Dow Inc. · NYSE:DOW
Dow — Q3 2020 Earnings Presentation
27 slides from Dow's earnings presentation, Oct 22, 2020
Slide 1: Dow 3Q 2020 Results
DOW 3Q 2020 RESULTS October 22, 2020
Slide 2: Agenda
AGENDA Quarterly Highlights Further Enhancing Our Financial Strength Continued Market Recovery & Outlook Competitively Positioned for Growth 2
Slide 3: 3Q 2020 Highlights
3Q 2020 HIGHLIGHTS Net Sales of $9.7B – above guidance; sequential increase of 16% $1.5B Demand growth YoY in Packaging & Specialty Plastics was more than Free cash flow offset by continued pandemic-driven weakness, primarily in durable good generation end markets Volume grew 9% vs. PQ with ga
Slide 4: 3Q20 Operating Segment Performance
3Q20 OPERATING SEGMENT PERFORMANCE REVENUE ($MM) OP. EBIT ($MM) & OP. EBIT Margin % YoY: Op. EBIT ↓ 19% YoY: Sales ↓ 10%; Volume ↑ 1% Packaging & • Integrated plastics demand growth partly 798 • Targeted expense reductions & volume Specialty 647 Plastics offset by lower licensing activity gains were
Slide 5: Dow Feedstock Flexibility a Key Enabler of Margin Expansion
DOW FEEDSTOCK FLEXIBILITY A KEY ENABLER OF MARGIN EXPANSION Deliberate USGC Feedstock Optimization Max ethane & propane capabilities with min naphtha requirement 100% Empowers Greater Returns vs. Industry Dow (1) Industry Purpose-built feedslate optimization capabilities; 50% managed dynamically o
Slide 6: Further Enhancing Our Financial Strength
FURTHER ENHANCING OUR FINANCIAL STRENGTH Cash Discipline Strengthens Financial Position Further Streamlining Cost Structure Boosts Competitiveness YE19 3Q20 On track to deliver 2020 operational expense 117% $13.7 $14.6 $12.8 reduction and working capital savings targets $10.7 78% Restructuring Prese
Slide 7: Sadara Operational and Financial Improvements
SADARA OPERATIONAL AND FINANCIAL IMPROVEMENTS Improving Operating Results Recovering global economy and improved end-market demand driving enhanced Sadara operating performance on a year-over-year basis Delivered improved 3Q equity earnings, up ~$100MM YoY Dow contribution now expected to be $
Slide 8: Market Recovery Offers First-Mover Advantage Upside
MARKET RECOVERY OFFERS FIRST-MOVER ADVANTAGE UPSIDE 30% II&I P&SP ex. H&E 2 PM&C Dow Proactively Matching Supply to Demand Sequential Polyethylene Operating Rate Changes3 10% 0% 0% Year-Over-Year Volume Trend1 -30% -10% JAN FEB MAR APR MAY JUN JUL AUG SEPT 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 Industry Dow
Slide 9: 4Q20 Modeling Guidance
4Q20 MODELING GUIDANCE Economic recovery progressing with typical seasonality Net Sales ~$9.5 – $9.8B Depreciation & Amortization ~$725MM Quarterly Operational Tax Rate ~23 – 27% Net Interest Expense (Net of Int. Income) ~$200MM Net Income Attrib. to Non-Controlling Int. ~$25MM Share Count ~745MM To
Slide 10: Advancing Toward Our Sustainability Targets
ADVANCING TOWARD OUR SUSTAINABILITY TARGETS Dow’s New Sustainability Targets Our Approach PROTECT THE CLIMATE By 2030, Dow will reduce its net annual carbon emissions by 5 million metric tons vs. its 2020 baseline (15% reduction). By 2050, Dow intends to be carbon neutral (scopes Developing low-carb
Slide 11: Competitively Positioned to Accelerate Growth & Capture Value
COMPETITIVELY POSITIONED TO ACCELERATE GROWTH & CAPTURE VALUE Advancing Our Taking Proactive Enhancing our Positioned for the Commitment to Actions Financial Position Market Recovery ESG Lowered operating Strong cash flow and cash Sustainability targets to Industry-leading dividend expenses
Slide 12: Seek Together
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Slide 13: 3Q 2020 Financial Highlights
3Q 2020 FINANCIAL HIGHLIGHTS Key Drivers in the Quarter • Resilient demand in integrated plastics & home care; improved demand in furniture & bedding and appliance end markets • Strong progress on expense reductions • Higher JV equity earnings driven primarily by operational improvements at Sadara •
Slide 14: Packaging & Specialty Plastics
PACKAGING & SPECIALTY PLASTICS Financial Performance Snapshot 3Q20 3Q19 B/(W) Net Sales by Business In millions, except margin percentages Packaging Hydrocarbons Net Sales $ 4,565 $ 5,062 $ (497) (10)% and & Energy Op. EBIT $ 647 $ 798 $ (151) (19)% Specialty Op. EBIT Margin 14.2 % 15.8 % (160) bps
Slide 15: Industrial Intermediates & Infrastructure
INDUSTRIAL INTERMEDIATES & INFRASTRUCTURE Financial Performance Snapshot 3Q20 3Q19 B/(W) Net Sales by Business In millions, except margin percentages Net Sales $ 3,058 $ 3,365 $ (307) (9)% Industrial Solutions Op. EBIT $ 104 $ 193 $ (89) (46)% Op. EBIT Margin 3.4 % 5.7 % (230) bps Adj. Op. EBIT (ex.
Slide 16: Performance Materials & Coatings
PERFORMANCE MATERIALS & COATINGS Financial Performance Snapshot 3Q20 3Q19 B/(W) Net Sales by Business In millions, except margin percentages Net Sales $ 2,002 $ 2,250 $ (248) (11)% Consumer Coatings & Solutions Perf. Op. EBIT $ 75 $ 200 $ (125) (63)% Monomers Op. EBIT Margin 3.7 % 8.9 % (520) bps Va
Slide 17: Principal Joint Venture Detail
PRINCIPAL JOINT VENTURE DETAIL Dow’s Proportionate Share of Principal JV Financial Results Drivers of YoY Changes 3Q 2020 3Q 2019 ▪ Kuwait JVs: Continued margin Kuwait Thai Kuwait Thai $ millions (unaudited) compression in MEG and Sadara JVs JVs Sadara JVs JVs polyethylene EBITDA $ 75 $ 105 $ 59 $ 1
Slide 18: 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 19: 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 20: 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 21: Operating and Pro Forma Operating EPS Reconciliation
OPERATING AND PRO FORMA OPERATING EARNINGS (LOSS) PER SHARE (EPS) RECONCILIATION Significant Items Impacting Results for the Three Months Ended Sep 30, 2020 In millions, except per share amounts (Unaudited) Pretax 1 Net Income 2 EPS 3 Reported results $ 42 $ (25) $ (0.04) Less: Significant items Int
Slide 22: Operating and Pro Forma Operating EPS Reconciliation (Continued)
OPERATING AND PRO FORMA OPERATING EPS RECONCILIATION (CONTINUED) Significant Items Impacting Results for the Nine Months Ended Sep 30, 2020 In millions, except per share amounts (Unaudited) Pretax 1 Net Income 2 EPS 3 Reported results $ 255 $ (11) $ (0.02) Less: Significant items Integration and sep
Slide 23: Operating and Pro Forma Operating EBIT & EBITDA Reconciliation
OPERATING AND PRO FORMA OPERATING EBIT & EBITDA RECONCILIATION Reconciliation of "Income (loss) from continuing Three Months Ended Nine Months Ended operations, net of tax" to Operating EBIT and Operating EBITDA Sep 30, 2019 Dec 31, 2019 Mar 31, 2020 Jun 30, 2020 Sep 30, 2020 Sep 30, 2020 Sep 30, 20
Slide 24: Segment Information
SEGMENT INFORMATION Net Sales and Pro Forma Net Sales by Segment Three Months Ended Nine Months Ended Three Months Ended Sep 30, 2020 Sep 30, 2019 Sep 30, 2020 Sep 30, 2019 Jun 30, 2020 In millions (Unaudited) As Reported As Reported As Reported Pro Forma As Reported Packaging & Specialty Plastics $
Slide 25: Segment Information (Continued)
SEGMENT INFORMATION (CONTINUED) Adjusted Operating and Pro Forma Operating EBIT by Segment Three Months Ended Nine Months Ended Three Months Ended Sep 30, 2020 Sep 30, 2019 Sep 30, 2020 Sep 30, 2019 Jun 30, 2020 In millions (Unaudited) As Reported As Reported As Reported Pro Forma As Reported Packag
Slide 26: 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 In millions Sep 30, 2019 Dec 31, 2019 Mar 31, 2020 Jun 30, 2020 Sep 30, 2020 Cash provided by operating activities - continuing operations (GAAP)
Slide 27: Reconciliation of Net Debt
RECONCILIATION OF NET DEBT Reconciliation of Net Debt In millions (Unaudited) Sep 30, 2020 Dec 31, 2019 Notes payable $ 329 $ 586 Long-term debt due within one year 347 435 Long-term debt 16,698 15,975 Gross debt (GAAP) $ 17,374 $ 16,996 - Cash and cash equivalents 4,549 2,367 - Marketable securitie