Dow Inc. · NYSE:DOW

Dow — The Dow Chemical Company — Q1 2012 Earnings Presentation

43 slides from Dow's earnings presentation, Apr 26, 2012

  1. Slide 1: Q1 2012 Earnings Conference Call

    Q1 2012 Earnings Conference Call The Dow Chemical Company April 26, 2012 January 4, 2012

  2. 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. future. uncertainties Dow cannot guarantee the accuracy of any forecasts or estimates, and we do not plan to update any forward-looking stateme

  3. Slide 3: Agenda

    Agenda  1Q 2012 Overview  Financial Update  Drivers to Deliver Shareholder Value − Feedstock Advantage − Integrated Portfolio − Innovation Agenda − Operating and Capital Efficiency  Outlook O tl k 3

  4. Slide 4: Dow Delivers Adjusted EPS of $0.61 Per Share

    Dow Delivers Adjusted EPS of $0.61 Per Share 10th Consecutive Quarter of Y-O-Y Top-line Growth; Record Ag Performance  Reported EPS of $0.35, or adjusted EPS of $0.61 – Certain items included a restructuring-related charge of $0.25 per share  Sales of $14.7B, adjusted sales up 4% – Volume grew 3 p

  5. Slide 5: Momentum Exiting 1Q12

    Momentum Exiting 1Q12 Operating Rate  Operating rate up 12 points 90% vs. 4Q11 to 84% 85% – March rate was 2 p percentage g 80% pts higher vs. 1Q average 75% 70%  Sales up Mar. vs. Feb.(1) 65% – U.S. sales grew 15% 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 – Germany up 14% Change in Volume vs.1

  6. Slide 6: 1Q12 Financial Performance

    1Q12 Financial Performance Dollars in millions, except per share amounts 1Q12 1Q11 Net Sales $14,719 $14,733 Adjusted Net Sales $14,719 $14,215 Adjusted Volume change in percent 3% Adjusted Price change in percent 1% Adjusted EBITDA $2,089 $2,445 Net Income Available for Common Stockholders $412 $62

  7. Slide 7: Year-Over-Year Volume and Price Trends

    Year-Over-Year Volume and Price Trends V l Volume  Volume up 3% Electronic & -2% Functional Materials  Strong demand in Agricultural Sciences Coatings & --- Infrastructure Solutions  U.S. demand up 2% Agricultural Sciences 12%  10th consecutive quarter off Y-O-Y O growth in emerging Performance

  8. Slide 8: Operating Segment View

    Operating Segment View Electronic and Functional Materials  Sales down 1%; 1% price increase offset by 2% volume decline  Dow Electronic Materials overall sales declined on industry softness; however Display Technologies reported strong demand gains in Europe  Functional Materials reported record

  9. Slide 9: Operating Segment View

    Operating Segment View Agricultural Sciences  Record sales of $1.8 billion; record EBITDA of $451MM  Volume rose 12%; sales and volume grew in all geographic areas  Crop Protection demand up 14%; sales of new crop protection products up 27%  Seeds, Traits and Oils posted demand gains of 16%  Gr

  10. Slide 10: Operating Segment View

    Operating Segment View Performance Plastics  Sales flat; both volume and price in line with the year-ago period  Dow Elastomers posted new quarterly sales and EBITDA records  Dow Electrical and Telecommunications increased sales, with double- digit sales and volume gains in Asia Pacific  Strong

  11. Slide 11: Equity Earnings Contract Due to Industry Pressures

    Equity Earnings Contract Due to Industry Pressures Equity Earnings from Nonconsolidated Affiliates  Dow Corning impacted by ($ millions, excluding certain items) oversupply, pricing pressure $350 in silicon value chain $300 − Industry consolidation in progress $250 − Volume continues to increase $2

  12. Slide 12: Additional Financial Highlights

    Additional Financial Highlights  1Q12 working capital vs. 1Q11 − DSO: down 1 day to 43 days − DSI: rose to 75 days due to seasonal builds and turnaround prep  Net Debt to Total Capital p (1) of 41.2% − Down 160 basis points vs. 1Q11 − Reduced debt by >$1B in 1Q12 − ~$50MM reduction in interest exp

  13. Slide 13: Agenda

    Agenda  1Q 2012 Overview  Financial Update  Drivers to Deliver Shareholder Value − Feedstock Advantage − Integrated Portfolio − Innovation Agenda − Operating and Capital Efficiency  Outlook 13

  14. Slide 14: Clear Drivers to Deliver Shareholder Value

    Clear Drivers to Deliver Shareholder Value  Largest, most flexible and experienced ethylene producer Feedstock  70% of ethylene production in cost-advantaged regions Advantage  Shale gas dynamics & USGC investments drive EBITDA upside of ~$2B/year $ y in 2017  Strategically aligned with key end-

  15. Slide 15: Ethylene Industry Dynamics Remain Strong

    Ethylene Industry Dynamics Remain Strong Dow EBITDA Growth from Ethylene Derivatives Drivers Persistently Favorable Oil-to- a-to-Ethane Ratio Gas Ratio  Crude oil $110+ $110+…leading leading to high naphtha costs  Upward pressure on ethylene derivative prices  Nat gas forecast ~$4/mmbtu $4/mmbtu

  16. Slide 16: Feedstock Advantage Bolsters Downstream Profitability

    Feedstock Advantage Bolsters Downstream Profitability K F Key Future t IInvestments t t Feedstocks & Energy  Driven by downstream needs Performance Plastics – St. Charles cracker: YE 2012  Performance – PDH in Texas: 2015 Ethylene Packaging  Dow Elastomers – New cracker in Freeport: 2017  Dow El

  17. Slide 17: High-Growth, High-Margin Portfolio

    High-Growth, High-Margin Portfolio Normalized Normalized Trailing 4 Quarters Operating Segment Revenue EBITDA EBITDA Growth Target Margin Target Margin Electronic El t i &F Functional ti l 2x GDP ~25% 24% Materials Coatings & Infrastructure 1.5x GDP 20-25% 19% Solutions Agricultural Sciences 1.5x GD

  18. Slide 18: Dow's Portfolio Can Pivot to Optimize Returns

    Dow’s Portfolio Can Pivot to Optimize Returns Shorter-Term Integration Value Drivers Ability to arbitrage within and across multiple value Optimization of chains price and volume Geographic Breadth Exposure to fastest growing markets; Investments address growing middle-class Energy Longer Term Longe

  19. Slide 19: Monetizing the Innovation Pipeline

    Monetizing the Innovation Pipeline Addressing Megatrends ENERGY Commercializing Today  DOW POWERHOUSE™ Solar Shingle CONSUMER &  EVOQUE™ Pre-Composite LIFESTYLE Polymer Technology $33 Billion* Pipeline  Refuge Advanced® powered NPV, with by SmartStax® >500 Projects AGRICULTURAL  ENLIST ENLIST™ W

  20. Slide 20: EVOQUE Technology: Commercializing In All Key Regions

    EVOQUE™ Technology: Commercializing In All Key Regions C stomers ha Customers e validated have alidated technolog technology / commerciali ation underway commercialization nder a Customer sampling and testing taking place 20 5 5 10 3 Paints P i t formulated f l t d with ith Dow D hidi hiding technol

  21. Slide 21: On Track to Achieve Efficiency and Cost Targets

    On Track to Achieve Efficiency and Cost Targets Total Levers $2.5B Interventions Underway $1B  On track to deliver $250MM of Actively Manage $1.5B cost reductions in 2012 CapEx & Growth Additional Spending Levers – April 2: Announced selective downsizing / shutdown of assets to Poised to reduce str

  22. Slide 22: Strong Cash Flow Generation and Clear Uses of Cash

    Strong Cash Flow Generation and Clear Uses of Cash  Shareholder Sh h ld Remuneration: R ti R i d di Raised dividend id d 28%  Deleveraging: Reduced >$1B of debt in 1Q12  Invest for Growth: Prudent investments for organic growth Cash Flow from Operations Dividend Payout Ratio* 100% 80% Average Pay

  23. Slide 23: Agenda

    Agenda  1Q 2012 Overview  Financial Update  Drivers to Deliver Shareholder Value − Feedstock Advantage − Integrated Portfolio − Innovation Agenda − Operating and Capital Efficiency  Outlook 23

  24. Slide 24: Macroeconomic Outlook

    Macroeconomic Outlook  Asia showing improvements – Solid demand growth in South East Asia – Post-tsunami recovery in Japan – Stabilization St bili ti iin Chi China as governmentt policies li i shift hift tto d domestic ti growth th  United States sees recovery – Improvement in consumer confidence

  25. Slide 25: Earnings Growth Trajectory Remains Intact

    Earnings Growth Trajectory Remains Intact Margin Expansion / Organic Growth Equity Earnings Growth Synergies / Innovation Dow’s Next Level of Earnings $15B ~$1.5B of incremental EBITDA $10B $8.4B $7.5B $5.5B Near Earnings 2009 2010 2011 Term T P Power 25

  26. Slide 26: 26

    26

  27. Slide 27: Appendix

     Appendix 27

  28. Slide 28: Macroeconomic Outlook

    Macroeconomic Outlook Continued Demand Growth Developed Emerging Developed Emerging Developed Emerging Flat or Insignificant Demand Growth (+ or -) Middlle East / Africa Middlle East / Africa Middlle East / Africa Wesstern Europe Wesstern Europe Wesstern Europe Easstern Europe Easstern Europe Easste

  29. Slide 29: Electronic & Functional Materials

    Electronic & Functional Materials Dollars in millions 1Q12 1Q11 Sales $1,121 $1,134 Price 1% Volume (2)% EBITDA $243 $257 EBITDA, excluding Certain Items(1) $260 $257 Equity earnings (included in EBITDA) $19 $24 (1) See Supplemental pp Information regarding g g these items. 1Q12 Sales 1Q12 Trends vs

  30. Slide 30: Coatings & Infrastructure Solutions

    Coatings & Infrastructure Solutions Dollars in millions 1Q12 1Q11 Sales $1,703 $1,732 Price (2)% Volume - EBITDA $204 $250 EBITDA, excluding Certain Items(1) $245 $250 Equity earnings (included in EBITDA) $22 $68 (1) See Supplemental pp Information regarding g g these items. 1Q12 Sales 1Q12 Trends P

  31. Slide 31: Agricultural Sciences

    Agricultural Sciences Dollars in millions 1Q12 1Q11 Sales $1,838 $1,606 Price 2% V l Volume 12% EBITDA $451 $406 Equity earnings (included in EBITDA) $1 $3 1Q12 Trends vs. 1Q11 Sales Price Volume Dow AgroSciences    31

  32. Slide 32: Performance Materials

    Performance Materials Dollars in millions 1Q12 1Q11 Sales $3,473 $3,541 Price (2)% Volume - Volume (excluding divestitures) 2% EBITDA $332 $564 EBITDA, excluding Certain Items(1) $518 $564 1Q12 Trends Equity losses (included in EBITDA) $(17) $(5) vs. 1Q11 (1) See Supplemental Information regarding t

  33. Slide 33: Performance Plastics

    Performance Plastics Dollars in millions 1Q12 1Q11 Sales $3,591 $4,043 Price - Volume (11)% Volume (excluding divestitures) - EBITDA $718 $981 Equity earnings (included in EBITDA) $34 $62 1Q12 Sales 1Q12 Trends Dow Elastomers vs. 1Q11 Dow Electrical & TTelecommunications l i ti S l Sales Pi Price V

  34. Slide 34: Feedstocks & Energy

    Feedstocks & Energy Dollars in millions 1Q12 1Q11 Sales $2,935 $2,588 Price 6% V l Volume 7% EBITDA $198 $248 Equity earnings (included in EBITDA) $125 $155 1Q12 Trends vs. 1Q11 1Q12 Sales Chlor‐ S l Sales Pi Price V l Volume Alkali/Chlor‐ Chlor-Alkali/Chlor-Vinyl    Vinyl EO/EG Energy    Ener

  35. Slide 35: Reconciliation of Non-GAAP Financial Measures

    Reconciliation of Non-GAAP Financial Measures Three Months Ended Dollars in millions 03/31/12 03/31/11 EBITDA $1 708 $1,708 $1 942 $1,942 - Depreciation and amortization 679 731 + Interest income 6 7 - Interest expense and amortization of debt discount 329 377 Income Before Income Taxes $706 $841 -

  36. Slide 36: Supplemental Information

    Supplemental Information Results in the first quarter of 2012 were impacted by the following items: • Pretax restructuring charges of $357 million. On March 27, 2012, the Company’s Board of Directors approved a restructuring plan as part of a series of actions to optimize its portfolio, respond to c

  37. Slide 37: Supplemental Information

    Supplemental Information Certain Items Impacting Results In millions, except per share amounts Pretax Impact (1) Net Income (2) EPS - Diluted (3) Three Months Ended Three Months Ended Three Months Ended 03/31/2012 03/31/2011 03/31/2012 03/31/2011 03/31/2012 03/31/2011 Adjusted to exclude certain ite

  38. Slide 38: Certain Items Affecting Results

    Certain Items Affecting Results Certain items decreasing EBITDA by operating segment In millions Three Months Ended 03/31/12 03/31/11 Electronic and Functional Materials $(17) - Coatings and Infrastructure Solutions $(41) - Agricultural Sciences - - Performance Materials $(186) - Performance Plastic

  39. Slide 39: 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. MEGl b l MEGlobal The SCG-Dow Group 39

  40. Slide 40: Emerging Geographies

    Emerging Geographies Dow defines emerging geographies as the following: Eastern Europe, p including g Russia Asia Pacific, excluding Japan, Australia and New Zealand Latin America India Middle East Africa 40

  41. Slide 41: Preliminary Results for Principal Joint Ventures

    Preliminary Results for Principal Joint Ventures Principal Joint Ventures - Total Dow Proportionate Share Dollars in millions 1Q12 1Q11 Dollars in millions 1Q12 1Q11 Sales $3 743 $3,743 $3 800 $3,800 Sales $1 823 $1,823 $1 854 $1,854 Adjusted Sales(1) $2,835 $2,950 Adjusted Sales(1) $1,400 $1,460 EB

  42. Slide 42: Reconciliation of Equity Earnings

    Reconciliation of Equity Earnings 2002 2003 2004 2005 2006 2007 2008 2009 Quarterly Average Equity Earnings excluding certain items $10 $81 $231 $241 $240 $281 $197 $181 Equity Earnings excluding certain items, items for the year 40 322 923 964 959 1,122 787 724 Certain items: Dow Corning Restructur

  43. Slide 43: Global Operating Rates as a Percent of Capacity

    Global Operating Rates as a Percent of Capacity Year QTR YTD 2009 1Q 68% 68% 2Q 75% 71% 3Q 78% 74% 4Q 76% 74% 2010 1Q 83% 83% 2Q 80% 82% 3Q 86% 83% 4Q 81% 83% 2011 1Q 83% 83% 2Q 84% 83% 3Q 83% 83% 4Q 72% 80% 2012 1Q 84% 84% 43

The Dow Chemical Company — Q1 2012 Earnings Presentation on 6ix