Urethane Blog
Dow Posts Results
January 29, 2020
Dow reports fourth quarter 2019 results
MIDLAND, Mich.–(BUSINESS WIRE)– Dow (NYSE: DOW):
FINANCIAL HIGHLIGHTS
- GAAP loss per share from continuing operations was $3.14; Operating EPS¹ was $0.78. Operating EPS excludes significant items in the quarter, totaling $3.92 per share, primarily related to: the impairment of the remaining Coatings & Performance Monomers acquisition-related goodwill and charges related to Sadara; integration and separation costs; and a tax gain associated with Swiss tax reform.
- Net sales were $10.2 billion, down 15% 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, primarily due to lower hydrocarbon co-product sales as a result of planned turnaround activity. Excluding the Hydrocarbons & Energy business, volume rose 2%, driven by demand growth in packaging and construction chemicals applications.
- Local price declined 12% versus pro forma results in the year-ago period. The largest declines were in Packaging & Specialty Plastics, driven by decreases in polyethylene and hydrocarbon co-products, and in Industrial Intermediates & Infrastructure, primarily due to polyurethane intermediates. Currency decreased sales by 1%.
- Equity losses were $21 million versus pro forma equity earnings of $26 million in the year-ago period. The reduction was primarily due to lower results at the Kuwait joint ventures, driven by margin compression in monoethylene glycol (MEG) and polyethylene.
- GAAP loss from continuing operations, net of tax, was $2.3 billion. Operating EBIT1 was $1.0 billion, down from pro forma results of $1.3 billion in the year-ago period, reflecting margin compression in Packaging & Specialty Plastics and Industrial Intermediates & Infrastructure. These factors were partly offset by margin expansion in Performance Materials & Coatings, savings from stranded cost removal, and the contribution from new polyethylene capacity on the U.S. Gulf Coast.
- Stranded cost removal in the quarter was more than $35 million, raising the full-year, cumulative stranded cost savings to more than $160 million.
- Cash provided by operating activities – continuing operations was $1.9 billion, up $531 million versus the year-ago period. Capital expenditures in the quarter were $577 million and free cash flow2 was $1.3 billion.
- Returns to shareholders totaled $611 million in the quarter, including $517 million in dividends and $94 million in share repurchases. The Company achieved its full-year share repurchase target of $500 million.
SUMMARY FINANCIAL RESULTS
| Three Months Ended December 31 | Three Months Ended September 30 | ||||
| In millions, except per share amounts | 4Q19
As Reported |
4Q183
Pro Forma |
vs. SQLY
[B / (W)] |
3Q19
As Reported |
vs. PQ
[B / (W)] |
| Net Sales | $10,204 | $12,008 | $(1,804) | $10,764 | $(560) |
| GAAP Income (Loss) from Continuing Ops, Net of Tax | $(2,310) | $531 | $(2,841) | $347 | $(2,657) |
| Operating EBIT¹ | $1,033 | $1,289 | $(256) | $1,117 | $(84) |
| Operating EBIT Margin¹ | 10.1% | 10.7% | (60) bps | 10.4% | (30) bps |
| Operating EBITDA¹ | $1,746 | $2,015 | $(269) | $1,856 | $(110) |
| GAAP EPS | $(3.14) | $0.68 | $(3.82) | $0.45 | $(3.59) |
| Operating EPS¹ | $0.78 | $1.07 | $(0.29) | $0.91 | $(0.13) |
| Cash Provided by Operating Activities – Continuing Ops | $1,920 | $1,389 | $531 | $1,790 | $130 |
| 1. | Op. EPS, Op. EBIT, Op. EBIT Margin and Op. EBITDA are non-GAAP measures. See page 13 for further discussion. | |
| 2. | Free cash flow is defined as cash flows from operating activities – continuing operations, excluding the impact of ASU 2016-15, less capital expenditures. | |
| 3. | Financial information for the three months ended December 31, 2018 was prepared on a pro forma basis and determined in accordance with Article 11 of Regulation S-X. |
CEO QUOTE
Jim Fitterling, chief executive officer, commented on the quarter:
“We experienced similar economic headwinds in the quarter as we have seen all year – especially in the industrial sector – which included price and margin compression, in part driven by additional industry supply and uncertain macros. Yet once again, the Dow team navigated these factors by leveraging our core strengths – feedstock flexibility, a lean cost structure, and leading positions in consumer-driven end-markets. Together, these enabled us to capture demand growth, excluding our Hydrocarbons & Energy business, while also delivering another year-over-year improvement in cash from operations.
“We also deployed capital to strengthen our financial flexibility and to reward our owners, reducing debt by more than $1 billion and returning more than $600 million to shareholders. We enter 2020 in a stronger competitive and financial position, poised to continue to deliver value for our customers and shareholders.”
SEGMENT HIGHLIGHTS
Industrial Intermediates & Infrastructure
| Three Months Ended December 31 | Three Months Ended September 30 | ||||
| In millions, except margin percentages | 4Q19
As Reported |
4Q18
Pro Forma |
vs. SQLY
[B / (W)] |
3Q19
As Reported |
vs. PQ
[B / (W)] |
| Net Sales | $3,253 | $3,777 | $(524) | $3,365 | $(112) |
| Operating EBIT | $221 | $339 | $(118) | $193 | $28 |
| Operating EBIT Margin | 6.8% | 9.0% | (220) bps | 5.7% | 110 bps |
| Equity Losses | $(45) | $(15) | $(30) | $(70) | $25 |
Industrial Intermediates & Infrastructure net sales were $3.3 billion, down 14% versus pro forma results in the year-ago period. Volume was flat, local price declined 13%, and currency decreased net sales by 1%.
Polyurethanes & Construction Chemicals reported a net sales decline as modest volume growth was more than offset by local price declines which included lower prices for polyurethane intermediates. The business reported volume growth in all geographic regions except the U.S. & Canada.
Industrial Solutions reported lower net sales, primarily driven by price declines in performance intermediates, including ethyleneamines and glycol ethers. The business reported a modest decline in volume, primarily in ethylene glycols, which more than offset growth in heat transfer fluids and pharmaceutical applications.
Equity losses for the segment were $45 million, down from pro forma equity losses of $15 million in the year-ago period, primarily due to margin compression in MEG at the Kuwait joint ventures.
Operating EBIT was $221 million, down from pro forma results of $339 million in the year-ago period, primarily due to margin compression in both businesses and lower equity earnings, partially offset by lower planned maintenance turnaround costs.
OUTLOOK
“Building on the consistent execution of our operational playbook in 2019, we are well-positioned to navigate the market dynamics that have carried into 2020 by focusing on the actions in our control,” said Fitterling. “We will continue to advance our pipeline of higher-return, lower-risk investments, particularly in sectors closer to the consumer where demand conditions remain favorable. By taking advantage of our unique feedstock capabilities, we will maintain our competitive cost positions. We expect to further reduce our cost structure over the course of the year as we complete the stranded cost removal. And, we plan to direct our free cash flow toward a balance of debt reduction and returns to shareholders. Taken together, these actions will give us the ability to continue to advance our strategic and financial priorities, outperform the competition and drive value for all our stakeholders.”
https://seekingalpha.com/pr/17762235-dow-reports-fourth-quarter-2019-results
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