our opportunity funnel. We plan to launch in Asia later this quarter. We also continue to drive enhancements in operational excellence. During the quarter, we rolled out an updated set of KPIs aligned with our focus on safety, quality, delivery, and cost. We also refreshed our toolkit around OEE and reliability, which is driving reductions in unplanned downtime and improving our maintenance spend and wrench time. On capital allocation, I highlighted earlier the dividend and share repurchase authorization that was approved by our board. In addition, we also announced in late September that we signed an agreement to acquire manufacturing capacity to expand our reverse osmosis footprint in China.

This aligns with our local-for-local strategy and increases our capacity to meet growing demand for industrial water purification and reuse in the region. With this backdrop, I remain confident in delivering the medium-term targets for 2026 through 2028 that we outlined for you at Investor Day: 3%-4% organic growth, 150-200 basis points of margin expansion, 8%-10% EPS growth, and generating strong free cash flow conversion at greater than 90%. With that, I'll now turn the call over to Antonella to cover the financials and outlook.

Antonella Franzen
CFO, DuPont

Thanks, Lori, and good morning, everyone. We delivered another quarter of year-over-year growth in organic sales and operating EBITDA on volume strength across many key end markets. Operational focus by our teams drove solid financial performance in the quarter, including strong cash conversion, beginning with third quarter financial highlights on slide five. Net sales of $3.1 billion increased 7% versus the year-ago period on 6% organic sales growth and a 1% benefit from currency. Organic sales growth consisted of a 7% increase in volume, partially offset by a 1% decline in price. Organic sales included a $70 million benefit from order timing shifts into the third quarter from the fourth quarter due to system cutover activities in advance of the separation. Excluding this, organic sales growth would have been 4% in the quarter. From a segment view, both segments saw organic sales growth with Industrials Co. and Electronics Co.

Up 4% and 10%, respectively. All businesses had organic growth during the quarter, led by low teens growth in interconnect solutions, high single-digit growth in both healthcare and water technologies and semi, and low single-digit growth in diversified industrials. We saw organic growth across all regions, with North America and Asia-Pacific up 7% and Europe up 6% year-over-year. Third quarter operating EBITDA of $840 million increased 6% versus the year-ago period, as organic growth and productivity benefits were partially offset by growth investments and unfavorable mix. Operating EBITDA margin during the quarter of 27.3% was down approximately 30 basis points year-over-year due to unfavorable mix in Electronics Co. Turning to cash flow, we delivered transaction-adjusted free cash flow of $576 million and related conversion of 126%. This was in line with our expected acceleration this quarter.

Turning to slide six, adjusted EPS for the quarter of $1.09 per share was flat with the year-ago period. Higher segment earnings of $0.09 was primarily offset by a headwind from a higher tax rate year-over-year. Our base tax rate during the quarter was 24.6%. The prior year base tax rate, which included discrete benefits, was 19.5%. Turning to slide seven. Industrials Co. third quarter net sales of $1.8 billion were up 5% versus the year-ago period, on 4% organic growth and a 1% benefit from currency. Organic growth included a benefit of approximately $30 million in order timing shifts. Excluding this benefit, organic sales growth was 2% in the quarter, in line with our expectations. For the third quarter, healthcare and water sales were up high single digits on an organic basis versus the year-ago period.

Organic growth was led by continued strength in medical packaging, biopharma, reverse osmosis, and ion exchange. Diversified industrial sales were up low single digits on an organic basis, as growth in industrial technologies was partially offset by continued softness in construction markets. Operating EBITDA for Industrials Co. during the quarter of $465 million was up 4% versus the year-ago period on organic growth and productivity gains, partially offset by growth investments. Operating EBITDA margin during the quarter was 25.9%, flat with the prior year, absorbing a margin headwind from currency. Sequentially, operating EBITDA margins improved 30 basis points. Turning to Electronics Co. on slide eight, third quarter net sales of $1.3 billion increased 11% versus the year-ago period on 10% organic growth and a 1% benefit from currency. Organic growth included a benefit of approximately $40 million in order timing shifts.

Excluding this benefit, organic sales growth was 7% in the quarter. At the line of business level, organic sales for semiconductor technologies were up high single digits on continued strong end market demand driven by advanced nodes and AI technology applications. Interconnect solutions also posted another strong quarter with organic sales up low teens, reflecting continued demand from AI-driven technology ramps and benefits from content and share gains across advanced packaging and thermal management solutions. Operating EBITDA for Electronics Co. of $403 million was up 6% versus the year-ago period, as organic growth was partially offset by growth investments to support advanced node transitions and AI technology ramps. Operating EBITDA margin during the quarter was 31.6%, down 140 basis points versus the year-ago period, primarily due to unfavorable mix and currency headwinds. As a reminder, CUNY Management will host a call later today to provide a business update.

Earlier this week, we announced the successful completion of the CUNY separation. In connection with this transaction, we received approximately $4.2 billion of cash in the form of a midnight dividend from CUNY, which will be used to reduce DuPont's debt and achieve the targeted capital structure that we outlined at Investor Day. Turning to slide nine, which outlined our latest view on 2025 financial guidance. As a reminder, we provided an updated view of our full year 2025 expectations, reflecting the separation of CUNY and the presentation of the Aramidz business as discontinued operations as part of our Investor Day in mid-September. Also, in the fourth quarter, we will be reporting under a new segment structure of healthcare and water technologies and diversified industrials. In the appendix to the slide deck, we have included preliminary, recasted, quarterly segment information for your reference.

From a top-line perspective, our expectation of organic sales growth for the full year remains in line with the guidance we provided at Investor Day. We expect organic sales to be up 2% year-over-year on strong demand in healthcare and water, partially offset by ongoing weakness in construction end markets. Our current full year sales guidance of $6.84 billion reflects slightly lower currency benefits from our prior expectations. We are raising our full year operating EBITDA guidance to $1.6 billion, driven by our stronger third quarter performance, underlying operational improvements across the businesses, and lower corporate costs. We expect full year adjusted EPS to be $1.66 per share, an increase of about 16% year-over-year. Our full year base tax rate is expected to be about 28%, including about 200 basis points of headwind related to total company interest expense that cannot be reflected as discontinued operations.

We continue to expect that our go-forward tax rate will be in the 25%-26% range, consistent with the guidance provided at Investor Day. For the fourth quarter, we estimate net sales of about $1.685 billion, operating EBITDA of about $385 million, and adjusted EPS of $0.43 per share. Our fourth quarter guidance assumes about 1% organic growth when normalizing for the third quarter timing shift. On a reported basis, we expect a fourth quarter organic sales decline of about 1% versus prior year. As you will recall, we provided full year 2025 pro forma estimates as part of our Investor Day to serve as a baseline for our medium-term targets. Our stronger underlying performance translates into revised full year 2025 pro forma estimates for operating EBITDA of $1.63 billion and adjusted EPS of $2.02 per share, compared to the $1.62 billion and $2 per share.

Our lower corporate costs are accelerating our run rate towards our expected $95 million public company corporate cost structure. I want to thank our employees for remaining focused on delivering these results and for driving the successful completion of the CUNY separation. With that, we are pleased to take your questions, and let me turn it back to the operator to open the Q&A.

Analyst Q&A

Jeffrey Sprague — Analyst, Vertical Research Partners
Hey, thank you. Good morning, everyone. Congrats on getting that done.
Antonella Franzen — CFO, DuPont
Good morning, Jeff.
Jeffrey Sprague — Analyst, Vertical Research Partners
Good morning.
Antonella Franzen — CFO, DuPont
Thanks.
Jeffrey Sprague — Analyst, Vertical Research Partners
Yeah. I just wanted to kind of focus more on just sort of the end market trends, and there's some color on page 12 that helps. First, this timing benefit, is this something you did or kind of pushed on behalf of your customers so they wouldn't somehow be disrupted? Maybe just give us a little sense of what was behind that, if you don't mind.
Antonella Franzen — CFO, DuPont
Yeah. Jeff, kind of the way to think about it is, as you would expect, the separation that we did really touched every legal entity within the organization. In essence, we had to retype everything in all of our financial systems to do that. Our customers were notified that we would be in a blackout period in early October as we did this after quarter end. Therefore, we had some orders that were originally set to go out in the October timeframe that our customers accelerated into the third quarter, given we were going to be in a blackout period. It was completely customer-driven. Again, no changes really to our expectations of what we expected from an organic growth perspective in the second half, but it clearly created a higher organic growth in the third quarter and a lower organic growth in the fourth quarter.
Jeffrey Sprague — Analyst, Vertical Research Partners
Yeah. I think you probably intentionally did not say anything about 2026 today, but maybe give us some initial thoughts on sort of these exit rates that we are looking at here in Q4, again, outlined on page 12. What might be the pluses and minuses as we shift into next year? Particularly interested in what you are seeing in the healthcare and water businesses, especially.
Lori Koch — CEO, DuPont
Yeah. We're exiting the second half at about 2% organic growth in line with where we are for the full year. From an end market perspective, we would expect healthcare and water to be right in line with what we gave in our medium-term targets, which is about 5% organic growth on average. On the diversified side, in the 2% that we'll report for the second half, shelter is still down. It's going to be down about 1% in the second half, but full year, it's about 4%. Given that that's about 25% of our revenues, if that were just even to normalize to flat, that would be a nice lift as we head into 2026. No material changes. We put the targets out just six weeks ago.
We mentioned that in order to be able to deliver against expectations, we can't start in a hole. So we would expect our medium-term targets to be something that we would consistently deliver. We'll obviously be paying close attention to the construction markets, though, and see how they play out.
Jeffrey Sprague — Analyst, Vertical Research Partners
Okay. Great. Thanks. I'll leave it there.
Lori Koch — CEO, DuPont
Okay. Great.
Antonella Franzen — CFO, DuPont
Thank you.
Scott Davis — Analyst, Melius Research
Good morning, Lori and Antonella. I'll echo what Jeff said. Congrats. You guys have done a lot of wood chopping in the last few years, particularly the last few months. It's kind of a lot of moving parts and head spinning a little bit. If we can just start with a little bit of minutia, what's your plan with the balance sheet? I think you're something like 0.8x pro forma leverage. I know you still have some liability issues you got to manage. What is kind of the plan and target there? I saw the buyback announcement, but will there be other deals like Spectrum, things like that, that you guys would be potentially looking at in 2026?
Antonella Franzen — CFO, DuPont
Yeah. Let me start from a balance sheet perspective. We would expect our pro forma debt to be around $3.25 billion, and we would expect to have $1 billion of cash on the balance sheet. Our starting point net debt to EBITDA leverage is around 1.7x. Our target is to stay below 2x from that perspective in terms of where we expect to be on the balance sheet. As you saw this morning, we did announce the $2 billion share repurchase authorization, and we expect to, I would say, imminently start an ASR in the size of about $500 million that we will do. Clearly, as we progress during the year, as we mentioned at Investor Day, we would have a balanced approach. We would continue to look at share buybacks. We will continue to look at M&A activity.
We're clearly in a very good spot from a balance sheet perspective, quite honestly, Scott, to be able to do both. We have a really strong balance sheet going in. We have the Aramidz proceeds that will be coming in in the first quarter as well. As we talked about at the Investor Day, over the next three years, even accounting for dividend payments and share creep, we would have about another $500 million a year that is deployable in free cash flow.
Lori Koch — CEO, DuPont
Yeah. On the opportunities, you had mentioned Spectrum, so we did actually complete a small tuck-in acquisition in the water space recently. We bought RO capacity in China that really helped with our footprint there and enabling us to be local for local, given that China is the largest RO footprint for us. We will continue to be opportunistic. We are looking in all spaces in healthcare with respect to not only additional Spectrum-like assets in the CDMO space, but also potentially in medical packaging and other areas that have nice secular growth. We will also be opportunistic as we can in additional water opportunities. We have got a really rich pipeline, and as Antonella mentioned, the strong balance sheet to be able to be proactive with it. We will be prudent. We will have a profile on a return that we want to deliver.
We would get to ROIC greater than WACC by year five. A nice path line to a net synergy number that is in line with our affordability range.
Scott Davis — Analyst, Melius Research
Okay. That's helpful. You talked a little bit about a renewed focus on lean and operational excellence at Investor Day. I think you made a hire in that regard. Chief Operations, I think, title, whatever you call it. Can you just talk about what you're trying to achieve on that front? I don't have a great sense of where you are today as it relates to lean in your current portfolio. Just talk a little bit about the opportunity and what you're playing for here. Thank you.
Lori Koch — CEO, DuPont
Yeah. So we picked up Dave Cook from Danaher. He was the ops leader for Paul, and we were fortunate to get him into our organization. He's made an impact already in just the couple of months that he's been here. We started down the path a few years ago on an OpEx framework that deployed lean tools as well as some Six Sigma tools and was in a continuous improvement mindset. We're going to take that baseline that we have and kind of put it on steroids and make sure that it influences truly the way that we work. We've rolled out enhanced management standards, which really will dictate how we monitor the performance in our business and solve problems in our businesses to make sure that we have a continuous improvement mindset. We've identified eight core KPIs.
Four of them are shareholder or financial-related, two of them are customer-related, and two of them are employee-related. They will form the basis of our monthly business reviews and allow us to be able to understand performance and understand improvement opportunity. It is really a cultural change around a continuous improvement mindset, looking for net productivity opportunities year in, year out.
Lori Koch — CEO, DuPont
Thank you.
Scott Davis — Analyst, Melius Research
I'll pass it on. Thanks.
Lori Koch — CEO, DuPont
Great.
Shigeru Sakato — Analyst, JPMorgan
Hi. This is Shigeru Sakato going for Steve. Thanks for taking my question. I'm just following up on the 80/20 initiatives that you talked about at Investor Day. On the flip side, there's probably some opportunity to prune the portfolio on the edges. If you can talk about any opportunities you're seeing there, it would be great. Thanks.
Lori Koch — CEO, DuPont
Yeah. Thanks. We had mentioned at Investor Day, too, as part of the team refresh, we brought in Beth Ferreira, who had a background in ITW, who was well-versed within the 80/20 framework. She's actively deploying that toolkit across the diversified industrials businesses to see opportunities for us to improve margins across that side of the portfolio. I think as far as pruning, we had mentioned that we have a goal to be able to continue to morph the portfolio towards more secular-based end markets. Today, we're about 50/50 with respect to healthcare and water and the diversified businesses. Ideally, we would be more like 2/3, 1/3. I do not really want to comment on what businesses those would entail, but the goal is to continue to get more into the secular-based mid-single-digit growth.
Shigeru Sakato — Analyst, JPMorgan
Okay. Great. Thank you.
John Patrick — Analyst, BMO Capital Market
Yeah. Good morning. Thanks for taking my question. Maybe just a quick one on the pro forma EBITDA forecast. Inched up a little bit. Not a huge amount, but it's in a pretty brief amount of time. I think you attributed it to stronger underlying business performance. I guess, where is the area that you're being surprised on? Is it on the volume front, or is it more on the cost and efficiency side, would you say?
Antonella Franzen — CFO, DuPont
I would say it's more on the margin side. What you see us kind of putting through in the pro formas is really how we exceeded or how we raised our guidance this year related to the segment performance that we had. You see that kind of flowing through the pro formas. It's from the margin perspective and better operational performance that we have.
John Patrick — Analyst, BMO Capital Market
Got it. Okay. And then with regard to M&A, I mean, you made the reverse osmosis asset acquisition. So clearly, some things out there on your radar that you're opportunistically going after. I guess, can you give us a little bit more color as to what you see in the pipeline? If there are a lot of targets out there at this point, if it's a little bit scarce, I guess, how you're thinking about that?
Lori Koch — CEO, DuPont
Yeah. We have a robust pipeline. I would say it is deeper on the healthcare side than it is on the water side, just given the fragmentation that exists in healthcare and the consolidation that exists in water. Water, there's still opportunities, probably to go beyond the water filtration assets that we have today into potentially other areas within the water value chain. On the healthcare side, it is pretty deep, just given, as I had mentioned, the fragmentation that exists on the CDMO side. There's lots of players. The majority of them on both sides, actually, are owned by private equity. That gives us the opportunity to be able to transact at some point versus having to try to take something loose from a strategic. It is deep, and we're actively pursuing opportunities and reviewing opportunities with our strategy and M&A team.
John Patrick — Analyst, BMO Capital Market
Great. Thanks very much for the call, and congratulations on the split.
Lori Koch — CEO, DuPont
Thank you.
Chris Parkinson — Analyst, Wolfe Research
Great. Thank you so much for taking my question. When you take a step back as an independent company and you look at your strategy and margins and market performance, whether it is this quarter or what you are forecasting on a preliminary basis for 2026, what do you think the street is missing the most about the independent company's outlook? What are you the most enthusiastic about now that you have full independence?
Lori Koch — CEO, DuPont
I think if I speak in the today and now, I think the street is confused on our numbers, just given where the pre-market trading is. There was a lot of noise, obviously, around the numbers with Aram is coming out as a disc ops and maybe consensus not getting fully reset. We had a beat and raise. We beat our Q3 numbers, and DuPont raised our side of the numbers as well. I think that's one kind of short-term confusion. I think longer term, it's just the view on who we are. I think there's still a view that potentially we're a chemical company versus we have significantly transformed the portfolio to a multi-industrial. We've got the financial performance that is right in line with the multi-industrial.
We would expect that we would continue to re-rate up towards more of that multi-industrial multiple. I think that's one of the biggest confusing points is that we have a much more streamlined, simplified portfolio and a refreshed team to be able to continue to deliver.
Chris Parkinson — Analyst, Wolfe Research
Got it. Just very quickly as a follow-up, on the water portfolio, you have a pretty well-rounded, enhanced lineup of everything from ultra to RO and everything else within the filtration side. Do you have the willingness or desire to get further into metering or anything else kind of as a tangential kind of growth theme in terms of how that market is evolving over the next three, five, 10 years? I'd love to hear about your strategy broader than it's been over the last, let's say, five or so. Thank you.
Lori Koch — CEO, DuPont
Yeah. We do have a strategy to go beyond just the water filtration. We're obviously the largest player in all the key technologies. To get larger there via acquisition could be tricky from a regulatory perspective. I would say metering is not one that we're actively looking at, just given the valuations are quite high. We are looking at opportunities more potentially either in systems plays or potentially other areas of filtration beyond just generally water. We do have within our ion exchange resins business some water filtration around food and beverage and microelectronics and dairy. Potentially, are there some opportunities there that kind of take us beyond traditional industrial wastewater purification and desalination?
Chris Parkinson — Analyst, Wolfe Research
Very helpful. Thank you so muc
Josh Spector — Analyst, UBS
Yeah. Hi. Good morning. First, I just wanted to try to ask on the cash and the balance sheet comments. I think some of our math was that your outcoming cash might be closer to $1.5 billion-$2 billion before buybacks, just given where cash sits today in fourth quarter free cash flow. I don't know if that's wrong from the math or if the $1 billion in cash is a target. Just curious, can you help bridge us for the moving pieces between 3Q and year-end, please?
Antonella Franzen — CFO, DuPont
Yeah. You have to keep in mind a couple of things. One, the cash on the balance sheet at the end of Q3 is the cash position for both the new DuPont as well as CUNY. There is some cash that will go over to CUNY as part of the separation. Again, on a pro forma basis, we expect to be at around $1 billion, which is what the new DuPont will have as a cash position, which, quite honestly, is a pretty healthy spot to be in as we move forward, given the size of the organization.
Josh Spector — Analyst, UBS
Is that before or after the ASR?
Antonella Franzen — CFO, DuPont
That would be before the ASR. That is our pro forma cash that we expect to keep. The other thing to keep in mind is as we get towards the end of the year, between the timing of when certain separation costs would be paid, we obviously said we're going to move pretty imminently on the ASR. Clearly, that's before we get to year-end in terms of doing that. There will be some cash out the door related to that that we'll have before year-end. There's also timing of separation costs. There is the potential that by end of year, we may have a little bit of commercial paper that's on hand. Clearly, as we mentioned before, we do have a nice amount of proceeds coming in the door in Q1 of 2026 related to the Aramid's divestiture.
Josh Spector — Analyst, UBS
Thanks. If I could just follow up quickly on margins, I mean, you reiterated your improvement plan over the next few years. I guess, assuming that the macro demand is a bit softer next year, do you see a bigger opportunity to pull forward some productivity and get more margin expansion, or is that more of a volume-dependent type profile where you'd need to get a stronger macro to achieve that?
Antonella Franzen — CFO, DuPont
I mean, as we did our walk that we talked about on Investor Day, we did have a portion of the margin expansion that would be coming from our revenue growth. As Lori mentioned earlier, I would keep in mind that when you look at our healthcare and water business, as we exit this year and go into next year, we are still in a very good position to be able to grow at mid-single-digit growth. You really only need a little bit of growth, I would say, on the diversified industrial side of the house to kind of get to, I would call it, the low end of our organic revenue growth CAGR as we move forward. That was a piece of it. We feel really good that we're positioned to do that.
In addition, we had about 40 basis points of margin expansion over the three-year period coming from the removal of our stranded costs. Clearly, that's 100% in our control. As I mentioned at the Investor Day, the plan would be to get that out by the end of year two. You'd have that margin improvement in the first two years of the plan. You heard Lori talk a little bit earlier about our lean initiatives and how we're operating as a new company going forward. We do have another additional up to 50 basis points coming from productivity greater than inflation. I would say the teams are doing a really good job relative to that. We even saw underlying margin improvement this quarter, and we would expect to continue to see that as we go forward.
Josh Spector — Analyst, UBS
All right. Thank you.
John Roberts — Analyst, Mizuho
Thank you. Where are we on the discussions with MSCI on reclassification? Will we get a pro forma balance sheet at some point, or just wait until we get the year-end balance sheet for new DuPont?
Antonella Franzen — CFO, DuPont
Yeah. So a couple of things. Let me take the good old Dick's question first because it's one of my favorite topics. I would say we are continuing to make progress towards an industry classification change. As I'm sure you've seen, CUNY got their semiconductor classification, which we obviously positioned for. That has worked out well. I would say the way that S&P and the MSCI work, they do kind of wait for your publicly filed information. I think they'll see clearly the new DuPont as we get to this upcoming Form 10-K filing. We will continue to push on that. I would say the one thing that I would always recall is that the fact that really our valuation is really going to depend more so on our consistent performance more than any classification.
I would tell you that I'm on a personal mission related to our DIC's code to ultimately have that appropriately reflect the DuPont portfolio that we have today. In terms of pro formas, on Monday, this past Monday, we did file an 8-K that did show pro forma information. Some of that is actually already out today and already out as of now. Clearly, as we get to the end of the year, all of our financials will clearly show both electronics and Aramids as discontinued operations. You'll have a nice 10-K with historical periods all recasted for the new DuPont as we go forward.
John Roberts — Analyst, Mizuho
Thank you.
Ryan Pirnat — Analyst, KeyBanc Capital Markets
Thanks. And good morning, everyone. This is Ryan on for Alexei. Just want to echo some of the earlier comments and my congratulations in getting everything done. The earlier part of the call kind of focused a lot on maybe where you could go with the portfolio, but I was hoping to kind of focus on what you currently have. Especially in the healthcare business, there's a lot of talk in the slide deck about medical packaging and biopharma this year. Maybe we could get some additional color kind of on what's going on in the medical device space.
Lori Koch — CEO, DuPont
Yeah. We are really excited about all aspects of the portfolio, but the healthcare and water within mid-single-digit growth areas that will continue to differentially invest. We saw nice growth across the broader healthcare business. We kind of said mid to high single-digit growth on a full-year basis for healthcare and water combined. The healthcare business would be north of that average. It was really a combination of nice performance across Liveo, which is our biopharma business. I think, as you have seen across many of the peers that have exposure in biopharma, this was a nice year with kind of completion of the DSOC and a return to really nice growth. We saw really nice growth in the medical packaging.
To your question specifically on healthcare and the med device space, we're seeing nice growth too as we exit the year. We actually just announced that we are bringing in a new leader for the healthcare business to lead the Spectrum and Liveo businesses. He joins us from a long history of running other types of CDMOs. He starts Monday, and we're really excited to have him join the portfolio as well. We look for nice growth from that business and then ideally being able to be opportunistic and add to it as we go forward.
Ryan Pirnat — Analyst, KeyBanc Capital Markets
Great. That's helpful. And then just on the construction market, you and a number of players in the space have just kind of been talking about softer market conditions. Just kind of wondering what your outlook is. I know it's still early kind of getting into 2026, but just maybe if you can give some high-level commentary about how you're thinking about it. Thanks.
Antonella Franzen — CFO, DuPont
Yeah. So a little bit of reminders of kind of where we've been related to our shelter business. That is what's tied to the construction market. When we look actually at 2024, I would say we were in a relatively good position. We actually held flat with the market. As you know, I would say over the last at least four years, we've all been in that. Second half of the year recovery, and then it kind of gets punted to the next year. Those are the early thoughts, I would tell you, as you start to read different reports that are out there related to the construction market that the second half of next year would start to get better. As Lori mentioned earlier, we do expect the shelter business to be down around 4% organically this year.
We do feel we're at a relatively low level at this point. We really aren't going to be expecting a significant amount of growth next year. Quite honestly, even getting to flat actually has a nice impact on our overall organic growth. We do expect a little bit of growth in shelter next year, again, though, off of a pretty low bottom here.
Matthew DeYoe — Analyst, Bank of America
Good morning, everyone. Yeah. And congrats on the formal separations, but it's been a long road. I think if we look under the surface at new pro forma industrial coat, I think the comment was organic sales were plus 4%. Extra. And then 2% ex the pull forward. Can you just parse that out a little bit on a segment basis? Just trying to get a sense for volume and price in healthcare and water versus diversified industrials coat. Just trying to get a little bit more granularity on what the pro forma business is doing here.
Antonella Franzen — CFO, DuPont
Yep. On a reported basis, healthcare and water were up high single digits. I would say if you kind of adjusted that for the pull forward impact, we were at mid-single digits. Diversified industrials was up on a reported basis organically in the low single digits. I would say if you adjust for the pull forward, it would have been pretty relatively flat.
Matthew DeYoe — Analyst, Bank of America
All right. You had said shelter was minus 4 on the year. As we just look at 3Q into 4Q, I'm not sure if you said it or not, but where is that construction business comping? Is it -2,-3 in this quarter in 3Q, or maybe a little bit more out there?
Antonella Franzen — CFO, DuPont
Yeah. I would say in the third quarter, relative to the pull forward we had, it was down around 2%. We do expect as we get into the fourth quarter, we're down more in that 3%-4% range. I would say when you look at the overall 4% for the year, we were down more in the first half of the year than we are in the second half of the year.
Matthew DeYoe — Analyst, Bank of America
Thank you for the context. I appreciate it.
Turner Hinrichs — Analyst, Morgan Stanley
Hey, good morning and congrats. This is Turner Hinrichs on for Vincent. I was just wondering if you could provide some color on your confidence in the 3%-4% top line algorithm for 2026.
Lori Koch — CEO, DuPont
Yeah. As we had mentioned, we do not expect to start in the hole to be able to achieve our medium-term targets of 3%-4% over the 2026 to 2028 timeframe. If we look at our performance in the second half of 2025, which can be an indicator of what you might be looking into in the beginning of 2026, our healthcare and water business is performing in line with our medium-term targets. With that being around the 5%, about half our companies, you get 2.5% organic growth straight from that. As we had mentioned, the shelter business, which is about 25% of portfolio in the second half, is down about 2.5%. We do not expect it to continue to be down next year, but we are not really expecting any material growth. Just the absence of a negative brings an opportunity incrementally from the second half.
As we look at the rest of the industrial tech portfolio, which makes up about 30%, we would expect to see sort of minimum low single-digit growth. We had mentioned the whole portfolio should be at average 2% for the industrial technology side. If you take that piece, you can generally roundly get to your medium-term targets at the midpoint range, with really just the big inflection point being cooperation of the shelter markets and no longer being a drag on the total organic growth.
Turner Hinrichs — Analyst, Morgan Stanley
Great. Great. Appreciate the color. I wanted to circle back as well on the building and construction discussion, specifically on the NC margins. How much are they holding the segment margin back at this point, given the weakened demand environment? How much lift could there be if conditions begin to improve? Would this be in addition to the 150-200 basis point improvement that you all are targeting for 2028 overall?
Antonella Franzen — CFO, DuPont
Yeah. I would actually say I believe you mentioned the construction market, so the shelter business. I would say overall, actually, the business has actually been doing pretty well from a margin perspective. I would do a nice shout-out and kudos to the team that despite the fact that volume has been down, they have been significantly driving productivity, watching costs, making sure that we are positioned for the current market environment that we're in. That should set us up nicely for when we get back to being in growth mode in the construction space.
Turner Hinrichs — Analyst, Morgan Stanley
Great. Thank you.
Rachael Lee — Analyst, Citigroup
Hi. Good morning, everyone. This is Rachel Lee on for Patrick. Can you expand more on the strategic rationale for the RO acquisition in China? Understand it enables you to be more local for local, but can you touch more on the technology value-add perspective and specifically what you're seeing in terms of water market growth in China?
Lori Koch — CEO, DuPont
Yeah. The acquisition was more one of a capacity add. On the ion exchange side, we've got five different plants across the globe, so we're able to be local for local. On the RO side, prior to this acquisition, we really had membrane capacity only at one spot for the most part in the U.S. and nothing outside of the U.S. of any materiality. We had started to build fabrication capabilities outside the U.S. through contract manufacturers, and we had established capabilities within the Asia-Pacific region. It was really important that we also get membrane capacity in Asia, just given that it's about a third of our sales and there are growing local for local preferences in the region. It really does not give us any additional technology. We've got the leading technologies that we'll continue to protect here in the U.S. operations.
It just gives us more local production capabilities for membrane within the China region.
Rachael Lee — Analyst, Citigroup
Got it. That's very helpful. Going to the diversified industrials side, it seems like organic sales grew better than expectations due to industrial technologies. Can you touch more on maybe how auto or aerospace or other businesses performed better than prior expectations? Thank you.
Lori Koch — CEO, DuPont
Yeah. On the diversified side, we had a little bit better performance than what we had expected. A lot of that was related to the timing shift, though. From a full-year perspective on an organic basis, we continue to expect to be at 2%. It really has not materially changed across any of the lines of business or reporting units. To your question, we did see nice improvement on the kind of general next-gen mobility space, which would include both the automotive and the aerospace side. We had mentioned at Investor Day, I believe, that we are starting to feel a little bit of momentum building in the auto space, and we saw that play out in Q3. The revisions that have been happening the last few months have been improving with respect to auto builds.
We are cautiously optimistic that we keep on pace there. The improvement that we have been seeing, more importantly, has been in the U.S. and North America markets, which is where our outside exposure is versus China. We will remain optimistic on the automotive piece. The EV piece that we have talked about too continues to perform really well. We have got share gains realized and more opportunities coming in the pipeline with opportunities with the EV battery space.
Rachael Lee — Analyst, Citigroup
Thanks very much.
Michael Sison — Analyst, Wells Fargo
Hey, good morning and congrats as well. Just curious, I think the case to change the Git code is pretty straightforward, but if it doesn't change and stays in chemicals, why do you think that is? If you are stuck with us, who do you think would be good comps relative to your performance for investors to look at? Is it more like an Ecolab, Linde, or Sherwin? Just curious if that sort of scenario unfolds.
Antonella Franzen — CFO, DuPont
Yeah. I would say it's not a straightforward process. One might think that it should be, but it's clearly not. In terms of having the classification change, as I mentioned earlier, we will continue down that path. At the end of the day, our performance will drive our valuation, and that's what we're focused on. As an organization, nothing will change in terms of our strategy, how we're expected to perform, and what we would do. Relative to peers, quite honestly, none of the chemical peers would be our peers that we should be compared to. I mean, we just have very different portfolios. There is no comparison to the others that are listed within specialty chemicals.
We would continue to say for no matter who's following us and reporting on us that at the end of the day, you really got to look at the multi-industrial peers to kind of compare our performance.
Michael Sison — Analyst, Wells Fargo
Got it. Thank you.
Arun Viswanathan — Analyst, RBC Capital Markets
Yeah. Thanks for taking my question. You commented on, maybe, some details on your healthcare portfolio. Could you also comment on the water side? You guys recently completed that acquisition in China. What else are you guys looking at? I guess, how are you prioritizing capital allocation towards this business? Thanks.
Lori Koch — CEO, DuPont
Yeah. On the water space, we'll look to see if we can be opportunistic to add to our water filtration capabilities. As I mentioned, they might be a little bit more minimal because of the consolidation that exists in the space as well as our market leadership we have across the core technology. We'll look more broadly into potentially systems plays or some services plays. I had mentioned that steering probably would be off the table just given the high valuations that come along with those assets. We'll continue to be prudent to ensure that we can get a return that's in line with our expectations. I think that the pipeline is rich on both sides, the healthcare and water.
We'll differentially invest in those businesses, both from an R&D and a capital perspective, to ensure that we're getting outsized returns and we'll bias our M&A activity towards those businesses as well.
Arun Viswanathan — Analyst, RBC Capital Markets
Thanks.
Ann Giancristoforo — Head of Investor Relations, DuPont
Great. Thank you, everyone, for joining our call. For your reference, a copy of our transcript will be posted on DuPont's website. This concludes today's call.
Source: DuPont de Nemours, Inc. earnings call transcript (2025-11-06). Management commentary and analyst Q&A are reproduced as delivered; speaker roles as stated on the call.

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