Urethane Blog

Urethane Highlights from Dow Investors Call

April 25, 2022

DOW Q1 2022 Earnings Call Transcript

Jim FitterlingChairman and Chief Executive Officer at DOW

Thank you, Pankaj. Beginning on slide 3, we entered our 125th year with global scale, a differentiated portfolio, unmatched feedstock and derivative flexibility and a track record of operational excellence, all of which enables us to continue to deliver more resilient earnings and cash flow in a variety of economic and geopolitical environments and positions us to deliver mid-cycle earnings above pre-pandemic levels. This is reflected in our first quarter results. Team Dow delivered top and bottom line growth, both year-over-year and sequentially. We capitalized on end market demand strength across the breadth of our diverse portfolio and mitigated the impacts of rising raw material and energy costs.

Year-over-year sales growth was 28% with gains in every operating segment, business and region. Sequentially, sales increased 6%, driven by gains in Performance Materials & Coatings and Packaging & Specialty Plastics. Local price was up 28% year-over-year, reflecting gains in all operating segments, businesses and regions. Price was up 2% sequentially, led by silicones and polyurethanes. Volume increased 3% year-over-year with gains in all operating segments and in the United States and Canada. Sequentially, volume was up 5%, reflecting strong demand for silicones and packaging applications.

In Industrial Intermediates & Infrastructure, our alkoxylates capacity and other efficiency investments are also on track to start up this year and in total, are expected to generate more than $50 million in run rate EBITDA with returns greater than 20%. In order to support the accelerating demand growth across pharma, cleaning and energy sectors, today, we’re proud to announce another series of alkoxylate investments in the United States and Europe.

All in all, by 2025, we’re projecting a cumulative underlying EBITDA improvement of approximately $2 billion, driven by projects like incremental high-margin polyethylene and functional polymers capacity to serve growing demand for flexible packaging, debottlenecking projects to enhance our mix toward polyurethane systems serving mobility and consumer applications, and new capabilities to formulate differentiated silicones, including silicone adhesives for next-gen electronics, mobility and infrastructure applications.

Arun Viswanathan Analyst at RBC Capital Markets

Great. Thanks for taking my questions. Good morning. So I guess, two questions real quickly. So could you just give us a quick outlook on MDI? And then also maybe if you could discuss the certain situation that you see as far as inventories in polyethylene. We know that there’s some tied up in supply chain, but do you see that alleviating over the next couple of months? Thanks.

Jim FitterlingChairman and Chief Executive Officer at DOW

Yeah. Look, good question, Arun. On MDI, the balances through 2026 are pretty good. Demand looks like it’s going to continue to outpace supply through 2026. So I think that continues to be positive for MDI. On polyethylene, as I mentioned, in the Gulf Coast — in the U.S. Gulf Coast, we’ve seen inventories come down. Inventories were down in March by about 200 million pounds and days of demand decreased by about 9%. So it’s about 46 days of demand, and that’s pretty — if I looked at all of last year, they probably ran around 45 days all of last year. So I’d say pretty normal. And that is with still some congestion in the ports for the export channel.

So I would say supply challenges will still put upward pressure about 3 to 4 days on DDI. And half of that’s due to third-party congestion and the other half is inventories that were built to cover turnaround season in second quarter, which is typically the heaviest turnaround season. Based on the way things are moving, every month, we’re seeing a little bit better export flows out of the Gulf Coast. So I think if we can keep steady improvement through the year, hopefully, we can get back to a more normal kind of predictable rate by the end of this year.