Urethane Blog
Urethane Highlights from Dow’s Investor Call
April 28, 2025
Dow Inc. (DOW) Q1 2025 Earnings Call Transcript
Apr. 24, 2025 11:19 AM ETDow Inc. (DOW) StockDOW
Q1: 2025-04-24 Earnings Summary
EPS of $0.02 beats by $0.03
| Revenue of $10.43B (-3.10% Y/Y) beats by $170.34M
Dow Inc. (NYSE:DOW) Q1 2025 Earnings Conference Call April 24, 2025 8:00 AM ET
Company Participants
Andrew Riker – Vice President, Investor Relations
Jim Fitterling – Chairman & Chief Executive Officer
Karen S. Carter – Chief Operating Officer
Jeff Tate – Chief Financial Officer
Jim Fitterling
Thank you, Andrew.
Beginning on Slide 3, in the face of volatile macroeconomic conditions, Team Dow focused on operational discipline while taking actions to reduce cost and align capacity to the slower GDP conditions that are impacting our industry. We delivered our sixth consecutive quarter of year-over-year volume growth, and net sales were $10.4 billion, down 3% versus the year-ago period. This reflects declines in all operating segments, largely due to margin pressures. Sequentially, net sales were flat. This reflected lower pricing in Industrial Intermediates & Infrastructure and Performance Materials & Coatings, which was offset by downstream growth in silicones as a result of improvements in home and personal care and electronic end-markets, as well as seasonally higher demand in building and construction and deicing.
EBITDA was $944 million, which is down compared to the same period last year, as volume gains were more than offset by margin compression. Cash flow from continuing operations was $104 million, and returns to shareholders totaled $494 million of dividends in the quarter. We are taking targeted actions to further reduce costs and support near-term cash flow in response to the ongoing macroeconomic weakness. Our actions include:
At least $1 billion in annualized cost reductions by 2026 in areas like purchase services, contract labor and the elimination of approximately 1,500 Dow roles.
We’re also delaying construction at our Path2Zero project in Fort Saskatchewan, Alberta, Canada. This will accelerate our CapEx spending reductions this year, reflecting a total decrease of $1 billion for an enterprise spend of approximately $2.5 billion versus our plan of $3.5 billion.
In addition, we are expanding the scope of our previously announced review of select European assets, primarily in polyurethanes. Today, we announced that we have identified three initial assets that we expect to idle or shut down. We remain on track to complete the full review by mid-2025, including the best options for our polyurethanes business.
We also received regulatory approval from the Committee on Foreign Investment in the United States for our strategic transaction with Macquarie Asset Management for the sale of our minority stake in select U.S. Gulf Coast infrastructure assets. We expect to receive proceeds of approximately $2.4 billion upon closing, which is on track to be completed by May 1, with the potential for an additional $600 million later this year.
And lastly, we received the final ruling on the pending NOVA litigation for which we expect to receive more than $1 billion later this year.
The reality is, our industry is in one of the most protracted down-cycles in decades, facing a third consecutive year of below 3% GDP growth. This has been further exacerbated by geopolitical and macroeconomic concerns, which are weighing on demand globally. In response, Team Dow remains agile, taking quick and decisive actions to reduce our costs, adjust our supply chains and protect and improve our margins. These proactive actions will help us to outperform our peers and ensure long-term competitiveness.
We also remain committed to a balanced capital allocation approach over the cycle. Let me delve deeper into the actions that we announced today, beginning on Slide 4. Team Dow remains focused on disciplined execution to improve profitability and support cash flow, as evidenced by the additional actions we announced today.
First, following a comprehensive review, we have made the decision to delay construction at our Path2Zero project in Fort Saskatchewan until market conditions improve. This decision supports our near-term cash flow and adjusts the project timing to align with the market recovery. We remain committed to the long-term strategic rationale of the project and the growth upside that it will enable in targeted applications like pressure pipe, wiring cable and food packaging.
However, we now see a higher probability of a lower-for-longer earnings environment, which changes our expectations for when the capacity from this project will be needed. We are steadfastly focused on ensuring returns for the project are above our cost of capital, and because of that, now is the time to delay construction before spending ramps-up. As a result of this decision, we now expect our 2025 capital expenditures to be $2.5 billion compared to the original plan of $3.5 billion.
In addition, we are expanding our European asset review to address the ongoing demand challenges and regulatory environment in that region. We have identified three initial upstream assets across each of our operating segments where we expect to either idle or shut down capacity.
These actions will help to further enhance Dow’s near-term cash flow and align our asset base to the realities of our participation in the region. And importantly, they are additive to our previously announced plans to determine the best strategic option for our polyurethanes business in Europe.
The assets we announced today include an ethylene cracker in Böhlen, Germany, and chlor-alkali and vinyl assets in Schkopau, Germany that will likely result in an idle or shut down. Additionally, we expect to shut down our upstream siloxanes plant in Barry, the United Kingdom to focus that site on specialty downstream silicones production.
Each of these assets represents a meaningful portion of our regional capacity, which is either not fully integrated, resulting in excess merchant sale exposure or is high on our cost curve, where we have better options to supply derivative demand and optimize margins.
Jeff Tate
In the Industrial Intermediates & Infrastructure segment, we expect second quarter EBITDA to be roughly flat with first quarter. While we expect to see modest seasonal demand improvements and higher margins for MDI, some of this will be offset by lower anticipated pricing for MEG, driven by increased competition in Asia Pacific as naphtha prices come down with oil. In addition, we will have costs in the quarter related to a planned turnaround and the startup costs associated with our new alkoxylation capacity in Seadrift, Texas. This new capacity is one of the near-term growth investments we’ve spoken about and should support higher earnings beginning in the third quarter.
Jim Fitterling
Closing on Slide 13. As our industry weathers the current challenging conditions, we are executing several proactive and decisive actions to improve margins, support near-term cash flow and optimize our global portfolio. We’re doing so today in a manner that is consistent with our best owner mindset and a balanced capital allocation approach. Our purpose-built asset footprint and our low-cost feedstock positions, primarily in the Americas and the Middle East, create a meaningful cost advantage for Dow and provide industry-leading flexibility to navigate global trade dynamics.
We’re focused on improving our margins by reducing our spending and matching regional supply to profitable demand. As we’ve outlined throughout today’s call, we have line of sight to $6 billion in near-term cash flow improvement, including: completing the launch of Diamond Infrastructure Solutions, our strategic and growth-focused transaction with Macquarie for up to $3 billion; receiving proceeds from the NOVA judgment, which is expected to be more than $1 billion; delivering at least $1 billion in cost savings by 2026; delaying construction at our Path2Zero project in Fort Saskatchewan to align with market realities, which will result in reducing our total 2025 enterprise CapEx by approximately $1 billion; and expanding the scope of our strategic review of our polyurethanes asset in Europe by identifying three additional assets that we expect to idle or shut down in the region.
Karen S. Carter
Yeah. Thanks for the question. I mean, if you talk about it from a polyurethane perspective in particular, we expect the challenging macro to continue. I mean, think about soft demand on durables, automotive, that’s a direct impact to us as well. Automotive growth is slowing. You also see the EV transition starting to slow as well and particularly in North America and in Europe. And tariffs should, however, provide support for selected US-produced products Jim mentioned this earlier before, like MDI, where, of course, the global market has suffered from Chinese oversupply. And so, that could provide a bit of a tailwind, but the headline really on the outlook for polyurethanes and construction chemical that will continue to lean into a pretty challenging macro.
Matthew Blair
Thank you, and good morning. I was hoping you could expand a little bit more on how you’re thinking of the security of the dividend in this environment. You have $4 billion of extra cash coming in this year. You’re implementing some cost reductions. You’ve also reduced your spending for the year. Does that make the dividend secure for this year and probably next? And then, after that, we’ll have to see, or are you thinking about it differently? Thank you.
Jim Fitterling
Yeah, good morning, Matthew. Attractive dividend yield is something that’s always been a priority for Dow. We’re well aware of the pressures that the current environment places on the capital structure, certainly, the $6 billion in the near-term, and of that $6 billion, as Jeff mentioned earlier, the vast majority of that will come in 2025. That will help support the dividend. But as the macro evolves, we’ll have to continue to monitor and act in alignment with our capital allocation framework.
As you know, from the quarter, we’re pulling every lever we can to manage cash through a difficult time. And I think, we’ll have better certainty once we see how tariffs are going to settle out. We’re just in an environment right now where in the marketplace, if you look at downstream demand, it doesn’t matter if it’s a consumer or one of our customers or somebody in the B2B world. They’re all just kind of taking a wait-and-see approach and that has an impact on what we think the long-term is going to look like. I’m hopeful that we get some better clarity before the end of the quarter when this 90-day pause ends that will help us a lot, be able to have better visibility.
Kevin McCarthy
Yes, good morning, and thank you. Jim, I was wondering if you could speak to a few related questions on the subject of Europe. First would be, can you elaborate on how you — how and why, I guess, you’ve expanded your scope of strategic review there with emphasis on polyurethanes?
And then, secondly, on Slide 4, I think you referenced idling or shut down for a few different assets there. So, what will inform those decisions?
And then, more broadly and lastly, Dow is not alone, right? We’ve seen so many other announcements of capacity rationalizations recently from Total in Belgium, but Versalis, SABIC, ExxonMobil. As I add these up, we’re now in the teens in terms of percentage destruction of ethylene capacity in the European region. And so, I’d welcome your thoughts on that. Are we nearing stability looking out a year or two? Or how do you view that?
Jim Fitterling
Good morning, Kevin. How and why we expanded the scope? The polyurethanes, we looked at the region and felt there was a better owner. And so that’s the work that we’re going to complete by the end of the quarter. And I think there’s an opportunity there.
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