The Urethane Blog

Dow Chemical Q1 Results

Dow reports first quarter 2020 results



  • GAAP earnings per share was $0.32; Operating EPS¹ was $0.59. Operating EPS excludes significant items in the quarter, totaling $0.27 per share, related to restructuring and asset related charges; early extinguishment of debt; and integration and separation costs.
  • Net sales were $9.8 billion, down 11% versus pro forma results in the year-ago period, primarily driven by lower local prices in all operating segments due to a decline in global energy prices.
  • Volume declined 2% versus pro forma results in the year-ago period, and decreased 1% excluding the Hydrocarbons and Energy business. Demand grew in food, health and hygiene packaging; surfactants and solvents for cleaning; and coatings end-markets. However, these gains were more than offset by declines in polyurethanes and silicones applications, including automotive and durable goods. Sequentially, the Company reported broadly lower volumes in China on slower economic activity with the onset of the COVID-19 pandemic and public health interventions.
  • Local price declined 8% versus pro forma results in the year-ago period, primarily reflecting lower global energy prices. Currency decreased sales by 1%.
  • Equity losses were $89 million versus equity losses of $14 million in the year-ago period. The decline was primarily driven by lower results at the Kuwait and Thai joint ventures on margin compression in their key products, including monoethylene glycol (MEG) and polyethylene.
  • GAAP Net Income from continuing operations was $258 million. Operating EBIT1 was $843 million, down from a pro forma result of $1.1 billion in the year-ago period, reflecting margin compression, notably in the polyurethanes and silicones chains, as well as lower equity earnings. The decline was softened by pockets of demand growth and more than $30 million of savings from stranded cost removal.
  • Cash provided by operating activities – continuing ops. was $1.2 billion, up $193 million versus the year-ago period. Capital expenditures were $395 million and free cash flow2 was $841 million. Dow recovered $259 million in tax withholdings from the Canadian tax authority related to the 2019 judgment against Nova Chemicals.
  • Returns to shareholders totaled $643 million in the quarter, including $518 million in dividends and $125 million in share repurchases.
  • Total cash and available committed liquidity at quarter-end was approximately $12 billion. Cash and equivalents of $3.6 billion included $800 million of cash proactively accessed from uncommitted lines. Early in the quarter, the Company issued an aggregate principal amount of €2.25 billion in Euro denominated notes, achieving a weighted average coupon of approximately 1%. The Company used the net proceeds to redeem existing notes and repay debt. As a result, the Company has no substantive long-term debt due until the second half of 2023.
  • The Sadara joint venture signed its final logistics service agreement, the final substantive step to project completion.


Jim Fitterling, chairman and chief executive officer, commented on the quarter:

“I am proud of the Dow team’s determination and resilience in the midst of the global pandemic and rapid decline in global energy prices. We ensured the safety and security of our people and operations, maintained business continuity, and rapidly established an effective crisis management response. We showcased the necessity and value of our products as we met strong demand from our customers in food packaging, health and hygiene, and cleaning end-markets. And, we leveraged our extensive geographic reach and asset flexibility to quickly respond to shifting trends in regional consumption, as well as in feedstock prices, as crude oil prices declined 60% through the quarter.

“Our volumes and operating rates reflected divergent demand patterns, as we met increasing needs for consumer staple non-durable goods, which countered lower requirements for discretionary durable goods. We also experienced margin compression in our upstream polyurethanes and silicones chains on weaker industry fundamentals. We partly offset the headwinds with stranded cost removal, effectively managing our working capital, and demonstrating our operational responsiveness and agility.

“We ended the first quarter with $12 billion of committed liquidity, including $3.6 billion in cash, and an improved debt profile. Our results reflected continued prioritization of a flexible capital structure, solid cash flow generation, and execution on our non-operational cash actions. We delivered $1.2 billion in cash from continuing operations. Free cash flow improved by $240 million, supported by controls on expense and capital spending and additional stranded cost removal. Altogether, our operational playbook remained flexible to the dynamic business environment, and it continued to serve us well in navigating the challenges and volatility we experienced in the quarter.”

Polyurethanes & Construction Chemicals reported a net sales decline on reductions in local price and volume. Local price decreased on lower global energy costs. Volume declined in all geographic regions except EMEAI, which was up slightly. Demand fell in furniture and bedding, automotive and appliance applications. Mild winter weather in the northern hemisphere led to lower demand in aircraft deicing applications. The largest percentage volume decline was reported in Asia Pacific, particularly in China, which was heavily impacted by the COVID-19 pandemic.


“While we are beginning to see indications of a recovery from COVID-19 in China, the full extent of the impact of the pandemic in other major geographies is still being determined as the virus continues to spread,” said Fitterling. “Assuming a gradual and sustainable return of global economic activity and reopening of economies in May and June, we expect a recovery will begin to take hold as the year progresses.

“We are taking immediate and additional proactive measures to further strengthen our financial position. These actions include: further reducing our capital expenditure target to $1.25 billion, representing a $750 million reduction versus 2019; trimming operating expenses by $350 million; and unlocking another $500 million from working capital. In addition, we are temporarily idling select manufacturing units to balance production to demand across markets more severely affected by restrained economic activity. Operationally, we will continue to take advantage of our global footprint and industry-leading asset capabilities, remain close to our customers, and ensure availability of products essential to consumers and instrumental to containing the global pandemic, such as hand sanitizer and materials for personal protective equipment.

“We are proud of the critical role our company and industry continue to play during these extraordinary times. And, we are confident that the actions we are taking will position Dow to emerge even stronger when the global economy rebounds.”