Slide 1: 1Q 2020 Results
DOW 1Q 2020 RESULTS April 30, 2020
Slide 2: Agenda
AGENDA Quarterly Highlights Dow’s Response to COVID-19 Financial Overview & Near-Term Outlook Points of Distinction: Dow’s Differentiated Strengths 2
Slide 3: 1Q 2020 Highlights
1Q 2020 HIGHLIGHTS Net Sales of $9.8B – in-line with guidance ~$12B Modest volume decline YoY, down 1% (excluding H&E) Available cash & Constrained economic activity & COVID-19 containment efforts in Asia committed liquidity Demand growth in food packaging, health and hygiene & cleaning end-
Slide 4: #DowStrong
Seek Together” #DowStrong
Slide 5: Ensuring Safety & Business Continuity
Ensuring Safety & Business Continuity • Our first priority is the safety of our employees – in response to the COVID-19 pandemic we enabled ~2/3 of employees to work remotely and enhanced health safety measures for all our colleagues still operating our plants to support essential end-markets. • Our
Slide 6: Playing a Critical Role
Playing a Critical Role • We are committed to putting our assets to work to help combat the COVID-19 pandemic – ramped up raw material production for critically needed products, such as: • Disinfectants & sanitizers • Personal protective equipment (PPE) & medical supplies • Food supply and packaging
Slide 7: Supporting Global Community
Supporting Global Community • We have committed $3MM to aid COVID-19 relief efforts worldwide – $2MM for immediate support of impacts caused by COVID-19 and $1MM to build community resilience in the recovery phase. • We are donating hand sanitizer produced at our sites – to local health systems, gov
Slide 8: 1Q20 Operating Segment Performance
1Q20 OPERATING SEGMENT PERFORMANCE • Sales declined 10% vs. pro forma results in SQLY; volume was flat as growth in Packaging & Specialty Plastics consumer-staple packaging applications was offset by lower ethylene sales from increased internal derivative consumption • Operating EBIT was down, drive
Slide 9: Proactive Measures to Address Current Market Conditions
PROACTIVE MEASURES TO ADDRESS CURRENT MARKET CONDITIONS Announcing today a comprehensive set of near-term actions for remainder of 2020 Targeting a YoY cash release from working capital of at least ~$500MM Trimming expenses by ~$350MM Further reducing CapEx target to $1.25B, down $750MM YoY
Slide 10: Sadara Update
SADARA UPDATE Final logistics service agreement has been signed, the final substantive step to Project Completion Debt re-profiling discussions with lenders are underway Sadara and JV owners are making progress in executing longer-term structural operating improvements Dow’s total expected l
Slide 11: 1Q 2020 Financial Highlights
1Q 2020 FINANCIAL HIGHLIGHTS YoY Operating EPS Reconciliation Key Drivers in the Quarter $0.98 • Demand growth in food packaging, health and hygiene, and cleaning applications on consumer purchasing trends in response to $0.59 COVID-19 • Strong cash flow from operations 1Q19 Stranded Cost COVID-19 &
Slide 12: Financial Strength, Extensive Liquidity, Proactive Liability Management
FINANCIAL STRENGTH, EXTENSIVE LIQUIDITY, PROACTIVE LIABILITY MANAGEMENT Extensive Liquidity & De-Risked Debt Profile Robust Financial Position and Cash Generation Cash and committed liquidity covers >2/3rds of total ~$12B Available Cash & Liquidity debt; 100% of committed liquidity is untapped End
Slide 13: FY 2020 Modeling Guidance & Latest Updates
FY 2020 MODELING GUIDANCE & LATEST UPDATES [POSITIVE / NEGATIVE] Assumes economies begin to reopen in Q2, and build through 2H Operational EBIT Drivers vs. FY19 Equity losses YoY on compressed oil-gas spread, COVID-19 Equity Earnings demand softness ~($200MM headwind YoY) Cash Flow Considerations in
Slide 14: 2Q20 Modeling Guidance
2Q20 MODELING GUIDANCE Assumes economies begin to reopen in Q2, and build through 2H Net Sales $7.5B – $8.5B Depreciation & Amortization ~$735MM Operational Tax Rate 30% – 35% Net Interest Expense (Net of Int. Income) ~$200MM Net Income Attrib. to Non-Controlling Int. ~$20MM Share Count ~740MM Top-L
Slide 15: Dow's Points of Distinction
DOW’S POINTS OF DISTINCTION Superior Product Mix Serving Critical End-Markets Unmatched Feedstock Flexibility Geographic Breadth 15
Slide 16: Points of Distinction: Feedstock, Product Mix & Margin Resilience
POINTS OF DISTINCTION: FEEDSTOCK, PRODUCT MIX & MARGIN RESILIENCE Unmatched Feedstock Flexibility Superior Product Mix Higher, More Resilient Margins NORTH AMERICA BALANCED PORTFOLIO Op. EBITDA/lb. POLYOLEFINS CAPACITY (cpp)1 Naphtha Dow Differentiated Functional Industry asset HDPE Polymers Investo
Slide 17: Points of Distinction: Solutions for Critical End-Markets
POINTS OF DISTINCTION: SOLUTIONS FOR CRITICAL END-MARKETS Cleaning Food Packaging Health & Hygiene Pharmaceuticals Personal Care Infrastructure 17
Slide 18: Points of Distinction: Geographic Diversity & Breadth
POINTS OF DISTINCTION: GEOGRAPHIC DIVERSITY & BREADTH PACKAGING & SPECIALTY PLASTICS North America Europe, Middle East, Africa & India 37 LAA 35 manufacturing sites in Pro Forma 2019 Net Sales1 manufacturing sites in 2 countries 15 countries APAC NA EMEAI INDUSTRIAL INTERMEDIATES & INFRASTRUCTURE LA
Slide 19: #DowStrong
#DowStrong
Slide 20: Seek Together
<r Seek Together"
Slide 21: Packaging & Specialty Plastics
PACKAGING & SPECIALTY PLASTICS Net Sales by Business Financial Performance Snapshot 1Q20 1Q19 B/(W) In millions, except margin percentages As Reported Pro Forma Hydrocarbons Packaging Net Sales $4,609 $5,138 $(529) (10)% & Energy and Specialty Op. EBIT $580 $690 $(110) (16)% Plastics Op. EBIT Margin
Slide 22: Industrial Intermediates & Infrastructure
INDUSTRIAL INTERMEDIATES & INFRASTRUCTURE Net Sales by Business Financial Performance Snapshot 1Q20 1Q19 B/(W) In millions, except margin percentages As Reported Pro Forma Industrial Net Sales $3,045 $3,489 $(444) (13)% Solutions Op. EBIT $175 $277 $(102) (37)% Op. EBIT Margin 5.7% 7.9% (220) bps Ad
Slide 23: Performance Materials & Coatings
PERFORMANCE MATERIALS & COATINGS Net Sales by Business Financial Performance Snapshot 1Q20 1Q19 B/(W) In millions, except margin percentages As Reported Pro Forma Coatings & Consumer Perf. Net Sales $2,065 $2,320 $(255) (11)% Solutions Monomers Op. EBIT $162 $271 $(109) (40)% Op. EBIT Margin 7.8% 11
Slide 24: Principal Joint Venture Detail
PRINCIPAL JOINT VENTURE DETAIL Dow’s Proportionate Share of Principal JV Financial Results Drivers of YoY Changes 1Q 2020 1Q 2019 Kuwait JVs: Margin compression Kuwait Thai Kuwait Thai in MEG and polyethylene $ millions (unaudited) Sadara JVs JVs Sadara JVs JVs EBITDA $9 $110 $4 $28 $128 $34 Tha
Slide 25: FY19 Benchmarking Update
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Slide 26: Culture of Benchmarking: Summary of Observations
CULTURE OF BENCHMARKING: SUMMARY OF OBSERVATIONS Segment FY19 Benchmarking: Strengths & Gaps FY19 YoY Adj. Op. EBITDA decline significantly less than peers Adj. Op. EBITDA per pound polyolefin capacity ahead of peers; advantage widened P&SP Adj. Op. EBITDA margin was among highest in the peer
Slide 27: Benchmarking Peers – Consistent with Investor Day 2018
BENCHMARKING PEERS – CONSISTENT WITH INVESTOR DAY 2018 P&SP Chemicals Polyolefins Olefins & Polyolefins Corporate II&I Intermediates & Derivatives Corporate Corporate Corporate PM&C(1) Coatings, Silicones Ind Sp. and Acetyl Corporate Silicones Adhesives, Specialties Benchmarking conducted against se
Slide 28: Packaging & Specialty Plastics Benchmarking Snapshot
PACKAGING & SPECIALTY PLASTICS BENCHMARKING SNAPSHOT on a Pro Forma Basis (1,2,3,4,5,6) FY19 UPDATE & INVESTOR DAY 2018 Adj. Op. EBITDA Adj. Op. EBITDA Free Cash Conversion SG&A + R&D CORE STRENGTHS Growth (TTM) Margin (TTM) (FY) (FY, as a % of Sales) FOCUS AREAS FY19 vs. Investor Investor Investor
Slide 29: Return on Polyolefin Capacity
RETURN ON POLYOLEFIN CAPACITY Op. EBITDA Per Pound Dow’s P&SP Returns Polyolefins Capacity1 (cpp) Remain Ahead of Peers 22 • Full feedstock-to-polymer integration 21 delivers enhanced value 19 • Differentiated portfolio delivers margin 14 resiliency 12 • Functional Polymers portfolio dampens trends
Slide 30: Industrial Intermediates & Infrastructure Benchmarking Snapshot
INDUSTRIAL INTERMEDIATES & INFRASTRUCTURE BENCHMARKING SNAPSHOT on a Pro Forma Basis (1,2,3,4,5) FY19 UPDATE & INVESTOR DAY 2018 Adj. Op. EBITDA Adj. Op. EBITDA Free Cash Conversion SG&A + R&D CORE STRENGTHS Growth (TTM) Margin (TTM) (FY) (FY, as a % of Sales) FOCUS AREAS FY19 vs. Investor Investor
Slide 31: Performance Materials & Coatings Benchmarking Snapshot
PERFORMANCE MATERIALS & COATINGS BENCHMARKING SNAPSHOT on a Pro Forma Basis (1,2,3,4,5,6) FY19 UPDATE & INVESTOR DAY 2018 Adj. Op. EBITDA Adj. Op. EBITDA Free Cash Conversion SG&A + R&D CORE STRENGTHS Margin (TTM) (FY) (FY, as a % of Sales) FOCUS AREAS Growth (TTM) FY19 vs. Investor Investor Investo
Slide 32: Appendix
APPENDIX
Slide 33: 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 34: 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 35: 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 36: Operating and Pro Forma EPS Reconciliation
OPERATING AND PRO FORMA EPS RECONCILIATION Significant Items Impacting Results for the Three Months Ended Mar 31, 2020 In millions, except per share amounts (Unaudited) Pretax 1 Net Income 2 EPS 3 Reported results $ 396 $ 239 $ 0.32 Less: Significant items Integration and separation costs (65) (51)
Slide 37: 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 net of tax" to Operating EBIT and Operating EBITDA Mar 31, 2019 Jun 30, 2019 Sep 30, 2019 Dec 31, 2019 Mar 31, 2020 In millions (Unaudited) Pro Forma As Repo
Slide 38: Segment Information
SEGMENT INFORMATION Net Sales and Pro Forma Net Sales by Segment Three Months Ended Mar 31, 2020 Mar 31, 2019 In millions (Unaudited) As Reported Pro Forma Packaging & Specialty Plastics $ 4,609 $ 5,138 Industrial Intermediates & Infrastructure 3,045 3,489 Performance M aterials & Coatings 2,065 2,3
Slide 39: Segment Information (Continued)
SEGMENT INFORMATION (CONTINUED) Adjusted Operating and Pro Forma Operating EBIT Three Months Ended Mar 31, 2020 Mar 31, 2019 In millions (Unaudited) As Reported Pro Forma Packaging & Specialty Plastics $ 575 $ 652 Industrial Intermediates & Infrastructure 251 325 Performance M aterials & Coatings 16
Slide 40: Cash Conversion Reconciliation
CASH CONVERSION RECONCILIATION Operating EBITDA to Cash Flow From Operations Conversion Three Months Ended Mar 31, 2020 Mar 31, 2019 In millions As Reported Pro Forma Cash flows from operating activities - continuing operations $ 1,236 $ 1,043 Operating EBITDA $ 1,567 $ 1,886 1 Operating EBITDA to c