Dow Inc. · NYSE:DOW
Dow — The Dow Chemical Company — Q3 2016 Earnings Presentation
26 slides from Dow's earnings presentation, Oct 27, 2016
Slide 1: 3Q 2016 Earnings Conference Call
The Dow Chemical Company 3Q 2016 Earnings Conference Call October 27, 2016 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: Dow Delivers 3Q16 Operating EPS of $0.91, up 11%
Dow Delivers 3Q16 Operating EPS of $0.91, up 11% Achieves Four Full Years of YoY Operating Earnings Growth & Margin Expansion Financial • 16th consecutive quarter of YoY operating EPS and EBITDA margin expansion • Highest 3Q operating EPS in a decade • Record 3Q operating EBITDA of $2.5B • >$900MM o
Slide 4: Agenda
Agenda • Financial Highlights • Business Highlights • Dow’s Enhanced Earnings Growth Trajectory 4
Slide 5: 3Q16 Financial Performance Summary
3Q16 Financial Performance Summary Consumer-led Demand for Dow’s Solutions Drives Operating EBITDA Tailwinds: Operating EBITDA, ($MM) • Broad-based, consumer-driven demand $203 $54 • Dow Corning integration uplift $141 $36 • Strong Ag performance in Latin $(218) $(98) America $2,471 • Productivity i
Slide 6: Dow Corning Integration Well On-Track
Dow Corning Integration Well On-Track Significant Progress on Cost Synergies and Delivery of Quick Win Opportunities Cost Synergies Cost Synergy Tracking vs. $400MM Commitment Progress Commitment 100% • Cost synergy run-rate at 85% >$200MM 70% 51% • >85% of role reduction 30% target notified • Full
Slide 7: 4Q16 Modeling Guidance
4Q16 Modeling Guidance Corporate TDCC Revenue $12 - 13B D&A $750 - 800MM Corp. Segment EBITDA $(85) - (125)MM Net Interest Expense $175 - 225MM Operational Tax Rate 23 - 27% Sharecount ~1,125MM Segments Key Drivers Agricultural Continued productivity and self-help actions offset by challenging indus
Slide 8: Agenda
Agenda • Financial Highlights • Business Highlights • Dow’s Enhanced Earnings Growth Trajectory 8
Slide 9: Ag. Sciences: Highest 3Q Operating EBITDA in Nearly a Decade
Ag. Sciences: Highest 3Q Operating EBITDA in Nearly a Decade Quarterly Segment Performance Record 3Q Seeds Sales and Crop Protection Operating EBITDA ($MM) 3Q15 3Q16 • Op. EBITDA increased $141MM YoY on strong growth in LAA, $1,235 $102 $1,167 8% productivity gains and demand for innovative products
Slide 10: Consumer Solutions: Record Quarterly Operating EBITDA
Consumer Solutions: Record Quarterly Operating EBITDA Dow Automotive Systems: Record 3Q Operating EBITDA Quarterly Segment Performance • Double-digit volume gains in Asia Pacific on new business wins ($MM) 3Q15 3Q16 and market share gain $1,575 $492 • 7 consecutive quarters of YoY Op. EBITDA growth
Slide 11: Infrastructure Solutions: B&C Strength, Softness in Energy & Water
Infrastructure Solutions: B&C Strength, Softness in Energy & Water Dow Building & Construction: Record 3Q Operating EBITDA Quarterly Segment Performance • Volume growth on demand for acrylics-based construction chemicals ($MM) 3Q15 3Q16 and continued adoption of BLUEDGE™ polymeric flame retardant •
Slide 12: Perf. Materials & Chemicals: PU Systems Strength, Volume Growth
Perf. Materials & Chemicals: PU Systems Strength, Volume¹ Growth Polyurethanes: Growth Driven by Energy Efficiency Applications Quarterly Segment Performance ($MM) 3Q15 3Q16 • Record volume on continued tilt to downstream systems; $540 double-digit gains in specialty polyols and systems $3,142 • Op.
Slide 13: Performance Plastics: Double-Digit Volume Growth
Performance Plastics: Double-Digit Volume Growth Dow Packaging and Specialty Plastics: Record 3Q Sales Volume Quarterly Segment Performance ($MM) 3Q15 3Q16 • Double-digit growth in developed geographies and adoption 29% of INNATE™ and AFFINITY™ grades into food and specialty $4,665 $4,702 $1,349 27%
Slide 14: Agenda
Agenda • Financial Highlights • Business Highlights • Dow’s Enhanced Earnings Growth Trajectory 14
Slide 15: Earnings Growth Showcases Power of Dow's Business Model
Earnings Growth Showcases Power of Dow’s Business Model Innovation and Integration Deliver Higher, More Consistent Earnings Track Record of Growth, Innovation & Integration Shift Earnings Trajectory Integration & Portfolio Enhancements $10 7-Year Avg Operating EBITDA • Narrower focus on packaging, t
Slide 16: Strategic Shifts Have Yielded Enhanced Shareholder Returns
Strategic Shifts Have Yielded Enhanced Shareholder Returns Average Operating EBITDA ($B) Average Operating Cash Flow ($B) $9.6 $7.2 $8.6 $5.6 $6.7 $5.1 $3.9 $3.0 2001-2005 2006-2010 2011-2015 3Q16 TTM 2001-2005 2006-2010 2011-2015 3Q16 TTM 1 Consistent EBITDA Growth Enhanced Cash Flow Profile • Esta
Slide 17: Dow Will Continue to Deliver
Dow Will Continue to Deliver • Focused Portfolio • Flexible Integration • Industry-Leading Innovation • Broad Geographic Reach Through a Relentless Focus on our Execution and on Maximizing Value Creation 17
Slide 18: Slide 18
Slide 19: Appendix
= Appendix
Slide 20: Financial Performance Metrics (on a trailing twelve month basis)
Financial Performance Metrics (on a trailing twelve month basis) Operating EPS Operating EBITDA ($MM) Operating Cash Flow1 ($MM) $3.75 $10,000 $9,000 $3.25 Op. FCF CAPEX $9,000 $7,500 $2.75 $6,000 $8,000 $2.25 $4,500 $7,000 $1.75 $3,000 $6,000 $1,500 $1.25 $5,000 $0 Target: 10% average annual EPS Di
Slide 21: 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% Operating rates likely stable over next few years Capacity and Demand (B lbs.) • Demand growth in consumer-driven markets Global Operating Rate 250 90% • Industry forec
Slide 22: Market Pulse – 3Q16 Heat Map
Market Pulse – 3Q16 Heat Map 3Q16 Up 3X GDP or greater Eastern Europe, ME, Flat Demand Growth Western Europe Developing Asia Developed Asia 3Q16 Down Double digit or greater Latin America US & Canada Africa, India Lower Participation >$1B Participation in 2015 ex. Divestitures, includes Silicones Ma
Slide 23: 3Q16 vs. 3Q15 Sales Trends by Business
3Q16 vs. 3Q15 Sales Trends by Business Agricultural Sciences1 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 24: Global Operating Rates as a Percent of Capacity
Global Operating Rates as a Percent of Capacity Year QTR YTD 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% 3Q 86% 85% 4Q 86% 85% 2016 1Q 88% 88% 2Q 82% 85% 3Q 86% 85% 24
Slide 25: Preliminary Results for Principal Joint Ventures
Preliminary Results for Principal Joint Ventures Principal Joint Ventures1 – Total Dow Proportionate Share Dollars in millions (unaudited) 3Q16 3Q15 Dollars in millions (unaudited) 3Q16 3Q15 Sales $2,146 $2,664 Sales $828 $1,042 Adjusted Sales2 $1,492 $1,821 Adjusted Sales2 $572 $710 EBITDA3 $343 $4
Slide 26: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Three Months Ended Nine Months Ended In millions 9/30/16 9/30/15 9/30/16 9/30/15 Operating EBITDA $2,471 $2,353 $7,188 $7,206 + Certain Items (408) 570 55 1,157 EBITDA $2,063 $2,932 $7,243 $8,363 - Depreciation and amortization 780 645 2,067 1,921 + Inte
The Dow Chemical Company — Q3 2016 Earnings Presentation on 6ix