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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

DuPont de Nemours Inc., economic profit calculation

US$ in millions

12 months ended:	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Net operating profit after taxes (NOPAT)¹	(572)	4,932)	2,498)	3,846)	8,206)
Cost of capital²	24.96%	18.61%	22.13%	19.22%	17.29%
Invested capital³	62,770)	153,164)	149,192)	50,610)	46,288)

Economic profit⁴	(16,242)	(23,574)	(30,517)	(5,879)	203)

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= -572 – 24.96% × 62,770 = -16,242

The analysis of economic profit over the five-year period from 2015 to 2019 reveals a transition from marginal value creation to significant value destruction. While the period began with a positive economic profit, the subsequent years were characterized by substantial deficits, driven by a combination of volatile operating profits and a massive expansion in the capital base.

Net Operating Profit After Taxes (NOPAT) Trends: NOPAT exhibited severe volatility and a general downward trajectory. After a peak of 8,206 million in 2015, profits declined sharply through 2017. Although a partial recovery occurred in 2018 with NOPAT rising to 4,932 million, the trend reversed aggressively in 2019, resulting in a negative NOPAT of 572 million. This indicates a failure to maintain consistent operational profitability over the analyzed timeframe.
Invested Capital and Cost of Capital Dynamics: Invested capital underwent a dramatic transformation, surging from 50,610 million in 2016 to 149,192 million in 2017, remaining elevated in 2018 before contracting sharply to 62,770 million in 2019. Simultaneously, the cost of capital remained high and unstable, fluctuating between 17.29% and 24.96%. The peak cost of capital in 2019 coincided with the lowest point of operational profitability, compounding the financial strain on the organization.
Economic Profit and Value Destruction: Economic profit shifted from a positive 203 million in 2015 to deep negative territory for the remainder of the period. The most severe value destruction occurred in 2017, with an economic profit of negative 30,517 million, largely due to the massive increase in invested capital coupled with a rising cost of capital. Although the economic loss narrowed to negative 16,242 million by 2019, the trend confirms that the returns generated from operations were insufficient to cover the cost of the capital employed.

In summary, the evidence indicates a period of significant financial instability. The organization experienced a sharp increase in capital requirements that was not supported by corresponding growth in operating profit, leading to a sustained period of economic value destruction.

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DuPont de Nemours Inc., NOPAT calculation

US$ in millions

12 months ended:	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Net income attributable to DuPont	498)	3,844)	1,460)	4,318)	7,685)
Deferred income tax expense (benefit)¹	(478)	(434)	(2,166)	(1,259)	305)
Increase (decrease) in allowance for doubtful receivables²	(1)	64)	17)	16)	(16)
Increase (decrease) in LIFO reserve³	—)	118)	(269)	45)	(561)
Increase (decrease) in deferred revenue⁴	—)	(41)	2,332)	—)	—)
Increase (decrease) in restructuring reserve⁵	20)	96)	307)	128)	108)
Increase (decrease) in equity equivalents⁶	(459)	(197)	221)	(1,070)	(164)
Interest expense	668)	1,504)	1,082)	858)	946)
Interest expense, operating lease liability⁷	23)	121)	110)	92)	110)
Adjusted interest expense	691)	1,625)	1,192)	950)	1,056)
Tax benefit of interest expense⁸	(145)	(341)	(417)	(333)	(370)
Adjusted interest expense, after taxes⁹	546)	1,283)	775)	618)	687)
(Gain) loss on marketable securities	(1)	9)	(110)	(56)	(82)
Interest income	(55)	(210)	(147)	(107)	(71)
Investment income, before taxes	(56)	(201)	(257)	(163)	(153)
Tax expense (benefit) of investment income¹⁰	12)	42)	90)	57)	54)
Investment income, after taxes¹¹	(44)	(159)	(167)	(106)	(99)
(Income) loss from discontinued operations, net of tax¹²	(1,214)	5)	77)	—)	—)
Net income (loss) attributable to noncontrolling interest	102)	155)	132)	86)	98)
Net operating profit after taxes (NOPAT)	(572)	4,932)	2,498)	3,846)	8,206)

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for doubtful receivables.

³ Addition of increase (decrease) in LIFO reserve. See details »

⁴ Addition of increase (decrease) in deferred revenue.

⁵ Addition of increase (decrease) in restructuring reserve.

⁶ Addition of increase (decrease) in equity equivalents to net income attributable to DuPont.

⁷ 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 554 × 4.07% = 23

⁸ 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 691 × 21.00% = 145

⁹ Addition of after taxes interest expense to net income attributable to DuPont.

¹⁰ 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 56 × 21.00% = 12

¹¹ Elimination of after taxes investment income.

¹² Elimination of discontinued operations.

The financial data reveals significant fluctuations in profitability metrics over the five-year period. Both net income attributable to DuPont and net operating profit after taxes (NOPAT) demonstrate notable volatility and an overall downward trend from 2015 to 2019.

Net Income Attributable to DuPont: The net income experienced a steep decline from a peak of 7,685 million US dollars in 2015 to 1,460 million US dollars in 2017. Although there was a partial recovery in 2018 where net income increased to 3,844 million US dollars, the figure sharply contracted again to only 498 million US dollars in 2019. This pattern highlights increasing challenges in maintaining consistent profitability.
Net Operating Profit After Taxes (NOPAT): The NOPAT metric follows a similar variable trend but shows even greater volatility throughout the period. It begins at 8,206 million US dollars in 2015 and falls sharply to 2,498 million US dollars by 2017. Despite a rebound in 2018 to 4,932 million US dollars, the NOPAT turns negative in 2019, indicating an operational loss of 572 million US dollars. This negative result in 2019 suggests operational difficulties or increased costs impacting the company's core profitability that year.

Overall, the data suggests a period of significant financial distress and operational challenges, especially towards the end of the timeline. Both net income and NOPAT show a loss of momentum post-2015 with a critical downturn in 2019. The negative NOPAT position in 2019 might call for a closer examination of the company’s operational efficiency and expense management during this period.

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DuPont de Nemours Inc., cash operating taxes calculation

US$ in millions

12 months ended:	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Provision for (benefit from) income taxes on continuing operations	140)	1,489)	(476)	9)	2,147)
Less: Deferred income tax expense (benefit)	(478)	(434)	(2,166)	(1,259)	305)
Add: Tax savings from interest expense	145)	341)	417)	333)	370)
Less: Tax imposed on investment income	12)	42)	90)	57)	54)
Cash operating taxes	751)	2,222)	2,017)	1,544)	2,158)

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

Provision for (benefit from) income taxes on continuing operations: The provision for income taxes on continuing operations demonstrates significant volatility over the analyzed period. In 2015, the provision was high at 2147 million US dollars, but it drastically decreased to 9 million US dollars in 2016, indicating a sharp reduction in tax expenses or changes in tax benefits. The following year, 2017, reported a negative value of -476 million US dollars, suggesting a tax benefit or credit rather than an expense. However, the provision increased again in 2018 to 1489 million US dollars before declining sharply to 140 million US dollars in 2019. Overall, the data reveals a highly fluctuating trend without a clear upward or downward consistency.
Cash operating taxes: Cash operating taxes exhibit a generally increasing trend from 2015 to 2018, starting at 2158 million US dollars in 2015 and peaking at 2222 million US dollars in 2018. This upward movement suggests rising actual cash outflows related to tax payments during the initial years. However, in 2019, a marked decrease to 751 million US dollars occurs, indicating a substantial drop in cash taxes paid. This shift may be reflective of tax strategy changes, timing differences, or altered profitability affecting cash tax obligations.

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DuPont de Nemours Inc., invested capital calculation (financing approach)

US$ in millions

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Short-term borrowings and finance lease obligations	3,830)	2,802)	4,015)	907)	995)
Long-term debt, excluding debt within one year	13,617)	37,662)	30,056)	20,456)	16,215)
Operating lease liability¹	554)	2,777)	2,836)	1,967)	2,040)
Total reported debt & leases	18,001)	43,241)	36,907)	23,330)	19,250)
Total DuPont stockholders’ equity	40,987)	94,571)	100,330)	25,987)	25,374)
Net deferred tax (assets) liabilities²	3,278)	3,711)	4,397)	(2,156)	(1,846)
Allowance for doubtful receivables³	9)	191)	127)	110)	94)
LIFO reserve⁴	—)	(98)	(216)	53)	8)
Deferred revenue⁵	—)	2,565)	2,606)	—)	—)
Restructuring reserve⁶	162)	684)	588)	281)	153)
Equity equivalents⁷	3,449)	7,053)	7,502)	(1,712)	(1,591)
Accumulated other comprehensive (income) loss, net of tax⁸	1,416)	12,394)	8,972)	9,822)	8,667)
Non-redeemable noncontrolling interests	569)	1,608)	1,597)	1,242)	809)
Adjusted total DuPont stockholders’ equity	46,421)	115,626)	118,401)	35,339)	33,259)
Construction in progress⁹	(1,652)	(3,870)	(4,600)	(6,100)	(4,355)
Marketable securities¹⁰	—)	(1,833)	(1,516)	(1,959)	(1,866)
Invested capital	62,770)	153,164)	149,192)	50,610)	46,288)

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of LIFO reserve. See details »

⁵ Addition of deferred revenue.

⁶ Addition of restructuring reserve.

⁷ Addition of equity equivalents to total DuPont stockholders’ equity.

⁸ Removal of accumulated other comprehensive income.

⁹ Subtraction of construction in progress.

¹⁰ Subtraction of marketable securities.

The financial data indicates significant fluctuations in the company's capital structure and invested capital over the five-year period.

Total reported debt & leases: This metric exhibits a rising trend from 2015 to 2018, increasing from 19,250 million US dollars to a peak of 43,241 million US dollars in 2018. However, this upward trajectory reverses sharply in 2019, with total debt decreasing to 18,001 million US dollars, indicating a substantial reduction in leverage or paydown of debt obligations during that year.
Total DuPont stockholders’ equity: Stockholders’ equity remains relatively stable between 2015 and 2016 but undergoes a dramatic increase in 2017, reaching 100,330 million US dollars, which is nearly quadruple the 2016 figure. This elevated level slightly declines in 2018 to 94,571 million but experiences a steep decrease in 2019 down to 40,987 million US dollars. The pronounced spikes and drops suggest significant equity transactions, asset revaluations, or changes in retained earnings during these years.
Invested capital: Invested capital follows a similar pattern to equity, growing moderately from 46,288 million US dollars in 2015 to 50,610 million in 2016, then experiencing a sharp increase to 149,192 million in 2017 and remaining close in 2018 at 153,164 million. In 2019, invested capital declines significantly to 62,770 million. This trajectory aligns with the movements seen in both equity and reported debt, indicating substantial changes in the company’s total capital invested in operating assets.

Overall, the data reflects periods of major capital structure changes, including a notable increase in both equity and debt leading up to 2017 and 2018, followed by a significant reduction in debt and equity in 2019. These shifts may be attributable to corporate restructuring, acquisitions, divestitures, or refinancing activities during these years. The volatility in invested capital further corroborates these possibilities, suggesting the company underwent important strategic financial decisions impacting its balance sheet composition and capital deployment.

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DuPont de Nemours Inc., cost of capital calculations

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	39,262)	39,262)	÷	58,866)	=	0.67	0.67	×	35.82%	=	23.89%
Preferred stock, series A, $1.00 par (book value)	—)	—)	÷	58,866)	=	0.00	0.00	×	0.00%	=	0.00%
Short-term borrowings and long-term debt³	19,050)	19,050)	÷	58,866)	=	0.32	0.32	×	4.07% × (1 – 21.00%)	=	1.04%
Operating lease liability⁴	554)	554)	÷	58,866)	=	0.01	0.01	×	4.07% × (1 – 21.00%)	=	0.03%
Total:	58,866)					1.00					24.96%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in millions

² Equity. See details »

³ Short-term borrowings and long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	39,083)	39,083)	÷	83,391)	=	0.47	0.47	×	35.82%	=	16.79%
Preferred stock, series A, $1.00 par (book value)	—)	—)	÷	83,391)	=	0.00	0.00	×	0.00%	=	0.00%
Short-term borrowings and long-term debt³	41,531)	41,531)	÷	83,391)	=	0.50	0.50	×	4.34% × (1 – 21.00%)	=	1.71%
Operating lease liability⁴	2,777)	2,777)	÷	83,391)	=	0.03	0.03	×	4.34% × (1 – 21.00%)	=	0.11%
Total:	83,391)					1.00					18.61%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in millions

² Equity. See details »

³ Short-term borrowings and long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	55,780)	55,780)	÷	94,739)	=	0.59	0.59	×	35.82%	=	21.09%
Preferred stock, series A, $1.00 par (book value)	—)	—)	÷	94,739)	=	0.00	0.00	×	0.00%	=	0.00%
Short-term borrowings and long-term debt³	36,123)	36,123)	÷	94,739)	=	0.38	0.38	×	3.88% × (1 – 35.00%)	=	0.96%
Operating lease liability⁴	2,836)	2,836)	÷	94,739)	=	0.03	0.03	×	3.88% × (1 – 35.00%)	=	0.08%
Total:	94,739)					1.00					22.13%

Based on: 10-K (reporting date: 2017-12-31).

¹ US$ in millions

² Equity. See details »

³ Short-term borrowings and long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2016

	Capital (fair value)¹	Weights					Cost of capital
Equity²	24,371)	24,371)	÷	49,418)	=	0.49	0.49	×	35.82%	=	17.67%
Preferred stock, series A, $1.00 par (book value)	—)	—)	÷	49,418)	=	0.00	0.00	×	8.50%	=	0.00%
Short-term borrowings and long-term debt³	23,079)	23,079)	÷	49,418)	=	0.47	0.47	×	4.70% × (1 – 35.00%)	=	1.43%
Operating lease liability⁴	1,967)	1,967)	÷	49,418)	=	0.04	0.04	×	4.70% × (1 – 35.00%)	=	0.12%
Total:	49,418)					1.00					19.22%

Based on: 10-K (reporting date: 2016-12-31).

¹ US$ in millions

² Equity. See details »

³ Short-term borrowings and long-term debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2015

	Capital (fair value)¹	Weights					Cost of capital
Equity²	17,133)	17,133)	÷	41,627)	=	0.41	0.41	×	35.82%	=	14.74%
Preferred stock, series A, $1.00 par (book value)	4,000)	4,000)	÷	41,627)	=	0.10	0.10	×	8.50%	=	0.82%
Short-term borrowings and long-term debt³	18,454)	18,454)	÷	41,627)	=	0.44	0.44	×	5.40% × (1 – 35.00%)	=	1.56%
Operating lease liability⁴	2,040)	2,040)	÷	41,627)	=	0.05	0.05	×	5.40% × (1 – 35.00%)	=	0.17%
Total:	41,627)					1.00					17.29%

Based on: 10-K (reporting date: 2015-12-31).

¹ US$ in millions

² Equity. See details »

³ Short-term borrowings and long-term debt. See details »

⁴ Operating lease liability. See details »

DuPont de Nemours Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit¹	(16,242)	(23,574)	(30,517)	(5,879)	203)
Invested capital²	62,770)	153,164)	149,192)	50,610)	46,288)
Performance Ratio
Economic spread ratio³	-25.87%	-15.39%	-20.45%	-11.62%	0.44%
Benchmarks
Economic Spread Ratio, Competitors⁴
Linde plc	—	—	—	—	—
Sherwin-Williams Co.	—	—	—	—	—

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -16,242 ÷ 62,770 = -25.87%

⁴ Click competitor name to see calculations.

Between 2015 and 2019, a significant shift occurred in the company's ability to generate economic value. After a period of modest value creation in 2015, the organization experienced substantial economic losses, indicating that the return on invested capital failed to exceed the cost of capital for the remainder of the period.

Economic Profit Trends: Economic profit transitioned from a positive US$ 203 million in 2015 to a significant deficit starting in 2016. The loss deepened sharply to a peak deficit of US$ 30,517 million in 2017. While the losses narrowed to US$ 23,574 million in 2018 and US$ 16,242 million in 2019, the company remained in a state of value destruction throughout this interval.
Invested Capital Volatility: The capital base exhibited extreme volatility, growing from US$ 46,288 million in 2015 to a peak of US$ 153,164 million in 2018. A substantial contraction occurred in 2019, where invested capital fell to US$ 62,770 million, suggesting significant structural changes or divestments within the corporate portfolio.
Economic Spread Ratio Analysis: The economic spread ratio plummeted from a positive 0.44% in 2015 to negative territory, reaching -20.45% in 2017. Despite the reduction in absolute economic losses between 2017 and 2019, the ratio deteriorated to its lowest point of -25.87% by the end of 2019. This divergence is attributed to the sharp reduction in invested capital, which amplified the negative impact of the remaining economic losses relative to the capital base.

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DuPont de Nemours Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit¹	(16,242)	(23,574)	(30,517)	(5,879)	203)

Net sales	21,512)	85,977)	62,484)	48,158)	48,778)
Add: Increase (decrease) in deferred revenue	—)	(41)	2,332)	—)	—)
Adjusted net sales	21,512)	85,936)	64,816)	48,158)	48,778)
Performance Ratio
Economic profit margin²	-75.50%	-27.43%	-47.08%	-12.21%	0.42%
Benchmarks
Economic Profit Margin, Competitors³
Linde plc	—	—	—	—	—
Sherwin-Williams Co.	—	—	—	—	—

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

¹ Economic profit. See details »

² 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × -16,242 ÷ 21,512 = -75.50%

³ Click competitor name to see calculations.

An analysis of the financial performance between 2015 and 2019 reveals a period of substantial economic value erosion. Following a marginal positive result in 2015, the entity experienced a sustained period of negative economic profit, indicating that the returns generated were insufficient to cover the cost of capital employed.

Economic Profit Trends: Economic profit transitioned from a positive US$ 203 million in 2015 to a severe deficit, peaking at a loss of US$ 30,517 million in 2017. Although absolute losses narrowed in 2018 and 2019, ending the period at US$ -16,242 million, the company remained unable to restore positive economic value added.
Adjusted Net Sales Volatility: Net sales demonstrated significant instability, rising from US$ 48,778 million in 2015 to a peak of US$ 85,936 million in 2018. This growth was followed by a dramatic contraction in 2019, with sales falling to US$ 21,512 million, signaling a fundamental change in the operational scale or a major structural divestiture.
Economic Profit Margin Analysis: The economic profit margin plummeted from 0.42% in 2015 to -47.08% in 2017. While there was a partial recovery to -27.43% in 2018, the margin collapsed to -75.50% in 2019. This sharp deterioration in the final year is driven by the combination of continued economic losses and a significant reduction in the sales base.

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DuPont de Nemours Inc. (NYSE:DD)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin