Dow Inc. · NYSE:DOW
Dow — Q4 2020 Earnings Presentation
24 slides from Dow's earnings presentation, Jan 28, 2021
Slide 1: 4Q 2020 Results
DOW 4Q 2020 RESULTS January 28, 2021
Slide 2: Agenda
AGENDA Quarterly & Full Year Highlights Operating Segment Performance Outlook Accelerating Our Competitive Advantage 2
Slide 3: 4Q 2020 Highlights
4Q 2020 HIGHLIGHTS ▪ Net Sales of $10.7B – YoY increase of 5% and sequential increase $1.4B of 10% Free cash flow generation ▪ Volume increased 1% YoY reaching pre-pandemic levels in all operating segments 93% ▪ Generated $1.7B of cash flow from operating activities – Op. EBITDA-to-CFFO cash convers
Slide 4: 2020 Year in Review: Advancing Our Priorities & Our Ambition
2020 YEAR IN REVIEW: ADVANCING OUR PRIORITIES & OUR AMBITION DISCIPLINED CAPITAL LOW-COST OPERATING PROFITABLE GROWTH BEST-OWNER MINDSET ALLOCATION MODEL OUR FINANCIAL PRIORITIES >2% demand growth >$300 million in proceeds Achieved reduced CapEx $500 million reduction in year-over-year from sale of
Slide 5: 4Q20 Operating Segment Performance
4Q20 OPERATING SEGMENT PERFORMANCE REVENUE ($MM) Sales ↑ 6%; Volume ↑ 2% Op. EBIT ($MM) & Op. EBIT Margin % Op. EBIT ↑ 20%; Margin ↑ 180bps Specialty Plastics Y-o-Y Y-o-Y 780 5,5 00 Disciplined price and volume management 16% 800 Improved supply/demand fundamentals in Packaging & enabled strong poly
Slide 6: Sadara Operational and Financial Improvements
SADARA OPERATIONAL AND FINANCIAL IMPROVEMENTS Improving Operating Results ▪ Strong supply/demand trends that benefitted our Packaging and Polyurethanes businesses also supported improvement at Sadara ▪ Substantially improved full year results; delivered improved quarterly equity earnings, up >$130 m
Slide 7: 1Q21 Modeling Guidance
1Q21 MODELING GUIDANCE Continuation of Recovery and Strong Fundamentals Support Sequential Growth Net Sales ~$10.7 – $11.2B Depreciation & Amortization ~$715MM Quarterly Operational Tax Rate ~23 – 27% Net Interest Expense (Net of Int. Income) ~$200MM Net Income Attrib. to Non-Controlling Int. ~$20MM
Slide 8: FY 2021 Modeling Considerations
FY 2021 MODELING CONSIDERATIONS Operational EBIT Drivers vs. FY20 Cash Flow Considerations in 2021 Equity Earnings Flat, margin increases offset by planned T/A’s CapEx ~$1.6B (~350MM higher YoY) Pension Expense Flat YoY Mandatory Pension Corporate Op. EBIT of ~$(275)MM and Op. EBITDA of ~$(250)MM ~$
Slide 9: Digital Acceleration Drives Growth & Competitive Advantage
DIGITAL ACCELERATION DRIVES GROWTH & COMPETITIVE ADVANTAGE Advancing & Expanding our Digital Platforms Target Additional to Deliver Enhanced Value Creation >$300MM Annual EBITDA Benefit1 % Run Rate 100% 100% 80% Run Rate Realized 60% Faster materials science Real-time manufacturing Frictionless e-co
Slide 10: Solid Pathway to Achieving Our Sustainability Targets
SOLID PATHWAY TO ACHIEVING OUR SUSTAINABILITY TARGETS CIRCULAR ECONOMY CLIMATE PROTECTION Innovation & Partnership to Clear Focus Areas to Drive Carbon Reduction Stop the Waste and Close the Loop Optimizing our Increasing Investments in facilities & processes renewables carbon capture Collaborating
Slide 11: Well-Positioned for Profitable Growth in 2021 and Beyond
WELL-POSITIONED FOR PROFITABLE GROWTH IN 2021 AND BEYOND Consumer-Led Portfolio Benefits from Consumer Solutions End-Market Demand Global Megatrends Support Higher Margin Recent Behavior Trends Improvement Underway Growth Opportunities 2Q20 YE21 Building FOOD & DIY CONSUMER ARCHITECTURAL Consumer PA
Slide 12: seek Together"
<r seek Together"
Slide 13: 4Q 2020 Financial Highlights
4Q 2020 FINANCIAL HIGHLIGHTS Key Drivers in the Quarter $0.78 $0.81 • Pricing strength in polyethylene and polyurethanes on improved supply/demand dynamics 4Q19 Expense COVID-19 & Equity Earnings 4Q20 • Higher JV equity earnings driven by Reductions Margin continued financial and operational Compres
Slide 14: Principal Joint Venture Detail
PRINCIPAL JOINT VENTURE DETAIL Dow’s Proportionate Share of Principal JV Financial Results Drivers of YoY Changes 4Q 2020 4Q 2019 ▪ Kuwait JVs: Margin pressure in Kuwait Thai Kuwait Thai MEG on supply/demand $ millions (unaudited) Sadara Sadara dynamics JVs JVs JVs JVs EBITDA $ 117 $ 152 $ 28 $ 21 $
Slide 15: 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 16: 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 17: 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 18: Operating and Pro Forma Operating Earnings (Loss) per Share Reconciliation
OPERATING AND PRO FORMA OPERATING EARNINGS (LOSS) PER SHARE (EPS) RECONCILIATION Significant Items Impacting Results for the Three Months Ended Dec 31, 2020 In millions, except per share amounts (Unaudited) Pretax 1 Net Income 2 EPS 3 Reported results $ 1,816 $ 1,236 $ 1.65 Less: Significant items I
Slide 19: Operating and Pro Forma Operating EPS Reconciliation (Continued)
OPERATING AND PRO FORMA OPERATING EPS RECONCILIATION (CONTINUED) Significant Items Impacting Results for the Twelve Months Ended Dec 31, 2020 In millions, except per share amounts (Unaudited) Pretax 1 Net Income 2 EPS 3 Reported results $ 2,071 $ 1,225 $ 1.64 Less: Significant items Integration and
Slide 20: Operating and Pro Forma Operating EBIT & EBITDA Reconciliation
OPERATING AND PRO FORMA OPERATING EBIT & EBITDA RECONCILIATION Reconciliation of "Income (loss) from continuing operations, net of tax" to Three Months Ended Twelve Months Ended Operating EBIT and Operating EBITDA Dec 31, 2019 Mar 31, 2020 Jun 30, 2020 Sep 30, 2020 Dec 31, 2020 Dec 31, 2020 Dec 31,
Slide 21: Segment Information
SEGMENT INFORMATION Net Sales and Pro Forma Net Sales by Segment Three Months Ended Twelve Months Ended Three Months Ended Sep 30, 2020 Dec 31, 2020 Dec 31, 2019 Dec 31, 2020 Dec 31, 2019 In millions (Unaudited) As Reported As Reported As Reported As Reported Pro Forma Packaging & Specialty Plastics
Slide 22: Segment Information (Continued)
SEGMENT INFORMATION (CONTINUED) Adjusted Operating and Pro Forma Operating EBIT by Segment Three Months Ended Twelve Months Ended Three Months Ended Sep 30, 2020 Dec 31, 2020 Dec 31, 2019 Dec 31, 2020 Dec 31, 2019 In millions (Unaudited) As Reported As Reported As Reported As Reported Pro Forma Pack
Slide 23: Cash Conversion and Free Cash Flow Reconciliation
CASH CONVERSION AND FREE CASH FLOW RECONCILIATION Reconciliation of Cash Flow Conversion (Operating EBITDA to Cash Flow From Operations) Three Months Ended Twelve Months Ended In millions Dec 31, 2020 Dec 31, 2019 Dec 31, 2020 Dec 31, 2019 Cash provided by operating activities - continuing operation
Slide 24: Reconciliation of Net Debt
RECONCILIATION OF NET DEBT Reconciliation of Net Debt In millions (Unaudited) Dec 31, 2020 Dec 31, 2019 Notes payable $ 156 $ 586 Long-term debt due within one year 460 435 Long-term debt 16,491 15,975 Gross debt (GAAP) $ 17,107 $ 16,996 - Cash and cash equivalents 5,104 2,367 - Marketable securitie