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Executives

Ellen Kullman - Chair & Chief Executive Officer

Analysts

Jeremy Redenius - Sanford C. Bernstein

E. I. du Pont de Nemours and Company (DD) Sanford C. Bernstein Strategic Decisions Conference Call May 31, 2013 9:00 AM ET

Jeremy Redenius - Sanford C. Bernstein

Good morning everybody. My name is Jeremy Redenius. I am the European chemicals analyst at Bernstein based over in London. I am very pleased today to introduce Ellen Kullman, Chair of the Board and CEO of DuPont. I would also like to introduce Carl Lukach, the Head of Investor Relations. I want to introduce you to DuPont, an integrated science company with a really fascinating range of products. She will give a brief introduction to the business and then we will follow with questions on the cards. With that I would like to turn over to Ellen.

Ellen Kullman

Good morning, everyone. It is a pleasure to be here at Sanford Bernstein's Strategic Decision Conference. And in the spirit or the theme of the conference, I would like to share with you DuPont's strategic priorities. How we integrated science across our portfolio of businesses to create competitive advantage and how we make resource allocation decisions. And then I will finish with what you as investors can expect from us.

So, obviously, the next slide will be what you see from all of us. It is the fact that the slides for today's presentation can be found on our website along with our news release. I will be making forward-looking statements and references to non-GAAP measures, and I will call your attention to the disclaimer here on slide two and encourage you to review the reconciliation and risk factors included on our website and in our SEC filing.

DuPont today is strong. We have a strong position in growth markets. We have enhanced our portfolio. We have improved our cost position. We are leveraging those strengths to grow the value of each of our businesses and drive total shareholder return through our disciplined approach to capital allocation. We are better positioned in growth markets today than just a few years ago. In agriculture, our market share is up and corn and soybeans. We have brought hundreds of new products to farmers including a blockbuster in crop protection product. We have a very high value, high potential pipeline of new products to help meet the growing demands for food globally.

In nutritional health and food markets, we have a meaningful presence in this attractive fast growing sector. Our customer list after the Danisco acquisition includes the largest, most recognized and advanced food and dairy companies in the world. We have created a world leading industrial biosciences capability and market position in enzymes and proprietary microbes, and these are building blocks of new advances in food, in fuel, and in industrial material.

In automotive markets, our ability to bring light weighting solutions to customers has reinforced this space as a growth market for us. In mobile devices, personal computing and displays, we have advanced our position as an innovative supplier of enabling technology in material for solutions that not only improve functionality, but reduce power usage and produce vivid color displays.

In photovoltaic market, in spite of the upheavals in the module manufacturing step of the value chain, we have strengthened our position as lead innovator. We have done this by delivering better paste and encapsulent films that boost conversion efficiency, prolong module life and increase return on investment for solar panel installations. And in protection we’ve added new offerings, such as process safety consulting to help companies meet increasing standards in developing countries. We have introduced light weight Kevlar fabrics to better protect law enforcers. These offerings use DuPont knowledge and science to make our world a safer place.

We have made important portfolio enhancements in the last two years to increase the value of DuPont. These include the $7 billion acquisition of Danisco and the $5 billion sale of our performance coatings business. Danisco, it presents growth opportunities across multiple DuPont businesses and we are working to capture these synergies. Coatings by comparison was not earning an adequate cash margin. We had higher value creating opportunities available to us in our portfolio, so we decided to monetize it. We were able to pay for nearly all of the Danisco acquisition with internal funds from the sale of the coatings business and from the $2.6 billion in permanently eliminated working capital we generated from our productivity project.

Further strengthening our company is our improved cost position. In the last four years, we have captured a cumulative $2.2 billion in fixed cost savings. This has more than offset inflation and helped fund growth investments. Our productivity initiatives are ongoing. We announced a restructuring program last year to deal with the residual cost from the coatings sale. We are confident we will continue to generate productivity savings and focus our fixed cost on targeted growth investments in R&D, selling and marketing.

Now let me address how we will increase the value of DuPont going forward. It all emanates with the purpose of our company, which we have summed up in the following statement. DuPont is a science company. We work collaboratively to find sustainable, innovative, market-driven solutions to solve some of the world’s biggest and ever-increasing challenges, making lives better, safer, and healthier for people everywhere. Our purpose and our core values are constant. The all emanate from who we are as a company, what we do, and how we create value. I have said many times that DuPont is a market driven science company. One way to visualize what I mean by this is plotting our seven business segments across three areas of scientific strength.

Materials sciences, biosciences, and agricultural sciences. The green to blue color portrays the convergence of biology and chemistry that is underway and DuPont is the acknowledged leader. Our scientific capabilities are integrated across our company and leverage to discover new solutions to our stakeholder problems. The vertical axis represents markets. It's at the intersection of markets and science where we find the opportunity to deliver the new, to apply our science and discover solutions for our customers. That’s where science meets demand. With that our purpose, what is the strategy to grow the value of DuPont. It is to generate superior shareholder returns by building world leading positions in three attractive spaces where we have strong science that is valued and rewarded by our customers.

These spaces are Ag and nutrition, bio-based industrials and advanced material. Each of these areas offers us the opportunity to continue to build a distinctive portfolio of high margin growth businesses. The scope of the portfolio also enables us to leverage a broad set of scientific capabilities across our businesses to access many markets, and to drive innovation across these spaces. We have three clear strategic priorities. The first is to extend our leadership in the high value, science driven segments of the agriculture to food value chain and to leverage the linkages across these segments. We are already uniquely positioned in this space and have tremendous opportunity and momentum to advance further.

Our second strategic priority is to strengthen and grow our leading position as a provider of differentiated, high value, advanced materials through science based solutions. This has been a historic strength of DuPont and we will extend our lead here. Our third strategic priority is to build on our leadership position in the industrial biotechnology area and create transformational bio-based businesses in areas like biofuels and biomaterials. We will achieve this goal by leveraging world class capabilities in critical, enabling technology. These include designing and operating cell factories and microbial pathway engineering. The application development capability and market access of our advanced materials businesses, along with the value chain relationships and feedstock knowledge of our Ag & nutrition businesses, offer advantages for our success here.

DuPont's scientific capability includes chemistry, material science and biological science. During the past 15 years, we have significantly strengthened our biology capabilities through internal development, acquisition of key technologies and collaboration with other companies, university, and national laboratory. With this capability in foundational sciences, the critical success factor to accelerate innovation lies in our ability to look beyond the boundary of a single discipline. We call our approach integrated science. We pool together the right combination of chemistry, biology and material sciences from the competencies that you see here, to deliver faster, better, and even transformational solutions for our customers.

While we have strong and capable competitors and individual scientific discipline, DuPont breadth in science is unique. Simply stated, we are advantaged like no other company to deliver value to customers and shareholders. Let me give you an example of integrated science delivering value. Back to example of our Sorona polymer. By pairing chemical and material sciences with biology, we have created a business that’s delivering $300 million in new revenue. Our unique science enables enhanced performance and lower systems cost while delivering a reduced environmental footprint. Bio 1, 3-Propanediol or Bio-PDO as we call it, starts with DuPont Pioneer high yielding corn hybrid. The corn is transformed into sugars using enzymes developed by DuPont’s Genencor science. The sugars are fermented into Bio-PDO by proprietary production microorganisms developed by DuPont. Bio-PDO monomer is then polymerized into Sorona using a DuPont proprietary process employing our expertise in process engineering and design.

At every step we use DuPont’s science then we leverage our global reach and market access through our customer facing team in areas like automotive. Our application base is growing, so in addition to Automotive, Bio-PDO and Sorona are finding new end-use application in carpet, apparels and personal care markets. Sorona is growing because it is quite simply a better product not just because it's green. It was a historic first commercial demonstration that microorganisms could be metabolically engineered into cell factory to turn renewable feedstock into industrial material at large scale. It was made possible only by integrated DuPont science across different competencies and different markets.

DuPont's integrated value chain in science touches a broad range in the food value chain, from hybrid seeds to crop protection solutions on the farms, through manufacturing and premium ingredients like soy proteins from Solae or probiotic microbes to improve nutrition. In addition, we have used integrated science to address food safety. The award winning DuPont BAX System is a fast and accurate method for detecting pathogens and other organisms in food and environmental samples. This system analyzes sample at the genetic level using the power of polymerase chain reaction to detect food borne pathogens with certainty to ensure the safety of food.

Another example of DuPont's integrated science at work is biofuels. As you know, ethanol has been since antiquity and there is a large ethanol for fuel industry in the United States and in Brazil. We sell a lot of enzymes into that market today. The next generation of biofuels will not be from ethanol from grain or sugar directly, but rather ethanol from cellulosic sources. And a little later we will see more concentrated biofuels like Biobutanol. If you look at what's required to make cellulosic ethanol a viable option at scale, you will see a complex conversion process. You start with the cellulosic feedstock, corn stover for example, which must be harvested, milled and pretreated. Sugars then must be fermented into ethanol and the ethanol itself must be separated for use.

And at the same time, the biology of feedstock require us to be clever enough to use parts of those feedstock which haven’t been accessible previously. If it sounds complex, it's because it is. And success here requires a tremendous array of diverse competency and collaboration which draw upon our integrated science. These include crop and agronomic practices from DuPont Pioneer and crop protection to increase the quantity of crop production. It also requires a metabolic engineering capability which enable us to covert the cellulose into sugars, and our novel process technologies to transform the sugars into ethanol at high yield. And we rely on partnership which are enabling us to build a production scale facility in Nevada, Iowa.

The simplest way of improving fuel efficiency is to reduce consumption. And we use our integrated science approach to find new ways to reduce fuel consumption, planes and of cars, by light weighting. New product examples employ DuPont core technology. But the challenge isn’t just to reduce the weight of materials in planes and cars, safety, heat resistance are also important factors. And that’s why we put Nomex materials into the ceilings and the bodies of airliners. They are light, they are strong, and they are fire resistant. And we draw on our bioscience to develop ways of converting renewable materials into high performing materials that are already under the hoods of your cars. The turbocharger hose in your car today may be made of a product, DuPont Hytrel RS, renewably sourced, a high performance elastomer with metal like performance. One of the monomers is renewably based.

Another good example of leveraging our innovation and global reach can be seen in our new DuPont innovation centers. All 11 were opened in the last 20 months. The most recent in Istanbul. They are low cost but they are high impact. The operative message here is, connect and collaborate. Connect more directly to the local market and customers and collaborate to solve problems. It also a means to connect internally among our segments. Share customers, share scientific knowledge and tap into previously undiscovered growth opportunities. By connecting directly with customers, we localize our science and bring our 10,000 scientists and engineers to bear on the local problems no matter where they are in the world.

We are able to increase our success rate by offering customers solutions for their specific opportunity. In addition, we have created a natural forum for all of our businesses to collaborate in addressing a single customer problem. Through our innovation centers, we are already working on 169 new growth projects that have the potential to deliver $400 million in sustainable incremental revenue when commercialized.

Now let me address how we make resource allocation decisions and I will start with R&D. Our allocation of resources is highly differentiated among our businesses. We have increased our R&D investment by approximately 50% over the past five years. However, it's not just about spending R&D dollars. We want to ensure that we are investing these dollars at the highest value creating places. As this chart shows, we have been increasing our R&D investment in those businesses that have the greatest potential for growth. We have nearly doubled the amount of R&D in our agriculture segment. Over the same time period, our Ag segment has increased sales at a 13% compound annual growth rate while earnings have increased at 19% compound annual growth rate, creating significant value.

To ensure that we are investing our R&D in the right places, our annual budget is based on a bottom-up, top-down approach. We run a process called prioritizations of initiatives. Each business submits their prioritization or POI plan to the office of the Chief Executive for funding consideration. We analyze these plans and decide which projects will generate the highest cash return. We also use our portfolio evaluation and prioritization of initiatives processes to decide on our capital expenditure projects. We are investing more today in those businesses that have proven they can generate faster growth and higher cash returns. We run a disciplined review process to make certain that we are generating the returns we originally expected from each investment. Every business and function president is held accountable for ensuring that the financial returns for each of their projects is meeting or exceeding objective.

For those projects that are not meeting expectations, a detailed analysis is performed and an action plan implemented to get the project back on track. We also capture key lessons so we learn and we get stronger. Our plan, subject to board approval of course, is to grow dividends in line with earnings growth. You can see from our history that paying dividends to shareholders is a top priority. Just last month our board approved a 5% increase in our dividend. Since 1904 we have never missed a quarterly dividend, and like some other companies, we did not suspend or decrease our dividend during the global financial crisis.

In addition to our dividend policy, we have also returned cash to shareholders through share repurchases. We have repurchased about $2.3 billion of shares over the past 2 plus years. In April, we completed $1 billion repurchase program using a portion of the performance coatings divestiture proceeds.

So let's summarize what you can expect from us. Building off of our strength. We will grow the value of DuPont by building world leading position in agriculture and nutrition, advanced materials and industrial biosciences. We will increase our return on research and development, capitalize on our global reach and focus on execution in ways that are visible to you on our top and our bottom line. We will continue to invest differentially across our portfolio and our most promising value creation opportunity. This includes acquisitions to boost our organic growth rate. And we will execute successfully against our defined value creation strategy.

Finally, our long-term five-year rolling growth targets are 7% average annual revenue growth, and 12% average annual operating earnings per share growth. We recognize these are challenging growth rates in a slowed growing world economy. But given the strength of our portfolio, our global reach, our integrated science, and our ability to execute, we are confident we will achieve these goals. Thank you.

Question-and-Answer Session

Jeremy Redenius - Sanford C. Bernstein

Thank you, very much, Ellen. I think I will just jump right into one topic about titanium dioxide.

Ellen Kullman

Oh, there's a surprise.

Jeremy Redenius - Sanford C. Bernstein

Just reflecting the market's demand here, by the number of questions. And one of the questions says, that TiO2 does not seem to fit in your purpose statement on page eight. I am afraid maybe some of the paint companies might disagree, but they would have that you explain that a bit.

Ellen Kullman

You know it's interesting, because when you are a 211 year company and you have a very diverse portfolio, our goal with the purpose statement wasn’t to include everything. It was a future statement. And we analyze our portfolio constantly. We work with our board on that. We understand that where science can make a difference to provide a better outcome is where DuPont focuses its resource. We have a very strong, vibrant TiO2 business. It is cyclical but it is very strong. We earn above the average returns from our company standpoint over the cycle. We earn greater than our cost to capital at the bottom of this cycle. We use our science in TiO2 from a differentiation standpoint to product a very high quality TiO2 at a very low cost. So we are the industry leader from that standpoint. TiO2 is a opacifier. We like to think it protects homes from the weather because it does give paint the ability to weather and protect. But as always with any of our portfolio, we are constantly assessing not only whether it's a strong enough business, but whether science really does make a difference for that.

Jeremy Redenius - Sanford C. Bernstein

And would you care to comment on the outlook for the next couple of years for the TiO2 business?

Ellen Kullman

Well, we provided a very strong detailed, I should say, outlook for that when we had our analyst meeting. I guess that was about four weeks ago. Recently in the first quarter, we saw volumes year-over-year, it's up plus 1%. Sequentially fourth quarter to first quarter volumes were up 8%, which means that the market we see is bottoming and stabilizing in the middle part of this year. And then improvement in that will occur if the economy continues to improve. But we see it coming through a period of stabilization and then improvement in the next few years as the economy grows, grows on a GDP rate on average over the cycle.

Jeremy Redenius - Sanford C. Bernstein

Innovation is clearly a major theme. Could you talk about your approach? Did you take the lead or is there something that’s more of a pull from customers to innovate?

Ellen Kullman

That’s a constant question, right. And the answer is, yes. You know it's interesting because these innovation centers have really allowed us to solidify our processes here. Historically, you go back in the last century, it was laboratory out. Right. Coming through the 80s and the 90s, there was a convergence. It was the laboratory and the customer had to meet on common grounds. Through these innovation centers, we actually, we bring customers in. We have all of our different businesses participate and talk to them about what their needs are. What are their biggest issues? Where are opportunities that they see that if they could find a better solution, they would be more successful than they were.

And that actually sparked ideas for new combinations of materials. For instance, dry type transformers in China. I am going back a couple of years. You know mid-range from a performance/duty cycle, Nomex is too expensive, the cheap materials can't provide the longevity for the transformer. We integrated Nomex and Mylar to create a laminate that met the need and was a better value for the customer. And that’s the power of localizing the science. Because if all we were thinking of is Nomex, then we are going to miss it. But if we bring the power of all of the different sciences we have, we can come up with an answer and we can create value, not only for the customer but for our company and our shareholders.

Jeremy Redenius - Sanford C. Bernstein

As an analyst, I think many investors find this is challenging as well, but thinking about how to value a company, how to value a company's innovation potential. Do you think this is an area that the market understands well as this is one of the major areas that the market misses about your company.

Ellen Kullman

Well, I think that’s a constant challenge for any company, right, the pipeline. And you see in the pharmaceutical industry where there is a lot more rigor to the pipeline because of the regulatory environment. We do spend a lot of time with our pipelines and individuals. We took analysts through good parts of it in the meeting about three to four weeks ago. In our agriculture business, our crop protection and Ag, we attend those kinds of meetings and do that. But it's something I think that we have to continue to work on. You know the funny -- not funny, the strange part of that innovation is you are never going to [doubt about] sales. And the team is always worried about talking about something before it's there. Look at Rynaxypyr. You all probably never even heard of Rynaxypyr four years ago. Most of you might not even know what it is now. It's a very novel insecticide that we launched five years ago. Right.

There were times during the development of Rynaxypyr where we weren’t sure whether it was going to make issues. Technical issues, fail issues, cost issues, and through the process we created a product that was highly novel, low toxicity, high efficacy insecticide. And it was registered around the world in land speed record and this year we will sell $800 million of it. Revenue that didn’t exist five years ago. And so those things mean that it was part of the pipeline. We probably didn’t size it at that size when we talked about it back five years ago. And so I think that we are getting better at discussing our pipeline with a little more transparency. But things like a home run like Rynaxypyr are hard to predict looking forward. And so I think that why, I think, as we get more of the new pipeline under our belt and more of that out in the marketplace, it will be a little more -- we will be able to better at predicting.

Jeremy Redenius - Sanford C. Bernstein

Any other parts of the business that you perceive are not very well understood that should be better understood by investors?

Ellen Kullman

Well, I think we are working for industrial biosciences. I think it's an area. And the nutrition, the new areas that we purchased with Danisco. Danisco is probably a little better because there are analogs out there for companies that you can take a look at, whether it's Chr. Hansen or others, that you can say, gee, how is our profile and how our performance in nutritional and food ingredients moving along. On the industrial biosciences, it's a business of enzymes as well as it's a capability, scientific capability, that's going to enable new polymers in our advanced materials area. It's to enable new products in its own business, in personal care and in other areas. And that’s the one that we are spending more time building out and really bringing forward. Because I do think that’s the least understood and it can have a tremendous -- it will have a tremendous impact on our company going forward.

Jeremy Redenius - Sanford C. Bernstein

And you mentioned Danisco along the way, how is the integration of Danisco going?

Ellen Kullman

I am really happy we made the acquisition. The integration is going well. Cost synergies were ahead of schedule. So it was fully accretive. That the acquisition was accretive, $0.23 accretive in the first full year, 2012, that included interest expense in there. But the top line synergies we are starting to see come forward. We bought out the minority partner in Solae, the soy isolate business. We are now integrating that into Danisco. So we have a full suite of products in both bakery, in meat, in dairy and other segments of food ingredients and we continue to drive forward. We are spending a lot of time globalizing that business. We have a very localized presence as a company in Southeast Asia, in Latin America and Danisco didn’t. And so a big part of the integration is localizing them in areas of the world that they just weren’t big enough to have a presence in and building out our capability there. And I will tell you, every country I go into, I see a lot of opportunity in that space.

Jeremy Redenius - Sanford C. Bernstein

Couple of questions about different types of risks the businesses might be facing. One of them, really following probably from the news this week at Monsanto's, I would like to say [tolerant] wheat that showed up in Oregon. What type of risk do you see from your business from GMO food or GMO food opposition that’s starting to build apparently?

Ellen Kullman

Yeah, so we run a very rigorous compliance and regulatory group in any and all of our businesses. It's part of being a global citizen. You have to not only abide by the rules but be a good citizen in the areas where you operate. You know genetic modification is an area that’s under more scrutiny today than it has been before. Obviously, Europe is where it is. We wouldn’t be where we are today from production agriculture in the United States without the traits that have enabled us to, to really enable farmers to get productivity continue to increase. So we work together with the industry. We work with GMA and others to make sure we are getting this into the right place.

I think if you take a look at global population at 7 billion going to 9. If you look at the amount of arable land that isn’t coming in, it's an amount that is not increasing. You look at the growing middle classes in India, in Southeast Asia, in China, and the amount of people moving from a grain based diet to a protein based diet. Productivity in agriculture is key and you are not going to get that without using the power of all the sciences available. It's genetics, it's native traits and it's biotechnology traits, along with good agronomic processes. And so I do think there is a need in the world to continue to let science allow us to feed the growing population and I think it's something we as an industry have to continue to be engaged in.

Jeremy Redenius - Sanford C. Bernstein

Question about the CO2 impact on refrigerant. How does CO2 impact the refrigerant business? What is the potential opportunity for DuPont?

Ellen Kullman

Well, we have introduced a new refrigerant. Low global warming potential, I think its global warming potential is 4 as opposed to the precedent refrigerant which was 100 times greater than that. We are just starting to bring it up. It's being driven by some of the automotive, European based automotives. Requirements to move to a lower global warming potential refrigerant. It's just starting to be utilized. It's going to take a few years to bring it to scale. But here is just another example of continued advancement of what science can do to create a better outcome in the future than we had in the past. And it's a [drop in]. You don’t have to redesign the car. It operates in the present systems and so that’s just starting that process.

Jeremy Redenius - Sanford C. Bernstein

Question about natural gas. Now you are benefitting from the lower natural gas prices in the U.S. so what are doing to take advantage of low natural gas prices?

Ellen Kullman

So natural gas is part of our cost of our company, it's not a very large part of our cost. But in the Gulf Coast where we do use a lot of it to run our plants, it's a help. It's not really a driver for our business because we are not in the basics end of the chemical industry. Chemicals are about 20% of our company. And there it's much more on the differentiated side on the products, so it's an advantage from the standpoint of input cost but not much beyond that.

Jeremy Redenius - Sanford C. Bernstein

And now coming back to agriculture and innovation. Is it really a local business in that innovation and agriculture need to be together for very different climates, different [locally]...?

Ellen Kullman

Absolutely. Yeah, we have, I don’t know I stopped counting, 150 research centers around the world for agriculture. We localized the genetics and integrate locally. And we for the most part, not always, but probably 90% of the time, the corn is grown locally to be sourced into the local market. We are building conditioning plants in Ukraine and building out even more capacity in Latin America and even here in the United States. You know agriculture, many [brands] are local market and you really have to be resident locally with that. That’s why we bought Pannar. We are in the process of closing on Pannar, which is a sub-Saharan African seed company. They have genetics local to the environment, combined with our infrastructure we have in South Africa and some of the projects that we are running in different countries in Africa. We will greatly increase our presence and our capability through their genetics and their market-based capability they have on the ground in these different countries. And that’s the next step in building out more infrastructure and capability very locally in sub-Saharan Africa.

Jeremy Redenius - Sanford C. Bernstein

And there are a few financial oriented questions. So you have talked about a longer-term EPS growth of 12% and 7% sales growth. Could you talk about the margin progression? How does that look by segment?

Ellen Kullman

So I think in our -- on our website, if it's in the charts you have, we have a chart that shows where the margins are for our segments currently and what the long-term goal is inherent in that. I don’t have that chart with me and wouldn’t want to start quoting numbers. But that is readily available to you, we can get that out to you. Carl is here and can help you with that. But very specifically, from an execution standpoint, I am a believer that there has to be great alignment between the businesses and what their goals are not only in the top line but from a productivity standpoint. And what they are going to deliver from a leverage standpoint on the bottom line. And it differs by business, each business has a unique set of competitors, is in a different market space, and its ability to deliver is comprehend those specifics. And I think that’s how we drive the execution and the accountability part to deliver on this.

Jeremy Redenius - Sanford C. Bernstein

I think this next one is bit of a top line. So DuPont, much of the message today is integrated science company, IP driven. But you have roughly mid-teen margins compared to 20% or more for companies like 3M, Monsanto. It's gives the appearance of more of a commodity like company. Could you please help us understand?

Ellen Kullman

No, I disagree. I do disagree. Okay. You probably want more color on that, is that -- you want me to expand?

Jeremy Redenius - Sanford C. Bernstein

Please comment.

Ellen Kullman

Okay. You know interesting we are a company that if you take a look, it's a company going through a transition. I think selling our performance coatings business which was the lowest return business we had from a cash standpoint. Bringing in higher growth, higher margin capability with Danisco. And so with industrial biosciences you are starting to see the power of that with the Nevada, Iowa, cellulosic ethanol plant. And that’s why in '09, when we restructured the company in the midst of the global financial crisis, we simplified, we took out a layer of leadership and created segments that were relevant segments to the external world. So you can compare our margins in agriculture to Ad companies, you can compare our margins in our performance materials to companies in that area as well.

And so I think you are going to see, as we look at the plants we have laid out, a progressions of margins to that areas. It's commensurate with the continued portfolio changes that we make and you have seen that on a small scale with little ins and outs, you have seen it on a larger scale with Danisco and with the performance coatings business. That kind of work continues. But I think that you will continue to see momentum building in that area as we continue to deliver on our goals.

Jeremy Redenius - Sanford C. Bernstein

And a question on the status of your pension funds.

Ellen Kullman

It's interesting, in '07, we were overfunded. And '07 was the year that we closed the plan and moved to a defined contribution plan. And so fast forward to 2013, we are underfunded. And you know a huge part of that is the discount rate change. And so we make contributions when we have to to that plan. I believe discount rates will change over time but that’s something that I think is -- that will work itself out over time. And we continue to watch but I think that that’s -- we are very transparent about that but it amazes me that in '07 we could have been overfunded and now, you know with the discount rate where we are today.

Jeremy Redenius - Sanford C. Bernstein

And maybe as a final question, I think the investors often find it helpful just to kind of get a little sense of your macro view of the world. How is the business development in the different regions of the world, maybe you can just kind of walk around the globe for a moment (inaudible)?

Ellen Kullman

Yeah, it's interesting because it's been a lot of years since I have said the United States is a bright spot, right. And although I do think we still have a lot of issues to work out as a country, you got strong housing momentum. And I think that’s helping. You have got record-breaking agriculture even though prices are coming off from the highs, very strong economy in agriculture. And so the U.S., if you take a look at industrial, it tends to be kind of continuing, it's not lighting any fires but making progress. I mean automotive started out slow in the year as opposed to continue to improve. Second quarter auto builds were supposed to be up 3% to 5%. But the U.S. when you add altogether, we see continued improvement. In China, recovery there is still weak but it is moving. There is more stabilization in place as their leadership gets a little firmer in the place. I am leaving this Sunday to spend a week there to see how our teams are doing. Auto builds were a positive in the first quarter, they were up 12%. Construction over there is hesitating a little bit. So we have actually -- we are doing better this year in China than we were last year. Overall, it's improving. But it's something I watch very carefully because it can turn quickly.

And so we do, as a leadership team, individuals, we spent a lot of time there, with their government, with our customer, really understanding. The food industry there I think is a big opportunity. You see the food is moving from a farm based economy to an urban based economy in food safety, food security, shelf-life, nutrition, packaging materials, all are at a different level today than they ever were in that country. So I think there are opportunities from that standpoint. Latin America from an Ag standpoint is going great. Tremendous opportunities there. Europe, nobody is expecting much. But it's interesting, Eastern Europe is actually, there is activity going on there. So Western Europe is pretty dead, no expectations, Eastern Europe in agriculture, in other sectors, continues to kind of balance out Europe. And unfortunately the result is zero growth but you have growth in east and contraction still in the West Europe. And Southeast Asia I think continues to progress but it's a fragile recovery. I would say, just give me a country and give me a sector and I can tell what happens but there are not a lot of themes that are consistent still but progress is being made.

Jeremy Redenius - Sanford C. Bernstein

Great. Well, thank you very much for that. Thank you for the introduction and the opportunity.

Ellen Kullman

Great. Thank you, Jeremy.

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Source: E. I. du Pont de Nemours' CEO Presents at Sanford C. Bernstein Strategic Decisions Conference (Transcript)
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