DOW 3Q 2019 RESULTS
DOW 3Q 2019 RESULTS
October 24, 2019
AGENDA
Quarterly Highlights Segment Results Financial Summary
Delivering on 2019 Priorities Outlook
2
3Q 2019 HIGHLIGHTS
Net Sales of $10.8B ? in-line with guidance
Demand growth YoY in packaging, polyurethanes and silicones applications; volume ex-H&E up 1% YoY
Grew earnings sequentially, with notable Op. EBIT margin expansion in P&SP (190 bps YoY, 100 bps QoQ)
Completed cost synergy program and delivered additional stranded cost removal
Generated $1.8B of cash flow from operating activities ? continuing operations, up $1.6B YoY
Returned $0.6B to shareholders: $0.5B in dividends, $0.1B in share repurchases
96%
Op. EBITDA-toCFFO Conversion
+80 bps
Sequential Op. EBIT Margin
Improvement
$1.365B
Completed Cost Synergy Program
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PACKAGING & SPECIALTY PLASTICS
Financial Performance Snapshot
In millions, except margin percentages
Net Sales Op. EBIT Op. EBIT Margin Op. EBIT ex. Eq. Earn. Op. EBIT Margin ex. Eq. Earn.
Packaging & Specialty Plastics
3Q19
As Reported
$5,062 $798 15.8% $775 15.3%
3Q18
Pro Forma
$6,157 $857 13.9% $774 12.6%
B/(W)
$(1,095) (18)%
$(59)
(7)%
190 bps
$1
-
270 bps
Variances vs. SQLY Pro Forma
Local
Op.
Sales Price FX Volume EBIT
-18% -13% -1% -4%
Net Sales by Business
Packaging and Specialty Plastics
Hydrocarbons & Energy
Net Sales by Geographic Region
U.S. & Canada
EMEAI
Packaging and Specialty Plastics Hydrocarbons & Energy
LAA
APAC
Packaging demand growth, Op. EBIT margin expansion & new capacity contributions more than offset lower equity earnings
4
INDUSTRIAL INTERMEDIATES & INFRASTRUCTURE
Financial Performance Snapshot
In millions, except margin percentages
Net Sales Op. EBIT Op. EBIT Margin Op. EBIT ex. Eq. Earn. Op. EBIT Margin ex. Eq. Earn.
3Q19
As Reported
$3,365 $193 5.7% $263 7.8%
3Q18
Pro Forma
$3,913 $466 11.9% $412 10.5%
B/(W)
$(548) (14)% $(273) (59)%
(620) bps $(149) (36)%
(270) bps
Ind. Intermediates & Infrastructure
Variances vs. SQLY Pro Forma
Local
Op.
Sales Price FX Volume EBIT
-14% -13% -1% ?
Net Sales by Business
Industrial Solutions
Polyurethanes & Construction Chemicals
Net Sales by Geographic Region
U.S. & Canada
EMEAI
Industrial Solutions
Polyurethanes & Construction Chem.
LAA
APAC
Demand growth in PU Systems more than offset by lower industrial end-market demand and lower equity earnings
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PERFORMANCE MATERIALS & COATINGS
Financial Performance Snapshot
In millions, except margin percentages
Net Sales
Op. EBIT
Op. EBIT Margin
3Q19
As Reported
$2,250
$200
8.9%
3Q18
Pro Forma
$2,552
$398
15.6%
B/(W)
$(302) (12)% $(198) (50)%
(670) bps
Net Sales by Business
Consumer Solutions
Coatings & Perf. Monomers
Performance Materials & Coatings
Variances vs. SQLY Pro Forma
Local
Op.
Sales Price FX Volume EBIT
-12% -10% -1% -1%
Net Sales by Geographic Region
U.S. & Canada
EMEAI
Consumer Solutions Coatings & Perf. Monomers
APAC LAA
Volume growth in Consumer Solutions more than offset by siloxanes margin compression and lower coatings demand
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3Q 2019 FINANCIAL HIGHLIGHTS
YoY Operating EPS Reconciliation
$1.34
$0.91
3Q18
Cost Synergies & Stranded Cost Removal
New USGC Capacity
Margin
Equity Losses Argentina
Compression
Ethylene Outage
3Q19
Financial Summary
($ millions, unless otherwise noted)
Net Sales Equity Earnings (Losses) Income from continuing ops, net of tax Operating EBIT
Op. EBIT Margin (%) Op. EBIT Margin ex. Eq. Earnings (%)
EPS ? diluted Operating EPS ? diluted Cash Provided by Op. Activities ? Cont. Ops
3Q19
As Reported
$10,764
$(44)
$347
$1,117 10.4% 10.8%
$0.45
$0.91
$1,790
3Q18
Pro Forma
YoY 2Q19 B/(W) As Reported
$12,697 $(1,933) $11,014
$135 $(179)
$(15)
$743 ($396)
$90
$1,611 $(494) 12.7% (230) bps 11.6% (80) bps
$1,059 9.6% 9.8%
$0.97 ($0.52)
$0.10
$1.34 $(0.43)
$0.86
$203 $1,587
$960
QoQ B/(W)
$(250)
$(29)
$257
$58 80 bps 100 bps
$0.35
$0.05
$830
Key Drivers in the Quarter
? Completed $1.365B cost synergy program and removed ~$40MM YoY in stranded costs
? Growth in packaging applications, supported by contributions from USGC investments
? Polyurethanes Systems growth ? 25th consecutive quarter of YoY volume growth
? Margin compression in siloxanes and isocyanates
? ~$100MM unfavorable impact from ethylene outage in Argentina
? Lower JV equity earnings, driven primarily by MEG at Kuwait JVs and isocyanates at Sadara
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4Q 2019 MODELING GUIDANCE
Sequentially, core EBIT improvement offset by normal seasonality & modest turnaround impact
Revenue Operational Tax Rate Net Income Attrib. to Non-Controlling Int.
$9.8B ? $10.2B ~24%
$15MM ? $25MM
Depreciation & Amortization Net Interest Expense (Net of Int. Income) Share Count
~$735MM ~$220MM
~745MM
Sales Drivers (4Q19 vs. 3Q19)
Sales down 7% - 9%
Packaging & Specialty Light cracker feedslates in U.S. and
Plastics
Europe continue, which reduces
co-product production and sales
Industrial Intermediates & Infrastructure
Sales down 2% - 4%
Performance
Sales down 10% - 12%, driven by
Materials & Coatings seasonality
Corporate
Sales of $70 - $80MM
Op. EBIT Drivers (4Q19 vs. 3Q19)
Add back: Argentina outage impact in 3Q19 (~$100MM tailwind) Absence of "lumpy" catalyst and licensing activity (~$85MM headwind) Completion of planned turnaround at cracker in The Netherlands (~$15MM headwind)
Add back: one-time items in 3Q19 (~$20MM tailwind) On average, MEG prices ~similar to 3Q19 Planned PDH turnaround; 2/3rd of cost and lost margin (~$40MM headwind)
Add back: one-time items in 3Q19 (~$25MM tailwind) On average, siloxanes prices stay at September levels Normal seasonality in Coatings (~$50MM headwind) Planned PDH turnaround; 1/3rd of cost and lost margin (~$20MM headwind)
Op. EBITDA of $(60) - $(80)MM and Op. EBIT of $(70) - $(90)MM
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