Dow Inc. · NYSE:DOW
Dow — Q1 2022 Earnings Presentation
37 slides from Dow's earnings presentation, Apr 21, 2022
Slide 1: 1Q 2022 Results
1Q 2022 RESULTS April 21, 2022
Slide 2: Agenda
AGENDA • Quarterly Results 1Q 2022 • Operating Segment Performance R E S U LT S • Outlook • Well-Positioned to Create Significant Value 2
Slide 3: 1Q 2022 Performance Highlights
1Q 2022 PERFORMANCE HIGHLIGHTS Delivered top- and bottom-line growth, both YoY and QoQ Net sales up 28% YoY, with gains in all operating segments, $15.3B businesses and regions NET SALES Local price increased 28% YoY and 2% QoQ Volume up 3% YoY and 5% QoQ Operating EBIT up $865MM YoY with
Slide 4: 1Q 2022 Operating Segment Performance
1Q 2022 OPERATING SEGMENT PERFORMANCE REVENUE ($MM) Sales ↑ 25%; Volume ↑ 4%; Price ↑ 24% Op. EBIT ($MM) & Op. EBIT Margin % Op. EBIT flat; Margins ↓ 400 bps Specialty Plastics Y-o-Y Y-o-Y 8,0 00 Price gains in both businesses and all regions; Price gains in the U.S. & Canada and Latin Packaging & 7
Slide 5: 2Q22 Modeling Guidance
2Q22 MODELING GUIDANCE Dow‘s Global Footprint and Differentiated Portfolio Well-Positioned in Dynamic Environment Net Sales ~$15.3 – $15.8B Depreciation & Amortization ~$715MM Quarterly Operational Tax Rate ~20 – 24% Net Interest Expense (Net of Int. Income) ~$150MM Net Income Attrib. to Non-Control
Slide 6: Competitive Advantages Provide Earnings and Cash Flow Resilience
COMPETITIVE ADVANTAGES PROVIDE EARNINGS AND CASH FLOW RESILIENCE Broad Global Reach and Advantaged Positions Diverse End-Market Participation Supports Attractive Growth Europe LPG advantage Packaging Infrastructure Consumer Mobility Asia Pacific Americas Pre-pandemic Shale advantage Middle East Supp
Slide 7: Clear Milestones Support Our 2030 Decarbonize & Grow Roadmap
CLEAR MILESTONES SUPPORT OUR 2030 DECARBONIZE & GROW ROADMAP Expect to grow capacity and underlying earnings by >$3B/year while reducing CO2 emissions by ~30%2 Renewable Energy EDH Renewable energy, asset FCDh LA3 EDH pilot plant ~2025 & Efficiency E-cracking Innovation, Commercial scale optimizatio
Slide 8: Near-Term Decarbonization Actions & Earnings Growth by 2025
NEAR-TERM DECARBONIZATION ACTIONS & EARNINGS GROWTH BY 2025 Reducing CO2 Emissions by ~2MM Higher-Return, Lower-Risk and Faster-Payback Capital Investments to Add ~$1B/yr1 EBITDA mta/Year while Growing an Additional Earnings by ~$2B/Year1 Projects Start-Up Est. EBITDA1 Est. ROIC Fort Saskatchewan cr
Slide 9: Dow Remains a Compelling Investment Opportunity
DOW REMAINS A COMPELLING INVESTMENT OPPORTUNITY Leading Cash Flow Generation Current Valuation across the Economic Cycle Industry-leader and well-positioned to unlock additional value by 2019-2021 Avg. EV / NTM EBITDA vs. Peers1 capturing fast-growing demand for sustainable solutions Annual Free Cas
Slide 10: Well-Positioned to Deliver Mid-Cycle Earnings Above Pre-Pandemic Levels
WELL-POSITIONED TO DELIVER MID-CYCLE EARNINGS ABOVE PRE-PANDEMIC LEVELS Leveraging our global scale and diverse portfolio to unlock additional value by capturing fast-growing demand for more sustainable solutions Flexible and advantaged operating model enables effective management through a wide
Slide 11: Thank You
ZO THANK YOU
Slide 12: FY 2022 Modeling Considerations & Latest Updates
FY 2022 MODELING CONSIDERATIONS & LATEST UPDATES [POSITIVE / NEGATIVE] Cash Flow Considerations in 2022 Dividends from Operating EBIT Drivers vs. FY21 ~$600MM (up ~$300MM YoY) Equity Companies Equity Earnings Down ~$300-400MM YoY (net of T/As) Pension ~$250MM (~$1B lower YoY) Pension Expense ~$FLAT
Slide 13: 1Q 2022 Financial Highlights
1Q 2022 FINANCIAL HIGHLIGHTS YoY Operating EPS Reconciliation Key Drivers in the Quarter YoY • Price gains in all operating $2.34 segments, businesses and regions $1.36 • Increased supply availability to meet strong end-market 1Q21 Margin Turnarounds Equity Interest/ Winter Storm 1Q22 demand with vo
Slide 14: Principal Joint Venture Detail
PRINCIPAL JOINT VENTURE DETAIL Dow’s Proportional Share of Principal JV Financial Results Drivers of 1Q 2022 1Q 2021 4Q 2021 JV Performance Kuwait Thai Kuwait Thai Kuwait Thai Sadara: Impacted by turnaround $ millions (unaudited) Sadara JVs JVs Sadara JVs JVs Sadara JVs JVs activity in Polyurethan
Slide 15: Dow FY21 Benchmarking Update
DOW FY21 BENCHMARKING UPDATE April 21, 2022
Slide 16: Benchmarking Peers
BENCHMARKING PEERS Total Dow P&SP Olefins & Polyolefins Chemicals Corporate Polyolefins II&I Intermediates & Derivatives Corporate Corporate Corporate PM&C Silicones Acetyl Chain Solutions & Corporate Functional Specialties1 Materials1 Benchmarking conducted against segment level peers if sufficient
Slide 17: Total Dow Benchmarking: Summary of Observations
TOTAL DOW BENCHMARKING: SUMMARY OF OBSERVATIONS Benchmarking: Strengths & Gaps FY21 YoY Adj. Op. EBITDA growth exceeded the peer median as Dow capitalized on the economic recovery, achieving record sales and earnings performance with gains in all operating segments FY21 Adj. Op. EBITDA margin am
Slide 18: Total Dow Benchmarking Snapshot
TOTAL DOW BENCHMARKING SNAPSHOT (1,2,3,4) CORE STRENGTHS FY21 UPDATE & FY20 FOCUS AREAS Adj. Op. EBITDA Adj. Op. EBITDA SG&A + R&D • Hallmark safety Cash Flow Conversion • Execute on ‘Decarbonize Growth Margin (as a % of Sales) performance and FY21 vs. FY20 vs. FY21 FY20 FY21 FY20 FY21 FY20 and Grow
Slide 19: Top Quartile Performance
TOP QUARTILE PERFORMANCE Operating Return on Capital (%) Free Cash Flow Yield (%) 2019-2021 Annual Average 2019-2021 Annual Average 12% 13% Median Median Excl. Dow Excl. Dow ~10% ~8% Peer 1 DOW Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 DOW Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Net Debt Ch
Slide 20: Culture of Benchmarking: Summary of Observations
CULTURE OF BENCHMARKING: SUMMARY OF OBSERVATIONS Segment Benchmarking: Strengths & Gaps YoY Adj. Op. EBITDA growth trailed the peer median due to lost volumes from higher than normal planned and unplanned outages; peers more heavily impacted by pandemic experienced higher earnings recovery in 2021
Slide 21: Packaging & Specialty Plastics Benchmarking Snapshot
PACKAGING & SPECIALTY PLASTICS BENCHMARKING SNAPSHOT (1,2,3,4,5) CORE STRENGTHS FY21 UPDATE & FY20 FOCUS AREAS Adj. Op. EBITDA Adj. Op. EBITDA SG&A + R&D • World-class packaging Free Cash Conversion • Execute on ‘Decarbonize Growth Margin (as a % of Sales) and Grow’ Strategy to franchise with leadin
Slide 22: Differentiated P&SP Portfolio Delivering Results
DIFFERENTIATED P&SP PORTFOLIO DELIVERING RESULTS Dow’s P&SP Returns Continue to Expand vs. Peers Generating Higher and More Resilient Margins vs. Peers Op. EBITDA Per Pound 30% Dow P&SP 5-Yr Avg. ~22%. Polyolefins Capacity1 (cpp) 25% Peer Median (Excl. Dow) 5-Yr Avg. ~16%. Advantage over Peers 21 25
Slide 23: Industrial Intermediates & Infrastructure Benchmarking Snapshot
INDUSTRIAL INTERMEDIATES & INFRASTRUCTURE BENCHMARKING SNAPSHOT (1,2,3,4,5) CORE STRENGTHS FY21 UPDATE & FY20 FOCUS AREAS • #1 global producer by Adj. Op. EBITDA Adj. Op. EBITDA SG&A + R&D Free Cash Conversion • Execute on capacity of Purified Growth Margin (as a % of Sales) Ethylene Oxide, Ethylene
Slide 24: Performance Materials & Coatings Benchmarking Snapshot
PERFORMANCE MATERIALS & COATINGS BENCHMARKING SNAPSHOT (1,2,3,4,5) CORE STRENGTHS FY21 UPDATE & FY20 FOCUS AREAS Adj. Op. EBITDA Adj. Op. EBITDA SG&A + R&D • #1 global producer by Free Cash Conversion • Execute on ‘Decarbonize capacity of Siloxanes & Growth Margin (as a % of Sales) and Grow’ Strateg
Slide 25: Dow Also Delivering Strong Performance vs. Select S&P Companies
DOW ALSO DELIVERING STRONG PERFORMANCE VS. SELECT S&P 500 COMPANIES TRADING AT ~8-10X MULTIPLES Dow vs. ~8-10x EV/EBITDA Multiple Companies in S&P 5001 Dow is delivering strong financial performance when compared to ROIC FCF Growth a broad set of S&P 500 companies trading in the ~8-10x 3-Year Averag
Slide 26: Appendix
APPENDIX
Slide 27: Operating Earnings Per Share (EPS) Reconciliation
OPERATING EARNINGS PER SHARE (EPS) RECONCILIATION Significant Items Impacting Results for the Three Months Ended Mar 31, 2022 1 2 In millions, except per share amounts (Unaudited) Pretax Net Income EPS 3 Reported results $ 2,055 $ 1,569 $ 2.11 Less: Significant items Digitalization program costs (41
Slide 28: 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 "Operating EBITDA" In millions (Unaudited) Mar 31, 2021 Jun 30, 2021 Sep 30, 2021 Dec 31, 2021 Mar 31, 2022 Net income $ 1,006 $ 1,932 $ 1,706 $ 1,761 $ 1,552 +
Slide 29: Segment Information
SEGMENT INFORMATION Net Sales by Segment Three Months Three Months Ended Ended In millions (Unaudited) Dec 31, 2021 Mar 31, 2022 Mar 31, 2021 Packaging & Specialty Plastics $ 7,189 $ 7,627 $ 6,082 Industrial Intermediates & Infrastructure 4,548 4,524 3,607 Performance Materials & Coatings 2,558 3,04
Slide 30: Segment Information (Continued)
SEGMENT INFORMATION (CONTINUED) Adjusted Operating EBIT by Segment Three Months Three Months Ended Ended In millions (Unaudited) Dec 31, 2021 Mar 31, 2022 Mar 31, 2021 Packaging & Specialty Plastics $ 1,312 $ 1,124 $ 1,122 Industrial Intermediates & Infrastructure 505 599 211 Performance Materials &
Slide 31: 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) Mar 31, 2021 Jun 30, 2021 Sep 30, 2021 Dec 31, 2021 Mar 31, 2022 Cash provided by (used for) operating activities - continuing operations (GAAP) $ (228) $ 2,021 $ 2,719
Slide 32: Annual Free Cash Flow Yield Reconciliation
ANNUAL FREE CASH FLOW YIELD RECONCILIATION Reconciliation of Annual Free Cash Flow Yield Twelve Months Ended In millions (Unaudited) Dec 31, 2019 Dec 31, 2020 Dec 31, 2021 Cash provided by operating activities - continuing operations (GAAP) $ 5,713 $ 6,252 $ 7,069 Capital expenditures (1,961) (1,252
Slide 33: 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) Mar 31, 2022 Mar 31, 2021 Net income $ 1,569 $ 991 - Significant items, after tax (211) (33) Operating net income (non-GAAP) $ 1,780 $ 1,024 Net income a
Slide 34: Reconciliation of Net Debt
RECONCILIATION OF NET DEBT Reconciliation of Net Debt In millions (Unaudited) Mar 31, 2022 Dec 31, 2021 Notes payable $ 92 $ 161 Long-term debt due within one year 355 231 Long-term debt 14,108 14,280 Gross debt (GAAP) $ 14,555 $ 14,672 - Cash and cash equivalents 3,143 2,988 - Marketable securities
Slide 35: 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 36: Safe Harbor
SAFE HARBOR Cautionary Statement about Forward-Looking Statements Certain statements in this report 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 Act of 1
Slide 37: 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