Slide 1: 4Q 2022 Results
4Q 2022 RESULTS January 26, 2023
Slide 2: Agenda
AGENDA • Quarterly Results 4Q 2022 • Operating Segment Performance R E S U LT S • Outlook • Competitive Position for Long-Term Value Creation 2
Slide 3: 4Q 2022 Performance Overview
4Q 2022 PERFORMANCE OVERVIEW Net sales were $11.9B $11.9B Local price down 5% YoY and 6% QoQ NET SALES Slower GDP growth and customer destocking; volume down 8% YoY and 9% QoQ U.S. dollar strength decreased reported sales by 4% YoY and 1% QoQ $1.3B Net income was $647MM and operating EBIT
Slide 4: 2022 Full-Year Highlights
2022 FULL-YEAR HIGHLIGHTS Financial Highlights Sustainability Highlights Increased net Delivered operating Among top 20 global corporations Reached preliminary investment sales by nearly EBIT of using renewable, clean energy; decision for building the world’s first $2B $6.6B expanded access to net-z
Slide 5: 4Q 2022 Operating Segment Performance
4Q 2022 OPERATING SEGMENT PERFORMANCE REVENUE ($MM) Sales ↓ 16%; Volume ↓ 4%; Price ↓ 9% Op. EBIT ($MM) & Op. EBIT Margin % Op. EBIT ↓ 55%; Margins ↓ 930 bps Specialty Plastics Y-o-Y Price gains in functional polymers more than Y-o-Y 8,0 00 180 000% Results driven primarily by lower integrated Packa
Slide 6: Dynamic Macro Environment Continues in 2023
DYNAMIC MACRO ENVIRONMENT CONTINUES IN 2023 U.S. – Destocking Helping Inventory Levels to Normalize Consumer confidence1 rebounding to 108.3 in Dec’22 on easing inflation APAC New mortgages down ~30% in 4Q22 vs 2Q22; Dec’22 housing starts down 22% YoY NAA LAA EMEAI China (excl. China) Dec ISM Manufa
Slide 7: Implementing Targeted Actions to Achieve $1B Savings
IMPLEMENTING TARGETED ACTIONS TO ACHIEVE $1B SAVINGS Actions to Maintain Low-Cost-to-Serve Structural Operating Model Expected to Deliver $500MM EBITDA Savings in 2023 Targets Total $1B EBITDA Savings in 2023 with <2-Year Payback on Investment Optimizing labor and services costs, including a globa
Slide 8: 1Q23 Modeling Guidance
1Q23 MODELING GUIDANCE Continuation of Value-Chain Destocking Pressure in Early 1Q23 Net Sales ~$11.0 – $11.5B Depreciation & Amortization ~$700MM Quarterly Operational Tax Rate ~25 – 29% Net Interest Expense (Net of Int. Income) ~$125MM Net Income Attrib. to Non-Controlling Int. ~$25MM Average Shar
Slide 9: FY 2023 Modeling Considerations
FY 2023 MODELING CONSIDERATIONS Cash Flow Considerations in 2023 Operating EBIT Drivers vs. FY22 Dividends from Equity ~$350MM Equity Earnings Down ~$300-400MM YoY Companies Pension Impact ~$100MM better YoY Pension contributions ~$150MM Corporate Op. EBIT of ~$(275)MM and Op. EBITDA of ~$(250)MM Ca
Slide 10: Near-Term Delivery of Our Decarbonize & Grow Strategy
NEAR-TERM DELIVERY OF OUR DECARBONIZE & GROW STRATEGY Reducing CO2 Emissions by ~2MM On-Track to Deliver >$2B/year EBITDA1 Growth mta/year2 by YE25 Projects Start-Up Est. EBITDA1 Status ~1MM Scope 1 & 2 Fort Saskatchewan cracker expansion 2H 2021 ~$75 – 100MM Complete CO2 Emissions ~0.5MM FCDh unit
Slide 11: Decarbonize & Grow: Protect the Climate & Transform the Waste
DECARBONIZE & GROW: PROTECT THE CLIMATE & TRANSFORM THE WASTE Expect to grow capacity and underlying earnings by >$3B/year while reducing CO2 emissions by ~30%1 by 2030 Innovation, Renewable Energy Alberta Net-Zero Terneuzen 2030 & Efficiency Scope 1 & 2 CO2 Emissions Site Reduced CO2 Emissions Site
Slide 12: Continued Focus on Cash Flow Generation
CONTINUED FOCUS ON CASH FLOW GENERATION Enhanced Financial Performance and Capital Structure Stable Cash Flow from Operations (CFFO) Generation Key Metrics At Spin YE22 Operating EBITDA ($B) $12.4 Operating EBITDA (3-Year Avg.)1 $8.2B $9.1B CFFO ($B) $9.3 $7.3 Free Cash Flow (3-Year Cumulative)1 $5.
Slide 13: Enhancing Our Competitive Position for Long-Term Success
ENHANCING OUR COMPETITIVE POSITION FOR LONG-TERM SUCCESS Proactively Navigating the Delivering Attractive Returns with Advancing our Current Environment Financial Strength Decarbonize and Grow Strategy $1B 15% >$2B Savings from 3-year average operating ROIC Run-rate EBITDA contributions by playbook
Slide 14: Appendix
APPENDIX
Slide 15: 4Q 2022 Financial Highlights
4Q 2022 FINANCIAL HIGHLIGHTS YoY Operating EPS Reconciliation Key Drivers in the Quarter YoY • Growth and efficiency levers improving $2.15 underlying earnings • Lower SARD due to continued focus on cost efficiency $0.46 4Q21 Growth SARD Below the Equity Pricing Destocking 4Q22 /Efficiency Line Item
Slide 16: Principal Joint Venture Detail
PRINCIPAL JOINT VENTURE DETAIL Dow’s Proportional Share of Principal JV Financial Results Drivers of 4Q 2022 4Q 2021 3Q 2022 JV Performance Kuwait Thai Kuwait Thai Kuwait Thai Sadara: YoY lower prices in all $ millions (unaudited) Sadara JVs JVs Sadara JVs JVs Sadara JVs JVs businesses; QoQ improv
Slide 17: Operating Earnings Per Share (EPS) Reconciliation
OPERATING EARNINGS PER SHARE (EPS) RECONCILIATION Significant Items Impacting Results for the Three Months Ended Dec 31, 2022 In millions, except per share amounts (Unaudited) Pretax 1 Net Income 2 EPS 3 Reported results $ 865 $ 613 $ 0.85 Less: Significant items Digitalization program costs (76) (6
Slide 18: Operating (EPS) Reconciliation (Continued)
OPERATING (EPS) RECONCILIATION (CONTINUED) Significant Items Impacting Results for the Twelve Months Ended Dec 31, 2022 In millions, except per share amounts (Unaudited) Pretax 1 Net Income 2 EPS 3 Reported results $ 6,090 $ 4,582 $ 6.28 Less: Significant items Digitalization program costs (230) (18
Slide 19: Operating (EPS) Reconciliation (Continued)
OPERATING (EPS) RECONCILIATION (CONTINUED) Significant Items Impacting Results for the Three Months Ended Sep 30, 2022 1 In millions, except per share amounts (Unaudited) Pretax Net Income 2 EPS 3 Reported results $ 1,001 $ 739 $ 1.02 Less: Significant items Digitalization program costs (62) (47) (0
Slide 20: Reconciliation of Net Income to Operating EBIT & Operating EBITDA
RECONCILIATION OF NET INCOME TO OPERATING EBIT & OPERATING EBITDA Reconciliation of "Net income" to "Operating EBIT" and Three Months Ended Twelve Months Ended "Operating EBITDA" In millions (Unaudited) Dec 31, 2020 Dec 31, 2021 Mar 31, 2022 Jun 30, 2022 Sep 30, 2022 Dec 31, 2022 Dec 31, 2022 Dec 31
Slide 21: Reconciliation of Income from Continuing Operations to Pro Forma Operating EBIT and EBITDA
RECONCILIATION OF "INCOME (LOSS) FROM CONTINUING OPERATIONS, NET OF TAX" TO "PRO FORMA OPERATING EBIT" AND "PRO FORMA OPERATING EBITDA" Reconciliation of "Income (Loss) from Continuing Operations, net of Twelve Months Ended tax" to "Pro Forma Operating EBIT" and "Pro Forma Operating EBITDA" In milli
Slide 22: Segment Information
SEGMENT INFORMATION Net Sales by Segment Three Months Three Months Ended Twelve Months Ended Ended In millions (Unaudited) Sep 30, 2022 Dec 31, 2022 Dec 31, 2021 Dec 31, 2022 Dec 31, 2021 Packaging & Specialty Plastics $ 7,327 $ 6,073 $ 7,189 $ 29,260 $ 28,128 Industrial Intermediates & Infrastructu
Slide 23: Segment Information (Continued)
SEGMENT INFORMATION (CONTINUED) Adjusted Operating EBIT by Segment Three Months Three Months Ended Twelve Months Ended Ended In millions (Unaudited) Sep 30, 2022 Dec 31, 2022 Dec 31, 2021 Dec 31, 2022 Dec 31, 2021 Packaging & Specialty Plastics $ 730 $ 599 $ 1,312 $ 3,751 $ 6,148 Industrial Intermed
Slide 24: Cash Conversion and Free Cash Flow Reconciliation
CASH CONVERSION AND FREE CASH FLOW RECONCILIATION Reconciliation of Cash Flow Conversion Three Months Ended In millions (Unaudited) Dec 31, 2021 Mar 31, 2022 Jun 30, 2022 Sep 30, 2022 Dec 31, 2022 Cash provided by operating activities - continuing operations (GAAP) $ 2,557 $ 1,612 $ 1,856 $ 1,940 $
Slide 25: Free Cash Flow Reconciliation (Continued)
FREE CASH FLOW RECONCILIATION (CONTINUED) Reconciliation of Free Cash Flow Twelve Months Ended In millions (Unaudited) Dec 31, 2017 Dec 31, 2018 Dec 31, 2019 Cash provided by (used for) operating activities - continuing operations (GAAP) $ (6,443) $ 3,096 $ 5,713 Impact of ASU 2016-15 and additional
Slide 26: Reconciliation of Operating Return on Capital (ROC)
RECONCILIATION OF OPERATING RETURN ON CAPITAL (ROC) Reconciliation of Operating Return on Capital (ROC) Three Months Ended In millions (Unaudited) Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Net income available for Dow Inc. common stockholders (GAAP) $ 613 $ 1,736 $ 1,236 - Significant items, after tax
Slide 27: Reconciliation of Net Debt
RECONCILIATION OF NET DEBT Reconciliation of Net Debt In millions (Unaudited) Dec 31, 2022 Dec 31, 2021 Mar 31, 2019 Notes payable $ 362 $ 161 $ 295 Long-term debt due within one year 362 231 2,367 Long-term debt 14,698 14,280 17,158 Gross debt (GAAP) $ 15,422 $ 14,672 $ 19,820 - Cash and cash equiv
Slide 28: General Comments
GENERAL COMMENTS Background On April 1, 2019, DowDuPont completed the separation of its materials science business and Dow Inc. became the direct parent company of TDCC, owning all of the outstanding common shares of TDCC. For filings related to the period commencing April 1, 2019 and thereafter, TD
Slide 29: Safe Harbor
SAFE HARBOR Cautionary Statement about Forward-Looking Statements Certain statements in this presentation are “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 Ac
Slide 30: 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. Management uses these measures internally for planning, forecasting and evaluating the performance of the Company's segments, including a