Slide 1: 4Q 2019 Results
DOW 4Q 2019 RESULTS January 29, 2020
Slide 2: Agenda
AGENDA Quarterly Highlights & Segment Results Financial Overview 2019 Year in Review & 2020 Priorities 2
Slide 3: 4Q 2019 Highlights
4Q 2019 HIGHLIGHTS Net Sales of $10.2B – above guidance midpoint 2% Volume up 2% YoY excluding the Hydrocarbons & Energy Volume growth excl. business; demand growth in packaging and construction H&E business chemicals 110% Removed >$35MM of stranded costs Op. EBITDA-to-CFFO Generated $1.9B o
Slide 4: Packaging & Specialty Plastics
PACKAGING & SPECIALTY PLASTICS Net Sales by Business Financial Performance Snapshot 4Q19 4Q18 B/(W) In millions, except margin percentages As Reported Pro Forma Hydrocarbons Packaging Net Sales $4,840 $5,898 $(1,058) (18)% & Energy and Specialty Op. EBIT $648 $839 $(191) (23)% Plastics Op. EBIT Marg
Slide 5: Industrial Intermediates & Infrastructure
INDUSTRIAL INTERMEDIATES & INFRASTRUCTURE Net Sales by Business Financial Performance Snapshot 4Q19 4Q18 B/(W) In millions, except margin percentages As Reported Pro Forma Industrial Net Sales $3,253 $3,777 $(524) (14)% Solutions Op. EBIT $221 $339 $(118) (35)% Op. EBIT Margin 6.8% 9.0% (220) bps Op
Slide 6: Performance Materials & Coatings
PERFORMANCE MATERIALS & COATINGS Net Sales by Business Coatings & Financial Performance Snapshot 4Q19 4Q18 B/(W) Consumer Perf. In millions, except margin percentages As Reported Pro Forma Solutions Monomers Net Sales $2,035 $2,269 $(234) (10)% Op. EBIT $233 $201 $32 16% Op. EBIT Margin 11.4% 8.9% 2
Slide 7: Sadara Update
SADARA UPDATE Logistics service agreement has been reached in principle; the official signing is imminent Process of achieving Project Completion is underway Remaining steps take ~4 weeks Enables Dow’s and Aramco’s guarantees on Sadara debt to be released Sadara will begin discussions with
Slide 8: 4Q 2019 Financial Overview
4Q 2019 FINANCIAL OVERVIEW YoY Operating EPS Reconciliation Key Drivers in the Quarter $1.07 • Removed >$35MM in stranded costs $0.78 • Demand growth in packaging applications, supported by contributions from USGC investments 4Q18 Stranded Cost New USGC Margin Equity Losses Planned 4Q19 • Strong cas
Slide 9: Principal Joint Venture Detail
PRINCIPAL JOINT VENTURE DETAIL Dow’s Proportionate Share of Principal JV Financial Results Drivers of YoY Changes 4Q 2019 4Q 2018 Kuwait JVs: Margin compression Kuwait Thai Kuwait Thai in MEG and polyethylene $ millions (unaudited) Sadara JVs JVs Sadara JVs JVs EBITDA $9 $142 $70 $7 $196 $47 Tha
Slide 10: 1Q20 Modeling Guidance: Conditions Remain at End-2019 Levels
1Q20 MODELING GUIDANCE: CONDITIONS REMAIN AT END-2019 LEVELS Net Sales $10.0B – $10.4B Depreciation & Amortization ~$735MM Operational Tax Rate 25% - 27% Net Interest Expense (Net of Int. Income) ~$200MM Net Income Attrib. to Non-Controlling Int. ~$20MM Share Count ~745MM Sales Drivers Op. EBIT Driv
Slide 11: FY 2020 Modeling Considerations
FY 2020 MODELING CONSIDERATIONS Operational EBIT Drivers vs. FY19 Equity Earnings Slightly worse equity losses YoY, driven by II&I Pension Expense (~$125MM headwind YoY) – $75MM Pension Expense in P&SP, $25MM in II&I, $25MM in PM&C Cash Flow Considerations in 2020 Corporate Op. EBIT of ~$(325)MM and
Slide 12: Significant FCF Potential, Several Near-Term Actions in Focus
SIGNIFICANT FCF POTENTIAL, SEVERAL NEAR-TERM ACTIONS IN FOCUS Base Case Highlights ~$4B of FCF Potential in 2020 ~$1B of FCF Upside Potentials Base Case Cash Upsides/Downsides vs. 2019 Recover tax paid on pre- (>10% FCF Yield at Today’s 2012 Nova judgment 0.1 Market Cap) 0.8 1.0 Reach settlement
Slide 13: 2019 Year in Review: Delivering on Our Priorities
2019 YEAR IN REVIEW: DELIVERING ON OUR PRIORITIES PROFITABLE DISCIPLINED CAPITAL LOW-COST BEST OWNER GROWTH ALLOCATION OPERATING MODEL MINDSET Capitalize on growth and Prioritize lower-risk, faster- Achieve best-in-class Implement most value- value-add materials science payback projects, with cost s
Slide 14: Profitable Growth Helped Navigate Market Headwinds
PROFITABLE GROWTH HELPED NAVIGATE MARKET HEADWINDS USGC investments enabled P&SP volume growth and provided additional Op. EBITDA contribution PROFITABLE Completed 16 silicone de-bottlenecks, enabling growth in key end-market applications GROWTH Generated nearly $3B of revenue through new Dow.
Slide 15: Financial and Capital Discipline on Display
FINANCIAL AND CAPITAL DISCIPLINE ON DISPLAY USGC investments enabled P&SP volume growth and provided additional Op. EBITDA contribution PROFITABLE Completed 16 silicone de-bottlenecks, enabling growth in key end-market applications GROWTH Generated nearly $3B of revenue through new Dow.com e-c
Slide 16: Cost Control Actions Enable Leaner Operating Model
COST CONTROL ACTIONS ENABLE LEANER OPERATING MODEL USGC investments enabled P&SP volume growth and provided additional Op. EBITDA contribution PROFITABLE Completed 16 silicone de-bottlenecks, enabling growth in key end-market applications GROWTH Generated nearly $3B of revenue through new Dow.
Slide 17: Culture of Benchmarking Drives Toward Best-in-Class Results
CULTURE OF BENCHMARKING DRIVES TOWARD BEST-IN-CLASS RESULTS USGC investments enabled P&SP volume growth and provided additional Op. EBITDA contribution PROFITABLE Completed 16 silicone de-bottlenecks, enabling growth in key end-market applications GROWTH Generated nearly $3B of revenue through
Slide 18: Key Priorities in 2020
KEY PRIORITIES IN 2020 Progress suite of lower-risk, high-return growth investments: WAVE 2: Silicones de-bottlenecks, new furnaces at TX-9 cracker, alkoxylation and glycol PROFITABLE ethers expansions, new USGC polyethylene capacity Grow bottom-line GROWTH WAVE 2: Co-investing with regional c
Slide 19: Outlook: Similar Conditions Continue in the Near-Term
OUTLOOK: SIMILAR CONDITIONS CONTINUE IN THE NEAR-TERM ~40% of Global PE Capacity at/below Breakeven Cash Margin High-cost capacity for many chains reportedly at breakeven or 40 negative cash margins at the end of 2019 Source: IHS-Markit(1), Dow Third-party industry reports suggest high-cost prod
Slide 20: Closing Comments
CLOSING COMMENTS Similar conditions continue in the near-term in our key product chains Soft margins in most of our chains in APAC and EUR to start 2020 Early signs of price recovery in PE, coming off the lows at the end of 2019 Consumer-driven demand still resilient, while industrial sector
Slide 21: Seek Together"
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Slide 22: Appendix
APPENDIX
Slide 23: Full Year 2019 Highlights
FULL YEAR 2019 HIGHLIGHTS Net Sales of $43B; achieved 1% volume growth excluding the Hydrocarbons & Energy business >$600MM Cost synergy and Diluted EPS of (-$2.42) and Loss from Continuing Op., net of tax stranded cost savings of (-$1,717); Pro forma Op. EPS of $3.53; Pro forma Op. EBIT of $4.4
Slide 24: 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 25: Safe Harbor
SAFE HARBOR Cautionary Statement about Forward-Looking Statements This presentation 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 ame
Slide 26: Non-GAAP & Definitions
NON-GAAP & DEFINITIONS Non-GAAP Financial Measures This presentation 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 use
Slide 27: Operating and Pro Forma EPS Reconciliation
OPERATING AND PRO FORMA EPS RECONCILIATION Significant Items Impacting Results for the Three Months Ended Dec 31, 2019 In millions, except per share amounts (Unaudited) Pretax 1 Net Income 2 EPS 3 Reported results $ (2,196) $ (2,323) $ (3.14) Less: Significant items Integration and separation costs
Slide 28: Operating and Pro Forma EPS Reconciliation (Continued)
OPERATING AND PRO FORMA EPS RECONCILIATION (CONTINUED) Significant Items Impacting Results for the Twelve Months Ended Dec 31, 2019 In millions, except per share amounts (Unaudited) Pretax 1 Net Income 2 EPS 3 Pro forma results $ (1,180) $ (1,739) $ (2.35) Less: Significant items Integration and sep
Slide 29: Operating and Pro Forma Operating EBIT & EBITDA Reconciliation
OPERATING AND PRO FORMA OPERATING EBIT & EBITDA RECONCILIATION Reconciliation of "Income (loss) from continuing operations, Three Months Ended Three Months Ended Twelve Months Ended net of tax" to Operating EBIT and Operating EBITDA Mar 31, 2019 Jun 30, 2019 Sep 30, 2019 Dec 31, 2019 Dec 31, 2018 De
Slide 30: Segment Information
SEGMENT INFORMATION Net Salesand Pro Forma Net Sales by Segment Three Months Ended Twelve Months Ended Dec 31, 2019 Dec 31, 2018 Dec 31, 2019 Dec 31, 2018 In millions (Unaudited) As Reported Pro Forma Pro Forma Pro Forma Packaging & Specialty Plastics $ 4,840 $ 5,898 $ 20,245 $ 24,237 Industrial Int
Slide 31: Segment Information (Continued)
SEGMENT INFORMATION (CONTINUED) Operating and Pro Forma Operating EBIT excluding Equity in Earnings Three Months Ended Twelve Months Ended (Losses) of Nonconsolidated Affiliates Dec 31, 2019 Dec 31, 2018 Dec 31, 2019 Dec 31, 2018 In millions (Unaudited) As Reported Pro Forma Pro Forma Pro Forma Pack
Slide 32: Cash Conversion Reconciliation
CASH CONVERSION RECONCILIATION Operating and Pro Forma EBITDA to Cash Flow From Operations (Cash Flow Conversion) Three Months Ended Twelve Months Ended Dec 31, 2019 Dec 31, 2018 Dec 31, 2019 Dec 31, 2018 In m illions As Reported Pro Forma Pro Forma Pro Forma Cash provided by operating activities -