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Dow Results

First Quarter 2019 Results for Materials Science Division¹ of DowDuPont

|Business Wire|About: DOW
  • Net Sales Decreased 10% to $10.8B, In-Line with Guidance
  • Op. EBITDA Declined 24% to $1.9B, In-Line with Guidance
  • Delivered >$125MM of Cost Synergy Savings; Cost Synergy Run-Rate of $1.365B



First Quarter Financial Highlights

  • Net sales decreased 10 percent to $10.8 billion, in-line with the division’s modeling guidance. This compares to net sales of $12.0 billion in the year-ago period.
  • Volume grew 1 percent from the year-ago period, as gains in Industrial Intermediates & Infrastructure (up 6 percent) and Performance Materials & Coatings (up 1 percent) more than offset a decline in Packaging & Specialty Plastics (down 2 percent), which was driven by lower sales of Hydrocarbons & Energy co-products.
  • Local price declined 9 percent from the year-ago period, with declines in all segments except Performance Materials & Coatings, which was flat. The decrease was primarily driven by lower polyethylene, isocyanates, and hydrocarbon co-products. Currency decreased sales by 2 percent, driven primarily by Europe, Middle East & Africa (EMEA) and Asia Pacific.
  • Equity losses for the quarter were $10 million, compared to equity earnings of $208 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 EBITDA2 was $1.9 billion, down 24 percent from the year-ago period and in-line with the division’s modeling guidance. Margin compression in polyethylene, isocyanates and siloxanes as well as lower equity earnings more than offset: volume gains, including in silicones, polyurethanes and packaging applications; cost synergy savings; and contributions from new capacity on the U.S. Gulf Coast.
  • The division achieved year-over-year cost synergy savings of more than $125 million in the quarter and since merger close has now delivered nearly $1 billion of cumulative savings. The division exited the first quarter at a $1.365 billion annual cost synergy run-rate.
  • In addition to the previously announced $3 billion open share repurchase program, on April 11, 2019 the Dow Board of Directors declared a dividend of $0.70 per share to be paid on June 14, 2019 to stockholders of record as of May 31, 2019, which reconfirms Dow’s commitment to an industry-leading dividend to its shareholders.

CEO Quote

“We successfully separated from DowDuPont on April 1, and are moving forward as the new Dow – a materials science leader well positioned to operate more productively, invest more prudently, grow more profitably and deliver higher returns to shareholders,” said Jim Fitterling, chief executive officer of Dow. “In the quarter, Dow showed its resilience. We achieved demand growth in differentiated silicones, polyurethane systems and packaging. We also continued to streamline our cost structure, delivering more than $125 million of cost synergies in the quarter and reaching a $1.365 billion cost synergy run-rate. We have nearly $400 million of additional cost synergy savings to deliver, as well as more than $200 million of remaining stranded cost removal, as separation of all three DowDuPont divisions is completed. These operational levers helped us moderate the impact of margin compression and discrete headwinds in our intermediate products.”

First Quarter Segment Highlights

Performance Materials & Coatings

Performance Materials & Coatings net sales were $2.3 billion, down 2 percent versus the year-ago period. Volume increased 1 percent, with growth in Asia Pacific and EMEA, and price was flat with the year-ago period. Currency decreased sales by 3 percent.

Consumer Solutions sales were flat with the year-ago period as gains in volume and local price were offset by currency headwinds in EMEA and Asia Pacific. The business reported local price and volume increases in all regions for its differentiated silicones products. These gains were partially offset by year-over-year price declines in siloxanes intermediates.

Coatings & Performance Monomers reported a sales decline on lower volume, local price and currency, in part due to shedding of lower margin business and weather-related delays to seasonal demand in the U.S. & Canada and EMEA regions.

Operating EBITDA was $481 million, down 18 percent from operating EBITDA of $586 million in the year-ago period, primarily due to lower prices for siloxanes and shipping restrictions from a Performance Monomers facility in Deer Park, Texas, due to a fire at a nearby third-party storage and terminal facility.

Industrial Intermediates & Infrastructure

Industrial Intermediates & Infrastructure net sales were $3.4 billion, down 8 percent versus the year-ago period. Volume grew 6 percent, with gains in all regions. Local price declined 11 percent with decreases in all regions and both businesses. Currency decreased sales by 3 percent.

Polyurethanes & CAV sales declined, primarily driven by lower year-over-year isocyanates pricing, which were partially offset by higher volumes in all regions.

Industrial Solutions reported lower sales in all regions, driven by lower local price and currency headwinds in most regions. The business grew volume, driven by gains in EMEA and U.S. & Canada for industrial and oil and gas applications, as well as on strong demand for de-icing fluids, lubricants and fuels.

Equity losses for the segment were $48 million, compared with equity earnings of $149 million in the year-ago period. The year-over-year decline was driven by increased equity losses from the Sadara joint venture, driven by margin compression in isocyanates products, as well as lower margins for MEG produced by the Kuwait joint ventures.

Operating EBITDA was $448 million, down 31 percent from operating EBITDA of $654 million in the year-ago period. The decline in earnings was primarily due to lower equity earnings, as well as margin compression in isocyanates products.