Dow Inc. · NYSE:DOW
Dow — The Dow Chemical Company — Q2 2007 Earnings Presentation
23 slides from Dow's earnings presentation, Jul 26, 2007
Slide 1: Second Quarter 2007 Earnings Conference Call
® The Dow Chemical Company Second Quarter 2007 Earnings Conference Call July 26, 2007
Slide 2: SEC Disclosure Rules
SEC Disclosure Rules ® Some of our comments today include statements about our expectations for the future. Those expectations involve risks and uncertainties. Dow cannot guarantee the accuracy of any forecasts or estimates, and we do not plan to update any forward-looking statements if our expectat
Slide 3: Agenda
Agenda ® • 2Q07 Financial Performance - Overview - Joint Venture Results - Business Segment Review • Strategy Update - Growth - Asset Light - Innovation - Financial Discipline • Outlook July 26, 2007 2Q07 Earnings Conference Call Slide 3
Slide 4: 2Q07 Financial Highlights
2Q07 Financial Highlights ® • Record sales and solid earnings - Sales up 6% vs. 2Q06 - Strong volume gains in Asia Pacific and Latin America; Europe volume impacted by planned refinery turnaround - Solid volume growth in Performance businesses - Joint ventures continue to deliver strong earnings • D
Slide 5: 2Q07 Financial Performance
2Q07 Financial Performance ® Dollars in millions (except per share amounts) 2Q07 2Q06 Change Sales $13,265 $12,509 6% Price 6% Volume 0% Purchased feedstock & energy cost 11% Equity income $258 $232 11% EBIT* $1,437 $1,469 (2%) Earnings per share $1.07 $1.05 2% *See Appendix for Reconciliation of No
Slide 6: Joint Venture Financial Highlights
Joint Venture Financial Highlights ® 300 2Q07 2Q06 250 • Improvement at MEGlobal 200 on healthy demand for EG in $MM 150 100 PET and polyester 50 • Strong results at EQUATE Equity Distributions Investments and OPTIMAL; 2Q06 Earnings from JVs in JVs impacted by planned 600 turnarounds YTD07 YTD06 500
Slide 7: Summary JV Financial Information
Summary JV Financial Information Principal Nonconsolidated Affiliates1 ® Dollars in millions - Unaudited 2006 2005 2004 Total Dow Share Total Dow Share Total Dow Share JV Income Statement Data Net Sales $11,968 $5,630 $11,046 $5,203 $8,514 $3,990 Adjusted Net Sales2 9,350 4,479 8,554 4,093 6,873 3,2
Slide 8: Summary JV Financial Information: Explanatory Notes
Summary JV Financial Information Explanatory Notes ® 1Principal Nonconsolidated Affiliates (Principal JVs) While Dow currently participates in over 75 joint ventures, the most significant are: Compañía Mega S.A., Dow Corning Corporation, EQUATE Petrochemical Company K.S.C., Equipolymers, MEGlobal, T
Slide 9: Performance Plastics
Performance Plastics ® Tech. Licensing & Catalyst Dollars in millions 2Q07 2Q06 Dow Automotive Sales $3,742 $3,442 Specialty Plastics & Elastomers Dow Building Price up 7%; Volume up 2% Solutions EBIT $382 $412 Sales Dow Epoxy Equity earnings (included in EBIT) $14 $26 Polyurethanes & PU Systems • P
Slide 10: Performance Chemicals
Performance Chemicals ® Dollars in millions 2Q07 2Q06 Designed Polymers Sales $2,071 $1,968 Specialty Chemicals Price up 3%; Volume up 2% EBIT $294 $362 Sales Equity earnings (included in EBIT) $104 $115 Dow Latex • Improved demand for Designed Polymers and Specialty Chemicals in most regions • High
Slide 11: Agricultural Sciences
Agricultural Sciences ® Dollars in millions 2Q07 2Q06 Seeds & Traits Sales $1,091 $962 Ag Chem Price up 2%; Volume up 11% EBIT $208 $161 Sales Equity earnings (included in EBIT) - - • Price, volume and EBIT gains driven by robust industry conditions and strong product portfolio • Growth in Latin Ame
Slide 12: Basic Plastics
Basic Plastics ® Dollars in millions 2Q07 2Q06 Polystyrene Sales $3,180 $2,986 Price up 7%; Volume down 1% EBIT $529 $493 Sales Polypropylene Equity earnings (included in EBIT) $48 $36 Polyethylene • Strength in Polyethylene continued outside North America • Volume impacted by plant closures and div
Slide 13: Basic Chemicals
Basic Chemicals ® Dollars in millions 2Q07 2Q06 EO/EG Sales $1,455 $1,416 Price up 3%; Volume flat EBIT $165 $219 Sales Equity earnings (included in EBIT) $80 $35 Core Chemicals • VCM and Caustic Soda prices down, energy costs up significantly resulting in margin squeeze • Improved industry fundamen
Slide 14: Committed to Transformational Growth
Committed to Transformational Growth ® • Establish more market-facing businesses and expand Performance portfolio • Drive Basics for competitive advantage while maintaining power of integration • Extend geographic growth • Actively manage portfolio • Accelerate technology and innovation • Continue t
Slide 15: Growth Strategy
Growth Strategy ® • Wolff Walsrode acquisition completed • Hyperlast acquisition completed • Designed Polymers to open laboratory in China • Polyurethanes to open systems laboratory in Egypt • ANGUS Chemical to build R&D facility in Louisiana • Committed to energy solutions in Eastern Europe - Four
Slide 16: Asset Light Strategy
Asset Light Strategy ® • Cooperation agreement for coal to chemicals in China - World-scale facility - Feasibility study underway • MoU with Saudi Aramco for Ras Tanura facility - World-scale chemical and plastics complex - Project manager now appointed • Styrenics strategic options - Chevron Philli
Slide 17: Innovation
Innovation ® • Second quarter sales from new products: 33% • Dow AgroSciences and Sangamo BioSciences passed key research milestones • Partnership formed with Lawrence Berkley National Laboratory and Chinese Energy Research Institute • Methane to chemicals initiative received 80 submissions • Array
Slide 18: Financial Discipline
Financial Discipline ® • Capital spending - $792 million year to date • Shareholder remuneration - Declared 12% dividend increase for July - Share repurchase: $400 million in second quarter • Portfolio management - Acquisition of Wolff Walsrode and Hyperlast • Working capital management - DSO: 40 da
Slide 19: Outlook
Outlook ® • Expect healthy global GDP growth - solid in Europe and strong in emerging regions, notably China • North American headwinds remain, but residential construction may be through its sharpest declines • Supply/demand will remain balanced in most chains, but chlor-alkali may weaken later in
Slide 20: Appendix
® Appendix July 26, 2007 2Q07 Earnings Conference Call Slide 20
Slide 21: Reconciliation of Non-GAAP Financial Measure
Reconciliation of Non-GAAP Financial Measure ® Three months ended Dollars in millions 06/30/07 06/30/06 EBIT $1,437 $1,469 + Interest income 33 38 - Interest expense and 129 151 amortization of debt discount - Provision for income taxes 277 310 - Minority interests’ share in 25 23 income Net Income
Slide 22: Sales by Geographic Region
Sales by Geographic Region ® 2004 2005 Percent Change 2006 Percent Change Dollars in millions - Unaudited Sales Sales Volume Price Total Sales Volume Price Total North America $16,908 $19,850 -2% 19% 17% $20.431 -1% 4% 3% Europe 13,243 15,561 2% 16% 18% 16,776 1% 7% 8% Asia Pacific 4,601 4,809 -9% 1
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The Dow Chemical Company — Q2 2007 Earnings Presentation on 6ix