The Urethane Blog

Dow Q2 Results

Dow reports second quarter 2019 results

|Business Wire|About: DOW

 

MIDLAND, Mich.–(BUSINESS WIRE)– Dow (NYSE: DOW):

FINANCIAL HIGHLIGHTS

  • GAAP EPS from continuing operations was $0.10; Op. EPS¹ of $0.86.
  • GAAP Net Income was $90 million; Op. EBIT¹ of $1.1 billion.
  • Net Sales were $11.0 billion, in-line with the Company’s guidance and down 14% versus pro forma results in the year-ago period, driven primarily by local price declines in polyethylene, siloxanes and isocyanates and lower sales of hydrocarbon co-products.
  • Volume declined 3% versus pro forma results in the year-ago period, driven primarily by higher ethane feedstock usage and lower hydrocarbon co-product sales, due to increased ethylene integration from the startup of new downstream assets. This was partly offset by demand growth in plastics packaging applications, supported by new capacity on the U.S. Gulf Coast.
  • Local price declined 9% versus pro forma results in the year-ago period, with declines in all segments. Currency decreased sales by 2%, driven primarily by Europe, Middle East, Africa & India (EMEAI).
  • Equity losses were $15 million, compared to pro forma equity earnings of $193 million in the year-ago period. The reduction was primarily driven by margin compression in monoethylene glycol (MEG) and polyethylene at the Kuwait joint ventures and isocyanates at the Sadara joint venture.
  • Operating EBIT was $1.1 billion, down 35% versus pro forma results in the year-ago period. Margin compression in polyethylene, isocyanates and siloxanes, as well as lower equity earnings, more than offset volume gains in packaging applications, contributions from new capacity on the U.S. Gulf Coast and savings from cost synergies and stranded cost removal.
  • Delivered more than $130 million of cost synergy savings and $45 million of stranded cost removal.
  • Cash provided by operating activities – continuing operations was $960 million, up 26% versus results in the year-ago period.
  • Returned $0.8 billion to shareholders in the quarter, including $0.5 billion in dividends and $0.3 billion in share repurchases.

SUMMARY FINANCIAL RESULTS

  Three Months Ended

June 30

Three Months Ended

March 31

In millions, except per share amounts 2Q19

As Reported

2Q18²

Pro Forma

vs. SQLY

[B / (W)]

1Q19²

Pro Forma

vs. PQ

[B / (W)]

Net Sales $11,014 $12,851 $(1,837) $11,016 $(2)
Operating EBIT¹ $1,059 $1,639 $(580) $1,143 $(84)
Op. EBIT Margin¹ 9.6% 12.8% (320) bps 10.4% (80) bps
Operating EBITDA¹ $1,802 $2,362 $(560) $1,886 $(84)
Operating EPS¹ $0.86 $1.41 $(0.55) $0.98 $(0.12)
Cash provided by operating activities – continuing operations $960 $760 $200 $1,043 $(83)
  1. Op. EPS, Op. EBIT, Op. EBIT Margin and Op. EBITDA are non-GAAP measures. See page 13 for further discussion.
  2. Financial information for the three months ended March 31, 2019, three months ended June 30, 2018 and the six months periods ended June 30, 2019 and 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:

“In spite of challenging market conditions, our results reflect the benefits of Dow’s streamlined and more focused portfolio, continued cost synergy savings and stranded cost removal. In the quarter, we faced margin compression in our intermediate products in both our core business and equity earnings. However, we achieved demand growth in packaging applications, supported by new capacity on the U.S. Gulf Coast. We delivered more than $175 million of savings from cost synergies and stranded cost removal. We also moved quickly to further tighten our expense and capital spending in response to the macro environment. We delivered higher cash flow from operations. And on a sequential basis, after adjusting for higher planned maintenance spending, the Dow team achieved core earnings growth. This result underscores our discipline and focus on agile operational and financial management.”

Industrial Intermediates & Infrastructure

  Three Months Ended

June 30

Three Months Ended

March 31

In millions, except per share amounts 2Q19 2Q18 vs. SQLY

[B / (W)]

1Q19 vs. PQ

[B / (W)]

Net Sales $3,342 $3,972 $(630) $3,489 $(147)
Operating EBIT $154 $502 $(348) $277 $(123)
Op. EBIT Margin 4.6% 12.6% (800) bps 7.9% (330) bps
Equity Earnings $(78) $96 $(174) $(48) $(30)

Industrial Intermediates & Infrastructure net sales were $3.3 billion, down 16% versus pro forma results in the year-ago period. Volume declined 1%, local price decreased 12% and currency decreased net sales by 3%.

Polyurethanes & Construction Chemicals reported a net sales decline, primarily driven by lower isocyanate prices, as well as currency headwinds in EMEAI. Volume gains in isocyanates and systems applications were offset by declines in polyols and propylene oxide/propylene glycol.

OUTLOOK

“Looking ahead, we still see global growth, but the pace of that expansion has slowed, as buying patterns remain cautious due to ongoing trade and geopolitical uncertainties,” said Fitterling. “In this environment, we will maintain cost and operating discipline by continuing cost synergy and stranded cost removal actions, by reducing our planned capital expenditures for the year from $2.5 billion to $2 billion, without sacrificing high-return growth projects, and by continuing with disciplined margin management. These near-term steps are responsive to the current market environment.

“Over the longer-term, our purpose-built portfolio and leading business positions, combined with a leaner cost structure and a suite of incremental, high-return growth investments, will continue to differentiate Dow and drive our earnings growth trajectory.”

https://seekingalpha.com/pr/17582287-dow-reports-second-quarter-2019-results