Ladies and gentlemen, thank you for standing by. And welcome to the DuPont Fourth Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. And later, we will conduct a question-and-answer session. Thank you. I would now like to turn the call over to Leland Weaver to begin.

Good morning, everyone. Thank you for joining us for DuPont's fourth quarter 2020 earnings conference call. We're making this call available to investors and media via webcast. We have prepared slides to supplement our comments during this conference call. These slides are posted on the Investor Relations section of DuPont's website and through the link to our webcast. Joining me on the call today are Ed Breen, Chief Executive Officer, and Lori Koch, Chief Financial Officer. Please read the forward-looking statement disclaimer contained in the slide. During our 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 risk and uncertainty, our actual performance and results may differ materially from our forward-looking statements. Our 2019 Form 10-K, as updated by our current and periodic reports, includes detailed discussion of principal risks and uncertainties, which may cause such differences. Unless otherwise specified, all historical financial measures presented today 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 posted to the Investors page of our website. I'll now turn the call over to Ed.

Thanks, Leland. And good morning, everyone. I will provide comments on the tremendous progress we made on several strategic priorities during the fourth quarter of 2020 and the start of 2021. But first, let me give my appreciation to our employees and partners around the world who rose to the occasion day after day in the face of extraordinary circumstances. 2020 presented us with the challenges of a global health pandemic, social and political unrest, and the worst economic conditions in many years. Despite these challenges, our teams remained focused on health and safety, delivering for our customers, strengthening the financial position of the company and continuing to drive our strategic priorities forward. It is because of our commitment of our employees that today we're able to announce strong financial results, as well as significant progress on critical milestones to make DuPont a premier multi-industrial company equipped for growth and value creation. Starting on slide 2, on February 1, we announced the completion of the merger of our N&B business with IFF, creating an $11 billion industry-leading company in the food and beverage, home and personal care and health and wellness markets. The new IFF will have unmatched capabilities to deliver for customers, with leading positions in markets such as nutrition, probiotics, soy proteins, flavors and fragrances. The combination of these complimentary portfolios puts IFF at the forefront of highly valued consumer ingredients companies that work closely with customers to meet the growing demand in areas such as all natural, clean label, and sustainability. The combined management team has planned and prepared for this integration, and they are committed to delivering for all stakeholders. They are already executing on a playbook to capture both the cost and revenue synergies, enabled by the combination. I am now on the IFF Board,…

Thanks, Ed. And good morning. With the completion of the N&B transaction on February 1 and the substantial progress we made on non-core divestitures, we announced our new segment reporting structure for DuPont going forward. We will be aligned around three business reporting segments, Electronics & Industrial, Water & Protection, and Mobility & Materials. Our new segment structure combines businesses with common financial characteristics, enabling clear line of sight and more effective allocation of resources across the company. Each business has a meaningful growth profile with a management team that understands how to best execute on its priorities and deliver for shareholders. We will move the following businesses to the newly named Electronics & Industrial segment – Kalrez, Vespel, medical silicones and Molykote, each previously reported in our T&I segment. We will move the Teijin Films joint venture, the Microcircuit Materials business, and the Tedlar business to our T&I segment, which will be renamed Mobility & Materials. Each of these was previously reported in our non-core segment. Safety & Construction will be renamed Water & Protection to highlight our market-leading water business that we have grown both organically and inorganically over the past few years. As Ed mentioned, we will wrap up the non-core segment as part of our first quarter reporting. We will report the results of the Biomaterials, Clean Tech and Solamet businesses in our Corporate segment until the divestitures are complete. I'll cover our fourth quarter results on slide 6. As Ed did earlier, I'd like to acknowledge the significant efforts of our teams in delivering a strong fourth quarter, a capstone to what was an incredibly productive year. We set working capital and CapEx targets and challenged our teams to enable the reduction of commercial paper balances to zero at year-end to improve our leverage heading…

Thanks, Lori. Before we move to the Q&A portion of our call, I would like to remind you that our forward-looking statements apply to both our prepared remarks and the following Q&A. We will allow for one question and one follow-up question per person. Operator, please provide the Q&A instructions.

[Operator Instructions]. Our first question comes from one of Jeff Sprague of Vertical Research Partners.

Congrats on getting a lot done in a crazy tough pandemic year. Question for me is really just thinking about kind of the way the company now is reconfigured post N&B. Ed, you mentioned M&A a little bit in your prepared remarks. I just wonder if you could elaborate a little bit more on kind of the balance between opportunities for organic investment in the areas that you're strategically focused and what the M&A pipeline and/or kind of magnitude of activity on the M&A front might look like?

As Lori highlighted, we were expecting 8% revenue growth in 2021. So, we feel like it's going to be a robust year for us. And key for us is our 4% spend on R&D. So, that's clearly number one. And we're very focused on the secular growth areas within the portfolio where we're spending the R&D. So, we feel like we're going to have very good results organically as we move forward in the new configuration. The way we're looking at M&A, I'd say, look, there's two targets that we're presently working on. I don't know if we'll be able to consummate them or not. We're not going to stretch to get them. We're going to make sure the numbers work for us. And we're going to make sure that numbers work on the cost synergy side, not taking into account revenue synergies, even though the couple that we're working on do have revenue synergies. So, we'll see how that plays out. We're actively in that right now. They're right down the middle of the plate in a couple areas that we already participate in. We're not going to do anything on the M&A side that's a new segment or anything like that. But we feel like there's some good consolidation opportunities right where we have our strengths and right where we have great relationships with customers. So, that's how we're looking at it. And as we highlighted, we are – even though we just took 27% of our shares out of the market, not using any cash, we do have still $1 billion open on our authorization. So, we're going to get back in the market and start repurchasing shares. We have a Board meeting coming up in the next month. And that will be a topic that we will have with the Board, share buyback versus mix of M&A that we're planning on doing during the year.

As a follow-up, actually unrelated, different topic. This global semiconductor shortage fire drill that's going on, can you just kind of address how that impacts you? I'm sure it's going to impact auto production builds. It might hurt you on one side, but you’re your kind of supply and the response on the other. Maybe you could just kind of tie that together for us.

I think it's going to affect the auto builds. I think the forecast out there is 650,000, 700,000 cars that'll be reduced by because of the shortages out there. But, Jeff, we're running full tilt on the semi side. And quite frankly, the whole electronics segment is running full tilt. As Lori had mentioned, even the smartphone demand where we – gee, that did not even soften up in the fourth quarter, and usually seasonally that even declines. So we're pumping out as much as we can. But definitely, there's some slight slowdown, but the car production is still hot and heavy even with that 650,000 unit reduction. And hopefully, that works its way – those issues work its way through during the first quarter. So, we're seeing a little bit there. But again, I think our forecast is very solid for what we're going to do in the electronics business and the semi. We're also seeing some headwinds on raw materials in the T&I business, which also somewhat relates to the auto business. So, we lost a little bit in volume in the fourth quarter and we'll lose a little bit of volume in the first quarter because of those constraints. But again, our forecast still is very solid and we're pretty much running full tilt there also.

Our next question comes from the line of Scott Davis of Melius.

What changed that got you to keep the non-core businesses, the Microcircuit, the Tedlar and the films JV? Is it just the timing issue and they may still be for sale? Maybe I'll just leave it at that and let you explain.

Scott, they are businesses that are kind of down right now because of the end market. So, take the Tedlar business, somewhat aerospace exposed. They're good businesses. Lori and I did really a study of all the non-core businesses and decided we have some really nice upside. And the businesses we're moving into T&I – T&I, that team is really great operators, which is exactly what's needed here. So, we think there's nice upside coming in these businesses. It was not – it wouldn't have been productive to sell them. I don't think it would have been good for our shareholders. And we see some good long-term trends there. So, we made this decision strategically to hold on to them and don't expect them to be up for sale during the year. That's not what we're doing. We're putting them in there and we're going to run them.

Ed, you just talked about T&I having some challenges, obviously, with obvious things that Jeff brought up. The pricing headwinds, I would imagine you're able to capture some of the some of this back in price, just takes a little bit of time. Is it as much of a mix issue as price issue when you say pricing headwinds? Or is it, in fact, just explicitly price?

No, the headwinds in T&I are really constraints, raw material constraints that we're having. [technical difficulty] we're going to have a very nice first quarter in T&I, but we could have more upside. I think we're going to – we think we're going to miss out on about $60 million to $80 million in sales in T&I because of raw material constraints in the first quarter. Now we think we'll get a lot of that back. We won't lose it because the whole industry is having a few issues there. But specifically to your question on pricing, things have firmed up very well. It's a constructive market for pricing as we've entered the first quarter. I think you'll see price increases in the industry across the board. But a lot of that won't kick in until you get it – by the time you put it in place with contracts with customers, usually 30 days, 45 days, you'll probably see more of that kick in in the second quarter. But it has turned very constructive at this point in time on the price front.

Our next question comes from the line of Steve Tusa of J.P. Morgan.

Just following up on that last question from Scott on the price side. I guess for the old T&I segment, what are you assuming for price? Or if you just want to talk about the new mobility. However you want to kind of look at it. But what are you assuming for kind of price mix for the year there?

For the quarter, we hit the quarter first of what we had guided to in the slide for the new M&M segment, we will see sequential improvement in nylon price. And so, we were down about 4% in Q4. We're looking at about 2% in Q1. So, there is some sequential improvement there. However, we still do expect to be down year-over-year just given that we were at still in a bit of a nylon run in the first quarter of 2020. So, as we go through the year, as Ed had mentioned, the pricing environment in nylon is constructive. We do have an awesome team that takes advantage of price. So, we do expect as we get to the full year that you could see positive price momentum as reported for the full year basis. Keep in mind, though, there are some raw material headwinds that Ed had mentioned that we're dealing with. So, some of that price most likely will be offset by escalating raws, especially as oil price is expected to pick up. There are some raw material headwinds that we will offset, but they could eat into some of the price appreciation that we would see.

So, like, flat kind of price costs for the year for you guys?

It will depend how the nylon dynamics plays out. Yeah. So, right now, I think we could hedge it, staying at about flat. But potentially with some upside, if the nylon and the end markets in auto continues to remain tight, there's I think a couple of recent force majeure in the industry that's making the price environment even more conducive.

You mentioned that you're kind of running full out to keep up with some of the demand on the electronics side. Are you going to have to add capacity at all, to keep up with this? Or are these just bottlenecks that are more temporary?

It's a combo of both, Steve. We're cranking out more and we're freeing up capacity with a lot of moves we're making on the factory floor. But we're also adding capacity with – our biggest single CapEx project is the Kapton expansion. We're running flat out on Kaptons. We could definitely ship more if we had more manufacturing capability. And that comes online as we go into 2022. And that's a big move forward. The Kapton is what we use for the 5G and the smartphones. And also, that's a major expansion coming along that we desperately [technical difficulty].

Our next question comes from the line of Jonas Oxgaard of Bernstein.

Wondering about the capital allocation. So, you said you were going to seek board approval for more buyback? Can I ask what kind of range of buybacks will you be seeking?

Jonas, don't fully know yet. It's also partially going to be contingent on, do we do some M&A during the year. In aggregate, we're in a really nice spot here. We've got $5 billion to $6 billion of cash available to us as we close the three non-core sales that we've made, but haven't closed them yet. I think Lori mentioned there's still $900 million gross coming in during the first half of the year, in addition to the $2.3 billion excess from the IFF transaction and the $2.5 billion we have just coming into the year from non-core sales and operating cash flow. So, it's a really nice position to be in. And so, partially just in general on where we end up on the M&A front, not going to sit on cash through the [technical difficulty] big number. So, it'll either be M&A or buyback.

If you don't mind, you seem to have been focused on the transaction, getting the businesses back up and running, so when you're thinking of 2021, like as the CEO, what are your big focus areas for the year?

Operational excellence if I just put it in two words. I think we have still nice runway for a lot of improvements. One of the areas that Lori and I are spending a lot of time on is really our throughput at our facilities. We think we have gross margin runway to improve. It's not – I think we're best in class when it comes to overhead cost structure if you benchmark us against the very best peers. So, that's not our opportunity, although we always look for ways to optimize that. But the key for us is the gross margin line. We want to move that up over time to 40%. We've been running kind of 35%. We're installing a lot of digital analytics at our facilities. We spent about $15 million last year on data analytics tools. This year, we budgeted $30 million. So, you kind of see how we're ramping there. A lot of it's on the supply chain and manufacturing efficiency. We're putting in some tools on smart demand forecasting, process optimization uptime, and we're seeing some real benefits from it. So, that's a huge focus area for us this year.

Our next question comes from the line of John Inch of Gordon Haskett.

How are you thinking about working capital improvements from here? I think you'd called out, correct me if I'm wrong, $1 billion long-term potential, but you just did over – around $850 million for 2020. And does working capital have to come back, let's say, in 2021 as your businesses cycle back, which I guess – it's probably a good problem to have actually.

Yeah, it is a good problem, John. I think when you're going back into an up environment here, I really look at it from what are the turns doing. And we took our turns from 4.3 turns going into last year to we exited the year at 5.2. And it's an $850 million improvement. And our plan this year is to slightly improve our turns from the 5.2. But not a lot this year, but slightly. And that would be a victory for us.

Would those areas where the turns are higher correlate, Ed, with what you just stated as the sort of five points of runway overall for gross margin? So, I was going to ask you that too, the gross margin, is it comparable by segments, that 5 points, 35% to 40%? Or how does that delineate across three segments?

No, the biggest opportunity is S&C. And it's also got our heaviest manufacturing footprint. So, between Nomex, Kevlar, and Tyvek, they are our biggest opportunities in the business. They are our biggest facilities. We definitely know we can improve our uptimes, our turnaround times. And that's the number one area we're working on. By the way, it's across the board. But the biggest opportunity is there.

Same goes for working Capital. A lot of the opportunity still resides within inventory. I think our DSO is at a nice level. Indeed, our working capital, we can continue to improve and a lot of that back to the S&C or the new W&P business is where a lot of the opportunity lies.

No, it makes sense. Just as a follow-up, Ed, what's your appetite for doing something larger on the deal front in the next year or so? Maybe I was thinking, instead of just continuing to shrink DuPont, maybe even a possible asset swap with another company?

We always look at every opportunity. So, I don't think anything will get by us if there's something interesting. Let me just highlight on the M&A side, maybe just to size it a little bit for you. We could spend up to $2.5 billion on M&A. Now, things don't always work out. And as I said, we're not going to stretch to get something. So, you never know. But we're kind of looking in that kind of range, if it were to play out. So, just to kind of size it a little bit for you. But we always look at other alternatives. We get calls every week. If something makes sense, we'll study it.

Our next question comes from the line of Steve Byrne of Bank of America.

Ed, when you were talking about the PFAS liability settlement, you also commented that it's your view that your liability will be limited to the legacy DuPont facilities, given you didn't ever manufacture firefighting foams. Is there anything you can do to solidify that view? And the reason I ask is, in the past, DuPont's supported the initiative to have the PFAS grouping regulated under CERCLA. And under the old superfund days, CERCLE allocated costs according to the ability to pay, not necessarily to the contribution to the problem. And thus, is that a potential concern for you with regard to broadening this potential cleanup liability?

Yes. So, let me clarify that we have been supportive – we've testified in front of Congress, that if you designate it as a hazardous substance, we're totally in agreement with that. We'd rather have a national standard than every state doing their own thing. But remember, under the CERCLA or the superfund designation, it's very narrow who is responsible for it. It's where you disposed of the material. And the party responsible either had to be the site owner or the past site owner when it occurred or the person that arranged to transport it to that location. That is the definition under the CERCLA which is very narrow. You have to be one of the players that did that. DuPont – by the way, we have four sites where we used it as a manufacturing agent. And we disposed of it on our own sites with, by the way, approval to do that. One of our sites is 800 acres. One of them was 1,500 acres. And that's why we had so much ground. That's where the disposals occurred. So, we're very contained where we did it. There's already cleanup going on with government authorities approving what we're doing. And it's been ongoing for quite a few years. And we never obviously dispose the firefighting foam anywhere in a dump or anything because we didn't make it. As the facts keep coming out, it'll get narrow and narrow here. And then we'll, as I've said before, and I don't want to get into too much detail, it's a little bit proprietary, but we'll look at a way to hopefully contain the firefighting foam issue, so our investors understand the limited or no liability that sits there based on what we did as a company. We're very focused on it. As you can see, we said there was a three-pronged approach, we just did two of the pieces. So, with the announcements we made, with the agreement between the three companies and settling the rest of the Ohio MDL for really very little in the scheme of things. And so, now we'll focus on this firefighting foam piece of it. Remember, also, we have been sued in states we don't even have anything in the state – State of Arizona, the State of New Hampshire. We don't even have a facility there. We didn't do anything there. So, the facts will keep coming out here. And then, hopefully, we'll get resolution and hopefully something by the end of 2021.

And now that N&B has been separated and you've reshuffled the segments and you've accomplished a bunch in the last year, just curious, how long do you see yourself remaining the CEO? And is there a process underway that that could change?

Well, I just signed a three-year contract, I don't know, a month or two ago. So, at least that period of time. So, no process in place. I'm very excited for the next few years.

Our next question comes from the line of Bob Koort of Goldman Sachs.

Ed, I'm curious, this maybe was asked in other ways, but when you think about sort of what your aspirational peer set was, and there's some pretty good variants still in the valuations of your individual businesses, even though you've obviously made some great progress, you've cleaned up some of the non-core stuff of portfolio, you've maybe diminished the angst around PFAS, what do you sort of see as the strategic options to narrowing that variance from a valuation standpoint?

Well, it's one of the reasons we continue buying back shares. If you look at our multiple, whatever it is, 13 times, and I stare at ITWs and Honeywells and Eaton and we're just as good a company. I think part of it is, we've got to continue to post consistent results. I think consistency and people not having to worry, I think, means a lot in the multiple. I've been doing this for a long time. And I've been saying that for over 20 years. So, I think we just keep posting good numbers and I think we continue to close that gap. And I think we're going to benchmark very well this year. All our metrics vis-à-vis those other very good competitors, by the way, and multi-industry companies. So, there's a gap to that peer set for us of 400 to 500 basis points. And I truly don't believe that discount should be there at all. And so, we'll continue to prove that out during 2021.

You mentioned a few markets that have been quite hot. Obviously, you've got a few in the portfolio, end markets that are maybe more of a post pandemic glide path. Can you give us an update on how you see things progressing in energy or maybe aerospace or some of these other businesses that are going to take a bit longer to recover?

If I describe at high level, and maybe if Lori wants to give a little more detail, some of those, the oil and gas, aerospace, they dropped 30% to 40% on the revenue line. And our gut is we kind of glide back up, get half of that back in kind of 2021. That's kind of how – if you just put them all together, that's how we would look at it. So, we still would be down from 2019 levels in those end markets. And oil and gas, specifically, and aerospace, as you mentioned, would be two of those. So, that's kind of how I would look at it.

Our next question comes from the line of David Begleiter of Deutsche Bank.

Ed and Lori, just on the sales guidance of up 7% to 9%, by segment, which would be above or below or in that range, do you think?

I'll give it to you on the current segment basis and then we'll remap it on the Q1 call when we have all of these recast on to get to the new segment basis. So, from the old segment basis, we would see T&I probably at this above that average 8%, just given all the strengths that we had mentioned earlier with the with the V shaped recovery in automotive and potentially some pricing tailwinds that could come our way. Ed had just mentioned, within S&C, is more of a delayed recovery to full 2019 levels within a lot of the aramid end markets that fell into oil and gas and aerospace, for example. So, they would probably be below that 8%. And we would say electronics right now right around that average. And so, very strong in the first half as we see it. We're watching the second half to see how the trends continue across semi, across the 5G infrastructure to see how we continue to trend there. Obviously, we posted very strong results in 2020, up about 8% in that segment. I'd say that's where you put it. So, T&I at the top, D&I right around the middle and S&C probably lagging the average for the company.

How was January? Was it above or in line with your expectations? And what are you expecting on seeing around Chinese Lunar New Year?

You hit the nail on the head with the Lunar New Year. So, January, it's hard to gauge from how the quarter is going to play out because it was strong, just given the timing of Lunar New Year from this year to last year. So, we're still comfortable looking at January results with the Q1 guidance that we gave. And we'll see how – we had mentioned that nylon price continues to play out as well as availability of raw materials within the T&I business to satisfy that demand. We'll see how much unconstrained demand we have at the end of the quarter.

Our next question comes from the line of Chris Parkinson of Credit Suisse.

Naturally, there are a few moving pieces heading into 2021 as well as 2022. But just given the current end market trends you're seeing and how they're setting up after that timeframe as it pertains to op leverage, mix, your efforts to just further improve your overhead structure and improve your cost profile, how should we just generally think about incremental margins on a segment by segment basis over that period versus how we used to think of them? Are there any major differences we should really be honing in on? Thank you.

I think on a steady state basis, there shouldn't be material difference between them. In 2021, it'll vary because of the recoveries and the different shape [indiscernible] of recovery. If we talk in a total company level, based on the guidance that we provided, you would see incremental margin sort of in the low 40s for 2021 over 2020 for the total company.

And just as a follow-up, in terms of your water solutions portfolio, where do you see your largest strength heading into 2021 and 2022 in terms of product offering? And can you also comment on just any additional substrates, you feel, could potentially augment via M&A to further enhance the breadth of your offerings. So, just trying to get a better sense of the longer-term strategy within that portfolio? Thank you.

I think with the acquisitions that we made at the tail end of 2019, we now have probably the most complete portfolio in the industry. So, we've got technologies within ultra-filtration, reverse osmosis and ion exchange. And so, as we look forward to capture opportunities there, we're looking to provide not only materials into those individual spaces, but also a solution set and a solution play, more along the lines of a complete offering. As we look to M&A, we'll look to continue to round out that portfolio from both the tamping [ph] existing businesses as well as also potentially looking at a geographic play. So, obviously, a lot of the opportunity within the water spaces in more of the emerging regions and there are some M&A plays that we can utilize to take advantage to solidify our footprint in some of those geographies.

Our next question comes from the line of John McNulty with BMO Capital Markets.

Just a follow-up on the water treatment side or the water solutions side. So, you indicated there were some order delays just around capital projects being delayed, I guess, can you quantify that a little bit or kind of frame it for us a little bit? And also, can you speak to the visibility that you have in this business? How far out you can actually see and how you see 2021 as a whole playing out this year?

If we size kind of the headwinds that we saw in Q4, so as we had mentioned, the capital delays, there were also some logistical delays in the quarter, availability to get shipping out the door. It was probably about $15 million for the fourth quarter. So, as we look at January results, they were strong, they were again up about 6%. We're looking for the quarter to return to that mid to high single-digit growth within water. And for the year, generally, that levels as well. So, we're confident in the go forward portfolio there. We just had a little bit around a capital project delay. And as I had mentioned, logistics. As far as visibility is concerned, we have back-end loaded order patterns. And so, a lot of the sales go into large capital projects that tend to be pushed to the back end of the quarter. And so, our visibility there on those larger opportunities is a little bit more limited than some of the shorter-term opportunities of selling materials into, like I had mentioned, reverse osmosis and ion exchange.

Just a follow-up on, Ed, your comments earlier around the hope of getting the gross margins to – at some point, getting them pretty close to 40% or above, with a lot of that tied to or it sounds like a disproportion amount tied to S&C. So, I guess just back of the envelope, that kind of says S&C starts to see margins at some point in the low to mid 30s, which is obviously a notable jump from kind of where we are. I guess, is it just operational improvement that gets you there? Is it mix improvement as some of these higher margin businesses, like water, really start to accelerate? I guess, how do you get to those types of levels, if that's what you're really targeting, say, over whatever over the next two to three years?

S&C, I would target it more towards the high 20s EBITDA margin because not all of the opportunity is in that business. But it is the biggest single piece. And I would say the single biggest thing then in there is the factory optimization or up times or throughput on those assets. So, that the biggest area and that's where we're putting a fair amount of focus on digital tools going into to help us there. But I think that business should be a high 20s EBITDA type of business over the medium term here, and we can definitely run it there. But it's mostly on the factory optimization piece.

Our next question comes from one of John Roberts of UBS.

Ed, do you have to reset some of your sustainability targets here with the N&B business going away because, obviously, that was the greenest of the DuPont businesses? No, we don't, John. We have our targets laid out by segment. They are public, obviously. So, you can go look at all of them. No, it doesn't really change what we're doing and what we've laid out. But I guess, overall, it does for DuPont because you're taking 30% of the EBITDA out those businesses, but we have targets laid out by division and then totally for the company. And it's a big focus area for us this year. I don't think we've said this publicly, but we've actually put sustainability in our bonus structure this year. It's a modifier of 10% in either direction in what the bonus payout would be for the company based on targets that we set with the board. So, I'm happy and I'm glad that we've put that in place also, so all our employees know the importance of it to us. They hit the goals that we've laid out.

Can you quantify at all what the raw material inflation number might be for 2021? What percentage up should we expect year-over-year? And what are the couple things that are going to be above the average to push that high?

In total, I would quantify about $100 million of a headwind in 2021, with the predominance of it being within T&I and some of the nylon feedstock.

Our final question will come from the line of Mike Sison of Wells Fargo.

Just one question. I guess in Transportation & Industrial, a lot of companies in polymer lands has talked about recycling, sustainability, recycled plastics and that type of offering. Just maybe give us your thoughts on where you participate in that trend. And then, is it maybe potentially an area for acquisitions to beef up that part of your portfolio?

I'll answer the second part first around the M&A opportunities right now. I would say they're more biased towards the electronics space. Within automotive, they could be biased towards getting us more of a footprint within the electric vehicle space. And then, obviously, as we had mentioned earlier, in the water space, rounding out that portfolio, taking advantage of the underlying growth trends within that space. I think as far as the recyclability within that space, I don't see that as a large challenge for our business. I think that more within the plastics space, I don't see that as a material driver of the overall new DuPont company.

Thank you, everyone, for joining our call. For your reference, a copy of our transcript will be posted on DuPont's website. This concludes our call.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may now disconnect.