Slide 1: Dow 3Q 2019 Results
DOW 3Q 2019 RESULTS October 24, 2019
Slide 2: Agenda
AGENDA Quarterly Highlights Segment Results Financial Summary Delivering on 2019 Priorities Outlook 2
Slide 3: 3Q 2019 Highlights
3Q 2019 HIGHLIGHTS Net Sales of $10.8B – in-line with guidance 96% Demand growth YoY in packaging, polyurethanes and Op. EBITDA-to- silicones applications; volume ex-H&E up 1% YoY CFFO Conversion Grew earnings sequentially, with notable Op. EBIT margin expansion in P&SP (190 bps YoY, 100 bps Q
Slide 4: Packaging & Specialty Plastics
PACKAGING & SPECIALTY PLASTICS Net Sales by Business Financial Performance Snapshot 3Q19 3Q18 B/(W) In millions, except margin percentages As Reported Pro Forma Hydrocarbons Packaging Net Sales $5,062 $6,157 $(1,095) (18)% & Energy and Specialty Op. EBIT $798 $857 $(59) (7)% Plastics Op. EBIT Margin
Slide 5: Industrial Intermediates & Infrastructure
INDUSTRIAL INTERMEDIATES & INFRASTRUCTURE Net Sales by Business Financial Performance Snapshot 3Q19 3Q18 B/(W) In millions, except margin percentages As Reported Pro Forma Industrial Net Sales $3,365 $3,913 $(548) (14)% Solutions Op. EBIT $193 $466 $(273) (59)% Op. EBIT Margin 5.7% 11.9% (620) bps O
Slide 6: Performance Materials & Coatings
PERFORMANCE MATERIALS & COATINGS Net Sales by Business Coatings & Financial Performance Snapshot 3Q19 3Q18 B/(W) Consumer Perf. In millions, except margin percentages As Reported Pro Forma Solutions Monomers Net Sales $2,250 $2,552 $(302) (12)% Op. EBIT $200 $398 $(198) (50)% Op. EBIT Margin 8.9% 15
Slide 7: 3Q 2019 Financial Highlights
3Q 2019 FINANCIAL HIGHLIGHTS YoY Operating EPS Reconciliation Key Drivers in the Quarter • Completed $1.365B cost synergy program $1.34 and removed ~$40MM YoY in stranded costs $0.91 • Growth in packaging applications, supported by contributions from USGC 3Q18 Cost Synergies & New USGC Margin Equity
Slide 8: 4Q 2019 Modeling Guidance
4Q 2019 MODELING GUIDANCE Sequentially, core EBIT improvement offset by normal seasonality & modest turnaround impact Revenue $9.8B – $10.2B Depreciation & Amortization ~$735MM Operational Tax Rate ~24% Net Interest Expense (Net of Int. Income) ~$220MM Net Income Attrib. to Non-Controlling Int. $15M
Slide 9: 2019 Priorities: Solid De-Leveraging Progress Made YTD
2019 PRIORITIES: SOLID DE-LEVERAGING PROGRESS MADE YTD DILIGENT STEPS TO IMPROVE DEBT MATURITY PROFILE RECENT ACTIONS TAKEN Refinanced $1.5B debt due 2020 and $500MM of $2.5 original term loan due 2021 AT SPIN $0.3(1) $1.8 $1.7 $1.5 $0.5 Secured 2-year extension option at a lower LIBOR 2019 2020
Slide 10: 2019 Priorities: Free Cash Flow Poised to Expand
2019 PRIORITIES: FREE CASH FLOW POISED TO EXPAND ~$1.5B OF NON-RECURRING OUTLAYS IN 3Q19 TTM HAVE FCF LEVERS INDEPENDENT MASKED UNDERLYING FCF GENERATION OF MARKET CONDITIONS Lower integration and separation costs 3Q19 TTM underlying FCF yield of ~13% at ~$1B upside in 2020 vs. 2019 today’s stoc
Slide 11: 2019 Priorities: Synergy and Stranded Cost Update
2019 PRIORITIES: SYNERGY AND STRANDED COST UPDATE CUMULATIVE COST SYNERGY SAVINGS RECENT ACTIONS TAKEN $1.365B Completed $1.365B cost synergy program >$1.1B >$975MM >$850MM On track to deliver ~$700MM of cost synergy and stranded cost savings in >$650MM 2019 (up from ~$600MM target) >$450MM >$25
Slide 12: 2019 Priorities: Incremental Growth Projects
2019 PRIORITIES: INCREMENTAL GROWTH PROJECTS Courtesy of UPM Announced retrofit of Louisiana cracker with Fuenix and UPM partnerships increase the Reached FID on previously announced proprietary FCDh propylene technology – lower recycled- & renewable-content in our polymer alkoxylates capacity expan
Slide 13: Outlook: Product Spreads Show High-Cost Producers at Breakeven
OUTLOOK: PRODUCT SPREADS SHOW HIGH-COST PRODUCERS AT BREAKEVEN APAC MEG Margin Hovering Around Zero High-cost producers in many key product chains are at breakeven margin today Source: IHS-Markit(1), Dow Spot MEG Minus Contained 20 U.S. cents per pound) Ethylene (NE Asia, 10 Americas feedstock a
Slide 14: Consistent Focus on Near-Term Playbook
CONSISTENT FOCUS ON NEAR-TERM PLAYBOOK Maintain financial and capital discipline Deliver enhanced cash flows and preserve our financial strengths Leverage our industry-leading feedstock flexibility Continue prioritizing lower-risk, higher-return growth investments, in-line with FY 2019 CapEx
Slide 15: Seek Together"
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Slide 16: Appendix
APPENDIX
Slide 17: Principal Joint Venture Detail
PRINCIPAL JOINT VENTURE DETAIL Dow’s Proportionate Share of Principal JV Financial Results Drivers of YoY Changes 3Q 2019 3Q 2018 Kuwait JVs: Decline in Asian Kuwait Thai Kuwait Thai MEG spreads and PE margins $ millions (unaudited) Sadara JVs JVs Sadara JVs JVs Thai JVs: Reduced cracker and EBI
Slide 18: General Comments
GENERAL COMMENTS Separation from DowDuPont On April 1, 2019, DowDuPont Inc. ("DowDuPont" and effective June 3, 2019, n/k/a DuPont de Nemours, Inc. or "DuPont") completed the separation of its materials science business and Dow Inc. became the direct parent company of The Dow Chemical Company and its
Slide 19: Safe Harbor
SAFE HARBOR Cautionary Statement about Forward-Looking Statements This press release contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as am
Slide 20: Non-GAAP & Definitions
NON-GAAP & DEFINITIONS Non-GAAP Financial Measures This earnings release includes information that does not conform to U.S. GAAP and are considered non-GAAP measures. These measures include the Company's pro forma consolidated results and pro forma earnings per share on an adjusted basis. Management
Slide 21: Operating EPS Reconciliation
OPERATING EPS RECONCILIATION Significant Items Impacting Results for the Three Months Ended Sep 30, 2019 In millions, except per share amounts (Unaudited) Pretax 1 Net Income 2 EPS 3 Reported results $ 437 $ 333 $ 0.45 Less: Significant items Integration and separation costs (164) (132) $ (0.18) Res
Slide 22: Operating EPS Reconciliation (Continued)
OPERATING EPS RECONCILIATION (CONTINUED) Significant Items Impacting Results for the Nine Months Ended Sep 30, 2019 In millions, except per share amounts (Unaudited) Pretax 1 Net Income 2 EPS 3 Pro forma results $ 1,016 $ 584 $ 0.78 Less: Significant items Integration and separation costs (914) (735
Slide 23: Operating EBIT & EBITDA Reconciliation
OPERATING EBIT & EBITDA RECONCILIATION Reconciliation of "Income from continuing operations, net of Three Months Ended Three Months Ended Nine Months Ended tax" to Operating EBIT and Operating EBITDA Dec 31, 2018 Mar 31, 2019 Jun 30, 2019 Sep 30, 2019 Sep 30, 2018 Sep 30, 2019 Sep 30, 2018 In millio
Slide 24: Segment Information
SEGMENT INFORMATION Net Sales by Segment Three Months Ended Nine Months Ended Sep 30, 2019 Sep 30, 2018 Sep 30, 2019 Sep 30, 2018 In millions (Unaudited) As Reported Pro Forma Pro Forma Pro Forma Packaging & Specialty Plastics $ 5,062 $ 6,157 $ 15,405 $ 18,339 Industrial Intermediates & Infrastructu
Slide 25: Segment Information (Continued)
SEGMENT INFORMATION (CONTINUED) Operating EBIT excluding Equity in Earnings (Losses) of Nonconsolidated Three Months Ended Nine Months Ended Affiliates Sep 30, 2019 Sep 30, 2018 Sep 30, 2019 Sep 30, 2018 In millions (Unaudited) As Reported Pro Forma Pro Forma Pro Forma Packaging & Specialty Plastics
Slide 26: Cash Conversion Reconciliation
CASH CONVERSION RECONCILIATION Cash Flow Conversion Three Months Ended Nine Months Ended Sep 30, 2019 Sep 30, 2018 Sep 30, 2019 Sep 30, 2018 In millions As Reported Pro Forma Pro Forma Pro Forma Cash provided by operating activities - continuing operations (GAAP) $ 1,790 $ 203 $ 3,793 $ 1,707 Impact