Dow Inc. · NYSE:DOW
Dow — The Dow Chemical Company — Q1 2017 Earnings Presentation
31 slides from Dow's earnings presentation, Apr 27, 2017
Slide 1: 1Q 2017 Earnings Conference Call
The Dow Chemical Company 1Q 2017 Earnings Conference Call April 27, 2017 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 expectati
Slide 3: 1Q17 Results Underscore Strength of Dow's Portfolio
1Q17 Results Underscore Strength of Dow’s Portfolio Business Model Continues to Deliver • All-time record quarterly Operating EBITDA – Up 20% YoY, reaching $2.7B • 18th consecutive quarter of YoY Operating EPS growth – Up 17%, rising to $1.04; highest 1Q EPS in over a decade • 14th consecutive quart
Slide 4: Agenda
Agenda • 1Q Financial Highlights • 1Q Business Highlights • Update on Dow Corning • Dow’s Growth Strategy 4
Slide 5: 1Q17: Double-Digit Sales, Op. EBITDA and Op. EPS Growth
1Q17: Double-Digit Sales, Op. EBITDA and Op. EPS Growth Financial Performance Snapshot 1Q16 1Q17 B/(W) Net Sales ($MM) $10,703 $13,230 +$2,527 Price: +7% Sales ex. Acquisitions ($MM) $10,703 $11,942 +$1,239 Volume: +4% Operating EBITDA ($MM) $2,253 $2,704 +$451 Operating EPS ($/share) $0.89 $1.04 +$
Slide 6: Agenda
Agenda • 1Q Financial Highlights • 1Q Business Highlights • Update on Dow Corning • Dow’s Growth Strategy 6
Slide 7: Ag. Sciences: Slow Crop Protection Market Partly Offset By Innovation-Led Growth
Ag. Sciences: Slow Crop Protection Market Partly Offset By Innovation- Led Growth Quarterly Segment Performance Innovation Driven Gains More than Offset by Macro Headwinds ($MM) 1Q16 1Q17 • Seeds growth in LA more than offset by lower sales in NA, led by reduced corn demand due to projected acreage
Slide 8: Consumer Solutions: Record First Quarter Operating EBITDA
Consumer Solutions: Record First Quarter Operating EBITDA Dow Automotive Systems: All-Time Quarterly Operating EBITDA Record Quarterly Segment Performance • Double-digit volume gains driven by growth in emerging markets, ($MM) 1Q16 1Q17 led by Greater China, Mexico and Brazil; notable growth in EMEA
Slide 9: Infrastructure Solutions: Higher Op. EBITDA on Construction Demand
Infrastructure Solutions: Higher Op. EBITDA on Construction Demand Dow Bldg. & Construction: Innovation Drives Tilt Towards Non-Res. Sector Quarterly Segment Performance • Strong volume growth driven by STYROFOAM™ insulation, methyl ($MM) 1Q16 1Q17 cellulosics and BLUEDGE™ polymeric flame retardant
Slide 10: Perf. Materials & Chemicals: Price and Volume Gains in all Businesses
Perf. Materials & Chemicals: Price and Volume Gains in all Businesses Polyurethanes: Robust Demand for Systems, Tight MDI Conditions Quarterly Segment Performance • Price and volume gains across all geographic areas ($MM) 1Q16 1Q17 • Strong demand for systems applications, particularly in $435 $2,44
Slide 11: Performance Plastics: Pricing Momentum, Record Volume Offset by Higher Feedstock Costs
Performance Plastics: Pricing Momentum, Record Volume Offset by Higher Feedstock Costs Quarterly Segment Performance Dow Packaging and Specialty Plastics: Record 1st Quarter Sales Volume ($MM) 1Q16 1Q17 • Demand gains led by strength in the industrial & consumer packaging end-market; notable gains i
Slide 12: Agenda
Agenda • 1Q Financial Highlights • 1Q Business Highlights • Update on Dow Corning • Dow’s Growth Strategy 12
Slide 13: Dow Corning Integration Ahead of Expectations
Dow Corning Integration Ahead of Expectations Cost Synergies Target Achieved; Increasingly Focused on Growth Financial Results Exceed Expectations Cost Synergy Capture 1+ Year Ahead of Plan Progress ($MM) Commitment ($MM) EPS accretive since first month post-close $400 $360 Accelerated cost syne
Slide 14: Execution of Growth Synergies Underway
Execution of Growth Synergies Underway • Exceptional skin feel personal • Well-defined synergy playbook to Consumer care offerings achieve at least $100MM in synergies • Improved durability and reduced moisture, vibration and shock • >400 opportunities identified impacts in appliances and systematic
Slide 15: Agenda
Agenda • 1Q Financial Highlights • 1Q Business Highlights • Update on Dow Corning • Dow’s Growth Strategy 15
Slide 16: Dow: Growth Strategy
Dow: Growth Strategy Narrower and Deeper Market Focus Enabled by Technology Platforms, Operational Excellence and Flexible Integration INTEGRATION & INNOVATION ADVANTAGED WORLD-CLASS SCIENCE AND NARROWER, DEEPER BACK-INTEGRATION ENGINEERING CAPABILITIES END-MARKET PRESENCE High-Throughput Research P
Slide 17: Consumer-Led Markets Increasingly Demand Unique Materials Toolkit
Consumer-Led Markets Increasingly Demand Unique Materials Toolkit Demand for PE Grows at 0.5 lb/yr per Capita Capabilities Required to Meet Customers’ Needs in Core Markets Global PE Consumption 35 Packaging Per Capita (lbs)1 30 25 Rapid Innovation 20 & Scalability 15 2000 2005 2010 2015 2020 One-St
Slide 18: World-Class Innovation Capabilities & Market Focus
World-Class Innovation Capabilities & Market Focus Meets Customer Needs, Drives Demand in Core End-Markets & Lifts Margins Dow’s R&D Leadership Drives Innovation & Yields Business Value Creation Examples of New Consec. Qtrs of YoY Dow Business Commercialization Success Products Volume Growth1 • >20%
Slide 19: Investments Provide Cost-Advantaged Hubs to Deploy Technology-Rich Products & Capture Geographic Growth
Investments Provide Cost-Advantaged Hubs to Deploy Technology-Rich Products & Capture Geographic Growth 10 integrated feedstock advantaged plants Foundational Springboards for Further Growth & Cash Flow Over the Next Decade 19
Slide 20: Consistent Track Record of Delivering on Financial Priorities Over Last Five Years
Consistent Track Record of Delivering on Financial Priorities Over Last Five Years Progress on Key Operating EPS: >2x Increase Operating Cash Flow1: Up 50% Financial Metrics (2012-2016) $4.25 $3.89 ($B) CAPEX Op. Free Cash Flow2 $8 Thousands $6.7 • Operating EPS CAGR of 18% $3.50 $6 $4.1 $3.0 $2.75
Slide 21: Poised for Enhanced Earnings As Growth Drivers Deliver
Poised for Enhanced Earnings As Growth Drivers Deliver Earnings Trajectory On Track; Generating >$10B Op. EBITDA Differentiated, Technology-Rich Products Growth Strategy and Cost-Advantaged Integration Drive Results Re-Affirmed in 2013 • Narrower and deeper focus in consumer- Future Op. EBITDA orien
Slide 22: 2017 – 2022 Growth Strategy
2017 – 2022 Growth Strategy 1. Deliver strong cash flow from USGC & Sadara investments 2. Expand downstream positions in four key market verticals of Packaging, Infrastructure, Transportation and Consumer Care 3. Invest in innovation and integration, while maintaining capex in-line with depreciation
Slide 23: Slide 23
Slide 24: Appendix
™ Appendix
Slide 25: Market Pulse – 1Q17 Heat Map
Market Pulse – 1Q17 Heat Map Eastern Europe, ME, 1Q17 Up 3X global GDP or greater Western Europe Developing Asia Developed Asia Flat Demand Growth Latin America US & Canada Africa, India 1Q17 Down Double-digit or Greater Lower Participation Market 2 Participation (includes Silicones) of ~$1B or more
Slide 26: 2Q17 Modeling Guidance
2Q17 Modeling Guidance Dow Revenue $13.3-13.8B D&A $800-850MM Corporate Operational Tax Rate 23-27% Net Interest Expense $175-225MM Share Count ~1,230MM Corp. Segment EBITDA $(75)-(100)MM YoY FOREX $(0.03)-(0.06)/sh. headwind, at prompt YoY Dow Op. EBITDA Margin impact from Sadara: exchange rates, l
Slide 27: Crop Protection Pipeline Full with High-Value Solutions
Crop Protection Pipeline Full with High-Value Solutions Name Discovery Development Est. Launch* Launched within 5 years Enlist Duo® herbicide with Colex-D® 2015-2018 Arylex™ Active 2015-2018 InatreqTM Active 2018-2019 Rinskor™ Active 2018-2019 Launched after 5 years Fungicide 1 Fungicide 2 Insectici
Slide 28: Operating Rates Remain High in Forecast Period
Operating Rates Remain High in Forecast Period Polyethylene Dow’s View on Market Drivers Demand Capacity Operating Rate (%) 300 95% Global operating rates likely stable over next few years Capacity and Demand (B lbs.) • Demand growth in consumer-driven markets Global Operating Rate 250 90% • Industr
Slide 29: 1Q17 vs. 1Q16 Sales Trends by Business
1Q17 vs. 1Q16 Sales Trends by Business Agricultural Sciences Consumer Solutions1 Infrastructure Solutions1 Sales Price Volume Sales Price Volume Dow Building & Sales Price Volume Construction # $ # Dow Automotive # $ # Crop Protection $ $ $ Systems Energy & Water # $ # Consumer Care # $ # Solutions
Slide 30: Quarterly Preliminary Results for Principal Joint Ventures
Quarterly Preliminary Results for Principal Joint Ventures Principal Joint Ventures1 – Total Dow Proportionate Share Dollars in millions (unaudited) 1Q17 1Q16 Dollars in millions (unaudited) 1Q17 1Q16 Sales $2,916 $1,862 Adjusted Sales2 $761 $472 Adjusted Sales2 $1,930 $1,228 Operating EBITDA3 $345
Slide 31: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Three Months Ended In millions 3/31/17 3/31/16 Net Income Available for The Dow Chemical Company Common Stockholders $888 $169 + Preferred stock dividends – 85 + Net income attributable to noncontrolling interests 27 21 + Provision (credit) for income ta
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