Dow Inc. (DOW) Q2 2025 Earnings Call Transcript

Jul. 24, 2025 10:33 AM ETDow Inc. (DOW) StockDOW

Dow Inc. (NYSE:DOW) Q2 2025 Earnings Conference Call July 24, 2025 8:00 AM ET

Company Participants

Andrew Riker – Vice President of Investor Relations
James R. Fitterling – Chairman & CEO
Jeffrey L. Tate – Chief Financial Officer
Karen S. Carter – Chief Operating Officer

James R. Fitterling

Thank you, Andrew. Beginning on Slide 3. The prolonged down cycle our industry has been experiencing was further amplified this quarter by heightened trade and geopolitical uncertainties, which have strained profitability across our industry. In this environment, it is critical that we successfully navigate the near-term, protect Dow’s financial flexibility and advance our near-term growth initiatives to support higher earnings as the industry recovers.

Additionally, growing signs of oversupply from newer market entrants being exported to other regions and anticompetitive economics requires an aggressive industry response and regulatory action to restore competitive dynamics. Given these challenges, we remain focused on driving operational discipline in everything we do.

In the second quarter, net sales were $10.1 billion, down 7% versus the year ago period, reflecting declines in all operating segments. Sequentially, net sales decreased 3% as seasonally higher demand in Performance Materials & Coatings was more than offset by declines in our other operating segments.

EBITDA was $703 million, which is also lower than the same period last year. Following a significant analysis and consideration, we announced this morning that Dow would implement a 50% dividend reduction effective in the third quarter of this year. This decision was not taken lightly as we understand the importance our shareholders place on the dividend and we carefully considered this on top of the financial impacts that we model. The dividend is a key element of our investment thesis, and that is not changing. We remain committed to targeting a competitive dividend across the economic cycle. However, given the current lower for longer earnings environment and the lack of a clear line of sight to a recovery for our industry, this is the most prudent way to maintain financial flexibility and maximize long-term value for our shareholders.

Also in the second quarter, we progressed several near-term cash support levers. The close of our strategic infrastructure asset partnership named Diamond Infrastructure Solutions delivered $2.4 billion of cash for Dow in the second quarter and has already captured growth opportunities with new customers. We also expect to receive cash proceeds from the NOVA judgment this year,

and consistent with our best owner mindset, we recently announced 2 noncore product line divestitures totaling approximately $250 million at attractive EBITDA multiples of around 10x. These divestitures are additive to our announcement that we will shut down 3 upstream assets in Europe to address structural challenges in that region.

We are confident that these actions paired with the completion of our near-term incremental growth projects will support long-term value creation. Additionally, we are accelerating progress on our $1 billion in cost savings actions, where we now expect to deliver approximately $400 million this year. We are committed to continuing Dow’s track record of operational and financial discipline, executing near-term actions to maximize shareholder value and navigating the current environment all to better position the company for profitable growth and higher shareholder returns as the industry recovers.

Karen S. Carter

Thank you, Jim. In the second quarter, our teams continued to focus on price management to restore margins as we prioritize volume in attractive end markets. As we have done for the past several quarters, we are closely monitoring the macros across the markets we serve, pulling all levers to help mitigate the current lower for longer earnings environment as well as the impact brought on by recent trade and tariff uncertainties.

Next, turning to our Industrial Intermediates & Infrastructure segment on Slide 5. Net sales declined both year-over-year and sequentially, as market conditions across the segment remains challenging, particularly in our polyurethanes and Construction Chemicals business, which has high exposure to durables and building and construction end markets. Volume declined 2% compared to the year ago period. Lower polyurethanes and construction chemicals volumes and EMEAI where we continue to see increasing import activity from competitors in China were partially offset by higher industrial solutions volumes across data center cooling and gas treating applications.

Sequentially, a decline in demand for deicing fluid following the winter month was only partially offset by a modest seasonal uplift in building and construction applications, which was lower than expected in a typical year. Operating EBIT for the segment decreased versus the year ago period as well as sequentially, primarily driven by lower prices and higher planned maintenance activity. This included activities related to the start-up of our new alkoxylation unit in Seadrift, Texas.

The new capacity representing the completion of one of our near-term growth investments will support earnings growth beginning in the third quarter and beyond. We also recently finalized a long-term agreement with a major consumer brand owner to supply millions of pounds of low-carbon solutions, demonstrating our ability to capitalize on innovation, that are meeting the needs of our customers and their sustainability commitments to consumers.

Jeffrey L. Tate

In the Industrial Intermediates & Infrastructure segment, we expect third quarter EBITDA to be approximately $85 million higher than the second quarter. This expected earnings uplift reflects our expectations for higher volumes from the start-up of our new alkoxylation facility.

In Polyurethanes, we anticipate higher volumes in both MDI and polyols although margins remained under pressure sequentially, driven by fierce price competition with Chinese exports into both Europe and Latin America. Following the heavy turnaround schedule in second quarter, II&I would have a sizable tailwind in the third quarter, in addition to the ramp and cost reductions. This segment will also experience headwinds from lower equity earnings at Sadara.

In May, we finalized our strategic partnership with Macquarie Asset Management for the sale of a minority equity stake in select U.S. Gulf Coast infrastructure assets, receiving approximately $2.4 billion in initial cash proceeds from the transaction. The new entity, Diamond Infrastructure Solutions recently announced the deal with a Climate Tech company named Again to build a first-of-its-kind plant to recycle waste CO2 emissions from an on-site tenant in our Texas City Industrial Park. This agreement is one of many growth opportunities, the Diamond Infrastructure Solutions business model is set up to enable with both new and existing customers.

And as a reminder, Macquarie has the option to increase their stake to 49% within 6 months of closing, which would occur no later than November. This would increase total cash proceeds from this new partnership to approximately $3 billion per Dow this year.

Looking into the second half of the year, we also expect to receive cash proceeds of approximately $1.2 billion from the resolution for damages related to the jointly owned ethylene assets with NOVA Chemicals. So in total, we expect these actions to provide more than $6 billion in near-term cash support. And building on this, Karen will now cover the work we’re doing to drive execution, ensure strong operational performance and enable higher near-term returns.

Patrick Duffy Fischer

Two questions. One, Jim, can you just talk about on the anticompetitive stuff which product chains are being most impacted there? And then where has legal actions been taken already? And where should we expect it going forward? And then could you just clarify how much of the July price increase is actually baked into your Q3 guide?

James R. Fitterling

Yes. I’ll take the first part, and I’ll ask Karen to take the second part. Polyurethanes, you’ve seen a lot of that activity, Duffy. And of course, there’s a lot of overcapacity that’s been built there. And so there’s been a lot of move there. And it’s a low demand environment. So that’s created that kind of pressure. Although it’s not a particular area for us, you see it in chlorine, aromatics. If you spots like that, you see that same kind of an impact.

We’re starting to see a bit of it in polyethylene. So we’ve seen Brazil take action, so Latin America. We’re starting to see a little bit of that potentially in Europe, although I don’t think it’s been as prevalent in Europe on the plastic side. We’re eyes wide open in all areas for that. And then I think you — obviously, you’ve seen it in electric vehicles in Europe. That was one of the early cases where there was a lot of pressure in Europe on EVs. So it’s not just a chemical industry, but in the chemical industry, there’s a significant activity.

Karen, do you want to talk about pricing and how much is in that testament?

Karen S. Carter

So all of our July price increase that we have on the table is incorporated into our results. And again, we fully expect to achieve that. We are pushing to achieve that because, again, the current integrated margins are not only low, but they’re unsustainable. So we are fully baking in integrated margin expansion as we get into third quarter.

John Ezekiel E. Roberts

Do you think the duration of the overcapacity in polyethylene, siloxanes and polyurethanes are all in sync? Or do you see one or another of these chains actually improving before the others?

James R. Fitterling

That’s a good question, John. I think isocyanate is in relatively decent shape within the polyurethane portfolio PO will take longer. We’ve got probably the biggest adjustment in PO coming end of the year with a reduction of a train here in the U.S. Gulf Coast.

the demand that’s out there and the size of the market will recover quicker.

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