Urethane Blog
Urethane Highlights from Dow Investors Call
October 22, 2026
Dow Inc. (DOW) Q3 2026 Earnings Call Transcript
Oct 22, 2026, 1:17 PM ETDow Inc. (DOW) Stock
Dow Inc. (DOW) Q3 2026 Earnings Call October 22, 2026 8:00 AM EDT
Company Participants
Andrew Riker – Vice President of Investor Relations
Karen Carter – CEO & Director
Jeffrey Tate – Chief Financial Officer
Karen Carter
CEO & Director
Thank you, Andrew. Our solid third quarter performance reflects the discipline and focus of Team Dow as we build a stronger company while navigating a dynamic market environment. We continue to partner with customers in attractive growth markets while also improving productivity and strengthening cash generation. And our collective self-help measures, which include the completion of our $1 billion 2025 cost savings program, the beginning of our previously announced European asset shutdowns and our transformation are all delivering tangible results. In the third quarter, that execution translated into meaningful progress and strong performance in many areas of our portfolio.
Net sales were up 13% year-over-year with growth in every operating segment. Operating EBITDA was more than $1.5 billion as pricing actions and self-help measures more than offset higher raw material and logistics costs to drive year-over-year growth. Together, our actions and the results they are delivering help reinforce Dow’s earnings power. They strengthen our financial position while also enabling us to build a more competitive company for the long term. Transform to Outperform continues to deliver benefits ahead of our initial schedule, and we remain on track to achieve approximately $700 million in growth and productivity improvements this year. We also completed significant planned maintenance during the third quarter, which will support stronger production and earnings performance heading into the fourth quarter and beyond. And we are optimizing our working capital and actively prioritizing debt reduction with excess cash. This reinforces our continued focus on financial discipline and operational execution.
Next, turning to the portfolio. Let me highlight the greatest areas of strength. First, in the Packaging & Specialty Plastics segment, we’re maintaining higher pricing for polyethylene and functional polymers in all regions, and we delivered sequential volume gains. In the Industrial Intermediates & Infrastructure segment, increased demand for energy applications and AI infrastructure is supporting improved pricing and margins. And we are seeing growth in the Performance Materials & Coatings segment, driven by consumer, electronics and home care applications. This quarter, we also saw volume gains in Europe as well as in Latin America and the United States and Canada, all while the macro conditions remained dynamic. Moving forward, our focus remains on improving shareholder returns through self-help actions, better cash generation and a stronger balance sheet.
Jeffrey Tate
Chief Financial Officer
Thank you, Karen. Starting with our Packaging & Specialty Plastics segment on Slide 4. Net sales were $5.8 billion, up 18% versus the year ago period. Operating EBIT was approximately $585 million, which represents an increase of more than $385 million compared with the same period last year. This was primarily driven by higher polyethylene prices, improved integrated margins and benefits from our self-help initiatives. The Packaging & Specialty Plastics business delivered higher net sales driven by polyethylene and functional polymer price gains in all regions. Polyethylene prices rebounded in the second half of the quarter, supported by elevated feedstock costs and demand remained resilient as evidenced by year-over-year volume growth, excluding supply constraints related to the Middle East conflict.
Polyethylene volumes were notably strong in pipe applications, led by gains in infrastructure-related applications in Europe, the Middle East, Africa and India. Higher net sales in the Hydrocarbons & Energy business were driven by increased pricing. We also saw increased olefins volumes after restarting our lowest cost, most flexible cracker in Terneuzen following an idling due to planned maintenance. As a result of having this asset back online, we delivered record LPG consumption in Europe in the third quarter, capitalizing on feedstock dynamics.
Next, I’ll turn to Slide 5, which outlines the strong year-over-year earnings improvement in our Industrial Intermediates & Infrastructure segment. Net sales were $3.1 billion, up 8% versus the year ago period, driven by a 16% increase in local price. This reflects gains across both businesses and all regions.
Operating EBIT improved to $176 million, reflecting an increase of $223 million versus the same quarter last year. This was driven by higher margins and benefits from our self-help initiatives. Polyurethanes & Construction Chemicals recorded higher sales, driven by stronger pricing in MDI and propylene oxide derivatives across Europe and the United States and Canada, reflecting constrained supply dynamics in the period. Additionally, volume and EBITDA growth in Industrial Solutions was fueled by robust demand for AI infrastructure and energy applications, where favorable trends continue to support the segment’s momentum.
Moving to Performance Materials & Coatings on Slide 6. We saw solid top line and EBITDA growth in the third quarter. Net sales were $2.3 billion, up 8% versus the same quarter last year. This included volume improvements in both businesses, which was led by downstream silicones. Operating EBIT was $154 million. The team delivered both price and volume gains as well as benefits from our self-help initiatives, including cost savings associated with the second quarter shutdown of our Barry siloxanes unit. Consumer Solutions had double-digit sales and EBITDA growth in the Americas. This was largely driven by downstream silicones volume gains in all regions. And the Coatings & Performance Monomers business delivered higher sales across all regions, led by price and volume gains in both acrylic monomers and Architectural Coatings.
Next, on Slide 8, I’ll walk through some details that support our overall view that underlying demand is steady, while the macroeconomic environment remains challenging. We continue to see resilience in packaging globally as well as electric vehicle growth in Asia and Europe. At the same time, higher interest rates and weaker consumer confidence continue to pressure demand for products tied to housing. Across regions, Dow’s footprint in the Americas remains advantaged, supported by our favorable feedstock position and continued high operating rates in the U.S. Gulf Coast. In Europe, persistently high energy costs continue to challenge industry economics and broad-based petrochemical closures are accelerating. In Asia, demand remains mixed. Strength in electronics is helping offset softer consumer spending and real estate markets. Lastly, in the Middle East, while oil supply concerns have eased from levels we saw earlier this year, risk to trade flows in energy markets remain elevated as do freight and other transportation costs with increased pressure on tanker and diesel prices.
Karen Carter
CEO & Director
Thanks, Jeff. Above all, our focus is on building a more competitive Dow that delivers improved long-term value. That comes down to 3 priorities: winning with customers in attractive growth markets, strengthening our portfolio’s competitiveness and maintaining a balanced approach to capital allocation. And importantly, our self-help commitments underpin all 3. I’ll start with our progress on Transform to Outperform on Slide 11, then we’ll walk through how these priorities guide our growth investments, portfolio decisions and financial discipline.
Dow’s transformation is contributing significant gains as part of our overall approach to continued self-help. These efforts are effectively resetting our cost structure and establishing a more targeted approach to sustained growth. As I mentioned earlier, we expect to deliver approximately $700 million this year, which is higher than our initial projections. Let me highlight a few timely examples of where this work is having an impact. As the way we work continues to evolve, so do our expectations for where and how work gets done.
We are enabling faster decision-making and putting the right roles in the right areas of the company. This includes the reduction of approximately 4,500 Dow roles. To date, we have implemented approximately 70% of those reductions, and we expect to substantially complete this phase of the transformation by year-end. At the same time, we are driving productivity improvements of approximately $150 million in benefits in the second half of this year. This includes deploying a repeatable site transformation playbook at our largest sites, which remains focused on maintenance productivity, energy efficiency and asset utilization. For example, recent improvements at a U.S. Gulf Coast site helped to cracker achieve durable record high production, which ultimately adds low-cost capacity and strengthens supply reliability for downstream customers.
On the growth side, we are establishing platforms and teams that bring Dow’s technologies and expertise together around attractive end markets like AI infrastructure and mobility. By pairing Dow’s materials science expertise, technical service and digital tools with customers’ own innovation goals, the platforms move us from supplier to partner. This helps customers innovate better and faster while earning Dow higher value and more stable growth. And we are using data more efficiently to ensure stronger commercial pipeline discipline. As a result, our teams have earlier visibility into customer opportunities and stronger insights, allowing us to quickly prioritize the opportunities that have higher value potential.
This also helps us decide sooner which opportunities not to pursue, allowing us to focus Dow’s resources where we are best positioned to win. These are just a few examples, and we remain committed to advancing all of our self-help measures to deliver material improvements in the near term. We’re doing so while also executing on each of our priorities, beginning with focused growth and innovation on Slide 12. Dow’s downstream silicones business illustrates our approach well. We are investing in applications and projects that serve fast-growing markets. Many of the incremental growth investments we have made in silicones specifically are expected to pay back in 2 to 3 years. For example, our closed-loop liquid cooling systems and advanced thermal fluids are serving markets that are growing at double-digit rates.
Our technologies are helping to solve important challenges for hyperscale servers and our thermal interface materials and engineered silicones are used in semiconductor packaging and power electronics. In mobility, the opportunities for Dow are driven by a growing EV market in Europe and Asia as well as the amount of silicon used in each vehicle. EVs contain approximately 3x as much silicone as a traditional internal combustion model. And Dow materials are used in critical applications that protect cameras and sensors as well as support battery pack assembly and thermal management. When it comes to how we think about growth and innovation, the bottom line is this. Dow teams are advancing from expanded customer development capabilities to new production capacity in key markets, and we are doing so with a clear focus on capital discipline and faster payback projects.
Turning to Slide 13. We’re strengthening the competitiveness of Dow’s portfolio by intentionally shifting our investments toward differentiated applications and advantaged production while also exiting higher cost upstream capacity. And while this particular slide doesn’t provide a [ complete list ], I’d like to share some key examples. First, we’re improving the cost position of our manufacturing footprint. We restarted our lowest cost and most flexible cracker in Europe in the second quarter, while also completing the shutdown of our higher-cost energy-intensive Barry siloxanes unit in the United Kingdom. Both actions contributed to improved third quarter earnings. At the same time, we’re investing in downstream applications where our differentiation matters to customers. More specifically, our Poly 7 polyethylene unit in the U.S. Gulf Coast supports specialty packaging as well as health and hygiene applications where demand remains resilient.
And our alkoxylation investments in the United States and Europe support growth in our Industrial Solutions business, which serves home care, pharmaceutical and energy markets. In silicones, we’re expanding capabilities across the U.S., China and Japan to serve electronics and mobility markets, including engineered silicone and silicone rubber capacity expansions. Our asset actions include both closures and prudent growth investments. Taken together, they form one integrated portfolio strategy. We have completed a number of key actions and expect to advance more through next year. Next, Jeff will discuss our third priority, balanced capital allocation and the actions we are taking to strengthen Dow’s financial position for the long term.
Frank Mitsch
Fermium Research, LLC
I was curious if you could update us on Sadara. There were obviously press reports early last month that suggested you were looking to exit the partnership. So I was wondering if you could comment on what the future is of Sadara within Dow’s portfolio? And also, if you could provide any update in terms of how those assets are given the Iran war.
Karen Carter
CEO & Director
Yes. Thanks, Frank, for the question. I think our message is the same as we shared on the call last quarter, we remain really engaged with Aramco. Jim is leading that negotiation team in his new role as Exec Chair. We’ve been really clear, I think, on the last call that we’ve established a financial boundary around Sadara, and we’re working diligently to identify the best long-term solution. Obviously, we’ve already made progress on 2 really important fronts. In the first quarter, as you know, we suspended further recognition of Sadara equity losses. And then we also limited our funding commitment to about $1.3 billion, and that continues to come down. So we should think about that $100 million a year as we move that down. So that’s where we are. And again, those negotiations continue. What I would say about the assets there is that they are running, not all of them. Some of them are running at reduced rates, as you can imagine, for the obvious reasons.
Harris Fein
Wolfe Research, LLC
This is Harris Fein on for Chris. Just a quick one on II&I. Just thinking about the outlook for MDI and some of the propylene oxide derivatives now that we’ve — we’re moving past some of your competitors’ outages. I guess, ignoring normal building and construction seasonality, has anything changed in terms of your price expectations? And I know there was a little bit of a restocking story because of the outages. Are you seeing that your customers are fully restocked? Or is that still ongoing?
Karen Carter
CEO & Director
Yes, it’s a good question, Chris, and thank you for it. I mean overall markets, to your point, do remain soft. As you know, 40% of the MDI end market is around building and construction, and that continues to be the weakest end market for us across the company. And so our expectation is in fourth quarter, we do expect to move back to a longer market with the resolution of industry supply disruptions — but also the recent start-up of new capacity here in North America. So the bottom line on MDI is that the market still remains challenging, mainly driven by the weak demand in building and construction and just a low demand environment overall for that segment, which is exacerbated by the new capacity additions. And so longer term, we expect gradual operating rate improvement through 2030, but that’s our view on fourth quarter right now.
Arun Viswanathan
RBC Capital Markets, Research Division
I guess I just wanted to get your thoughts on maybe global utilization rates across your 3 main chains, polyethylene, polyurethanes and silicones. It appears that we’re maybe in the mid-80s and there hasn’t really been any material closures. Would you agree with that? And would you also agree with the statement that China has increased their production pretty significantly in most of those chains, and that’s also impacting pricing negatively?
Karen Carter
CEO & Director
So let me start with ethylene and polyethylene. We do feel like and believe that operating rates today are in the low 80s. And so — and I think I’ve said this before, we believe that we could get back to mid-cycle rates by the end of the decade. And there’s a couple of reasons for that. Based on even where we were before the conflict, you needed about 10% of capacity to come out in order to materially get back to mid-cycle operating rates. 5% to 6% of that has already been announced, and that includes our cracker in Europe. There’s another about 8% that’s being speculated. Most of all of that are in high-cost regions. And so Asia as well as Europe. Recently heard in the last couple of months that there’s another 1 million tons that’s been confirmed to come out from Korea. And so you’re seeing the rationalizations.
And of course, we know that there’s capacity that’s coming online. But the other part of the story is that polyethylene continues to grow at a factor above GDP. So I would call industry operating rates on the ethylene side today in the low 80s. And again, we believe that we can get back to mid-cycle operating rates by the end of the decade, which also aligns, by the way, with the timing of our Alberta asset that, again, the first phase will come up in 2029. On the siloxanes and the silicones side, it’s a bit of a tale of 2 cities. So upstream, you’re absolutely right. China has added a significant amount of capacity. It’s one of the reasons why we took out our high-cost siloxane capacity in Barry U.K. in the second quarter of this year. Just as a reminder, that’s going to add $60 million of EBITDA in the second half of the year alone. But it’s really important to emphasize that downstream silicones continues to grow significantly, directly aligned with a number of megatrends, whether you’re talking about electrification, but also obviously, AI infrastructure.
So we are seeing that. Most of our end markets in silicones are growing double digits, and that’s showing up not only on our order books, but also on the bottom line. And then I think I just talked about MDI, one of the — of course, one of the key value chains where you’re seeing overcapacity for sure, being built in Europe. We’ve taken out both in [ PO ] in particular, we’ve taken out assets there as well. But again, working to rightsize our capacity across the entire portfolio with the profitable demand on — particularly on the downstream. But we continue to see strength in ethylene and polyethylene in particular, and in downstream silicones and a number of other ethylene derivatives.
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