Dow Inc. · NYSE:DOW
Dow — The Dow Chemical Company — Q2 2015 Earnings Presentation
37 slides from Dow's earnings presentation, Jul 23, 2015
Slide 1: 2Q 2015 Earnings Conference Call
The Dow Chemical Company 2Q 2015 Earnings Conference Call July 23, 2015 The Dow Chemical Company
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 expectatio
Slide 3: Agenda
Agenda • 2Q 2015 Overview • Segment Results • Outlook and Key Earnings Drivers 3
Slide 4: Dow Reports 2Q 2015 Results
Dow Reports 2Q 2015 Results • Operating EPS rises to $0.91 – up 23% YoY • Operating EBITDA reaches $2.5B – up $210MM YoY and representing 2Q record • Company achieves new 1H operating EBITDA record of $4.9B • Operating EBITDA margins expand to 19%, up 396 bps YoY – Highest 2Q since 2005 • Sales decl
Slide 5: Financial Performance Metrics (trailing twelve-month basis)
Financial Performance Metrics (on a trailing twelve-month basis) Operating EPS Operating ROC Percent Payout $3.50 12% 70% $3.00 11% 10% 60% $2.50 9% $2.00 50% 8% $1.50 7% 40% $1.00 6% Yearly declared dividend per share/operating EPS Calculated on dividends declared Target: 10% average annual EPS Tar
Slide 6: 2Q15 Financial Performance
2Q15 Financial Performance 2Q15 2Q14 B/(W) Revenue ($MM) $12,910 $14,917 (2,007) Operating EBITDA ($MM) $2,452 $2,242 $210 Operating EBITDA Margin 19% 15% +396 bps EPS ex. Certain Items $0.91 $0.74 $0.17 6
Slide 7: Agenda
Agenda • 2Q 2015 Overview • Segment Results • Outlook and Key Earnings Drivers 7
Slide 8: Agricultural Sciences
Agricultural Sciences Continued Improvement in a Challenging Macro Environment Competitive environment with weak commodity prices Quarterly Financial Performance • New Crop Protection sales increased 5% led by spinetoram insecticide $275 30% • Lower sales driven by industry wide inventory and curren
Slide 9: Consumer Solutions
Consumer Solutions Continued Strength in Semiconductor and Automotive more than Offset by Consumer and Display Dow Automotive Systems – 2Q operating EBITDA record Quarterly Financial Performance • Margins expand on continued demand for premium vehicles, SUV’s, lightweighting 30% $290 • Double-digit
Slide 10: Infrastructure Solutions
Infrastructure Solutions Value-Add Products Lead, more than Offset by Energy and Monomers Headwinds Energy & Water Solutions – Strong Water more than offset by Energy Quarterly Financial Performance • Demand continues to grow for industry-leading reverse osmosis solutions 30% • Volume growth in Lati
Slide 11: Performance Materials & Chemicals
Performance Materials & Chemicals Ongoing Productivity Actions Drive Continued Segment-Level EBITDA Improvements Polyurethanes – Margin and volume drive record Q2 operating EBITDA Quarterly Financial Performance • Broader market participation drove volume growth in all geographies, led by EMEAI $700
Slide 12: Performance Plastics
Performance Plastics Record Performances with High Demand for Dow Products; Feedstock Flexibility Also Provides Healthy Tailwind Dow Packaging and Specialty Plastics – Record Q2 operating EBITDA Quarterly Financial Performance • Strong volume YoY, led by industrial and consumer packaging, food and s
Slide 13: DCP – Olin Transaction Update
DCP – Olin Transaction Update Structure and Considerations Impact - Dow’s Capital Structure • Reverse Morris Trust structure – split-off intention 2Q 2015 Pro Forma Impact • Total value of ~$5.6B, pre-tax consideration ~$9B; – ~$2.0B Cash and Cash Equivalent Cash $6.2B ~$1.3B – ~$0.9B cash dividend
Slide 14: Agenda
Agenda • 2Q 2015 Overview • Segment Results • Outlook and Key Earnings Drivers 14
Slide 15: Outlook
Outlook • U.S. is robust, especially in Packaging, Auto, and Construction (esp. Housing) • China has been and will continue to be soft, with growth in some markets driven by domestic consumption • W. Europe is stable despite the Greece situation, especially in construction • Other emerging markets a
Slide 16: Earnings Drivers – 2015 and Beyond
Earnings Drivers – 2015 and Beyond • Focus and discipline with emphasis on EVA, portfolio management, and shareholder remuneration remaining our drumbeat • Key projects starting up in next six months – first units start up at Sadara and in Texas (PDH) • Key product launches in full swing (ISOCLAST™,
Slide 17: Slide 17
Slide 18: Modeling Guidance
Modeling Guidance End-markets – YoY volumes expected to be marginally up versus PQ Equity Earnings – Sadara costs will ramp approx. $50-75MM versus SQLY, EE excluding Sadara down on lower EG prices and lower volume after a record volume quarter Raw Materials – Flat to PQ; down ~$1B vs SQLY Share cou
Slide 19: NGL Balances Remain Favorable
NGL Balances Remain Favorable US Ethane Supply / Demand Balance US Propane Supply / Demand Balance 2200 1200 2750 1000 Propane Exports/(Imports) (MBD) 2500 800 Propane Supply/Demand (MBD) 2000 Ethane Surplus / Deficit (MBD) 900 600 Ethane Usage (MBD) 2250 400 1800 2000 600 200 1750 1600 0 1500 -200
Slide 20: Market Pulse – 2Q15 Heat Map
Market Pulse – 2Q15 Heat Map Eastern Europe, ME, Africa, Western Europe Developing Asia Developed Asia Latin America US & Canada Market India Construction Packaging Relative Portion of Dow Revenue Agriculture Consumer & Food Electronics Durables & Industrials Transportation Energy & Water Relative P
Slide 21: Key Earnings Drivers on the Horizon
Key Earnings Drivers on the Horizon ISOCLAST™ ARYLEX™ AgroFresh™ ENLIST DUO™ LPG Chlor-Alkali and Derivatives BETAMATE™ Pack Studios Transaction Penoxsulam rice herbicide PDH USGC Sadara first products Sadara PU derivatives Sadara EO derivatives ENLIST™ soybeans and corn ENLIST E3™ 2015 2016 2017 •
Slide 22: Agricultural Sciences
Agricultural Sciences Dollars in millions 2Q15 2Q14 Sales $1,747 $1,907 Price (6%) Volume (2%) Operating EBITDA $269 $249 Equity earnings (included in EBITDA) $0 $2 2Q15 Trends vs. 2Q14 Sales Price Volume Crop Protection $ $ $ Seeds $ $ $ 22
Slide 23: Consumer Solutions
Consumer Solutions Dollars in millions 2Q15 2Q14 Sales $1,096 $1,195 Price (7%) Volume (1%) Operating EBITDA $236 $263 Equity earnings (included in EBITDA) $19 $21 2Q15 Trends vs. 2Q14 Sales Price Volume Consumer Care $ $ $ Dow Automotive Systems $ $ # Dow Electronic Materials $ $ $ 23
Slide 24: Infrastructure Solutions
Infrastructure Solutions Dollars in millions 2Q15 2Q14 Sales $1,961 $2,268 Price (13%) Volume 0% Operating EBITDA $267 $310 Equity earnings (included in EBITDA) $35 $45 2Q15 Trends vs. 2Q14 Sales Price Volume Dow Building & Construction $ $ # Dow Coating Materials $ $ # Energy & Water Solutions $ $
Slide 25: Performance Materials & Chemicals
Performance Materials & Chemicals Dollars in millions 2Q15 2Q14 Sales $3,241 $3,761 Adjusted Sales $3,241 $3,662 Adj. Price (15%) Adj. Volume 4% EBITDA $572 $447 Equity earnings (included in EBITDA) $122 $97 2Q15 Trends vs. 2Q14 Sales Price Adj. Volume Chlor-Alkali and Vinyl $ $ $ Chlorinated Organi
Slide 26: Performance Plastics
Performance Plastics Dollars in millions 2Q15 2Q14 Sales $4,806 $5,713 Adjusted Sales $4,775 $5,713 Adj. Price (21%) Adj. Volume 5% Adj. Price excluding Hydrocarbons & (14%) Energy Adj. Volume 9% Operating EBITDA $1,166 $1,017 Equity earnings (included in EBITDA) $101 $68 2Q15 Trends vs. 2Q14 Sales
Slide 27: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Three Months Ended Six Months Ended In millions 06/30/15 06/30/14 06/30/15 06/30/14 Operating EBITDA $2,452 $2,242 $4,853 $4,638 Certain Items -75 -18 587 -18 EBITDA $2,377 $2,224 $5,440 $4,620 - Depreciation and amortization 642 677 1,276 1,349 + Intere
Slide 28: Supplemental Information - 2Q15
Supplemental Information - 2Q15 Certain Items Impacting Results In millions, except per share amounts (unaudited) Pretax Impact (1) Net Income (2) EPS - Diluted (3)(4) Three Months Ended Three Months Ended Three Months Ended 06/30/15 06/30/14 06/30/15 06/30/14 06/30/15 06/30/14 Operating Results - a
Slide 29: Additional Supplemental Information - 2Q15
Additional Supplemental Information - 2Q15 Certain Items Impacting Results In millions, except per share amounts (unaudited) Pretax Impact (1) Net Income (2) EPS - Diluted (3) (4) Six Months Ended Six Months Ended Six Months Ended 06/30/15 06/30/14 06/30/15 06/30/14 06/30/15 06/30/14 Operating Resul
Slide 30: Certain Items Affecting Results - 2Q15
Certain Items Affecting Results- 2Q15 Certain items increasing (decreasing) EBITDA by operating segment In millions Three Months Ended Six Months Ended 06/30/15 06/30/14 06/30/15 06/30/14 Agricultural Sciences ($14) $— ($14) $— Consumer Solutions (67) — (67) — Infrastructure Solutions (27) — (27) —
Slide 31: Supplemental Information
Supplemental Information Results in the second quarter of 2015 were impacted by the following items: • Pretax restructuring charges of $375 million. On April 29, 2015, Dow's Board of Directors approved actions to further streamline the organization and optimize the Company’s footprint as a result of
Slide 32: Emerging Geographies
Emerging Geographies Dow defines emerging geographies as the following: Eastern Europe, including Russia Asia Pacific, excluding Japan, Australia and New Zealand Latin America India Middle East Africa 32
Slide 33: Principal Joint Ventures
Principal Joint Ventures Although Dow participates in many joint ventures, the most significant joint ventures from a financial perspective are: Dow Corning Corporation EQUATE Petrochemical Company K.S.C. The Kuwait Olefins Company K.S.C. The Kuwait Styrene Co. K.S.C. MEGlobal Sadara Chemical Compan
Slide 34: Preliminary Results for Principal Joint Ventures
Preliminary Results for Principal Joint Ventures Principal Joint Ventures - Total Dow Proportionate Share Dollars in millions (unaudited) Dollars in millions (unaudited) 2Q15 2Q14 2Q15 2Q14 Sales $4,456 $4,938 Sales $1,981 $2,150 Adjusted Sales(1) $3,314 $3,672 Adjusted Sales(1) $1,505 $1,634 EBITDA
Slide 35: Reconciliation of Equity Earnings
Reconciliation of Equity Earnings 2005 2006 2007 2008 2009 2010 2011 2012 Quarterly Average Equity Earnings excluding certain items $241 $240 $281 $197 $181 $278 $259 $175 Equity Earnings excluding certain items, for the year 964 959 1,122 787 724 1,112 1,137 698 Certain items: Dow Corning Restructu
Slide 36: Global Operating Rates as a Percent of Capacity
Global Operating Rates as a Percent of Capacity Year QTR YTD 2011 1Q 83% 83% 2Q 84% 83% 3Q 83% 83% 4Q 72% 80% 2012 1Q 83% 83% 2Q 78% 81% 3Q 83% 81% 4Q 78% 81% 2013 1Q 82% 82% 2Q 78% 80% 3Q 82% 81% 4Q 82% 81% 2014 1Q 83% 83% 2Q 82% 83% 3Q 88% 85% 4Q 86% 85% 2015 1Q 84% 84% 2Q 84% 84% 36
Slide 37: Slide 37
The Dow Chemical Company — Q2 2015 Earnings Presentation on 6ix