Dow reports second quarter 2021 results

MIDLAND, Mich., July 22, 2021 /PRNewswire/ -- Dow (NYSE: DOW):

FINANCIAL HIGHLIGHTS

• GAAP earnings per share (EPS) was $2.51; Operating EPS¹ was $2.72, compared to a loss per share of $0.26 in the year-ago period and an increase of $1.36 versus the prior quarter. Operating EPS excludes certain items in the quarter, totaling $0.21 per share, primarily related to an early extinguishment of debt and digitalization program expenses.
• Net sales were $13.9 billion, up 66% versus the year-ago period and 17% sequentially, with gains in all operating segments, businesses and regions.
• Local price increased 53% versus the year-ago period and 16% sequentially, reflecting gains in all operating segments, businesses and regions, driven by tight supply and demand fundamentals across key value chains.
• Volume increased 9% versus the year-ago period, with gains in all operating segments, led by polyurethane and silicones applications on demand recovery from the impact of the pandemic. Sequentially, volume increased 1% as demand gains in infrastructure, industrial and personal care end markets were partly offset by lingering supply constraints from the impact of Winter Storm Uri on the U.S. Gulf Coast.
• Equity earnings were $278 million, up $373 million compared to the year-ago period, primarily driven by margin expansion in polyurethanes and polyethylene at the Sadara and Kuwait joint ventures. Equity earnings were up $54 million compared to the prior quarter, primarily driven by the Thai joint ventures.
• GAAP Net Income was $1.9 billion. Operating EBIT1 was up $2.8 billion from the year-ago period, with increases in all operating segments and businesses. The gains reflected margin expansion and improved equity earnings due to tight supply and increased demand across key chains. Sequentially, operating EBIT was up $1.3 billion, with increases in every operating segment and business.
• Cash provided by operating activities – continuing operations was $2 billion, up $422 million versus the year-ago period and an increase of $2.2 billion compared to the prior quarter. Free cash flow1 was $1.7 billion.
• Dow reduced gross debt by $1.1 billion in the quarter. The Company's proactive liability management actions to redeem existing notes maturing in 2024 have resulted in no substantive long-term debt maturities due until the end of 2025 and a reduction in annual interest expense by $35 million.
• Returns to shareholders totaled $722 million in the quarter, comprised of $522 million in dividends and $200 million in share repurchases.

SUMMARY FINANCIAL RESULTS

CEO QUOTE

Jim Fitterling, chairman and chief executive officer, commented on the quarter:

"Our second quarter results reflected strong demand in all our value chains and regions as we achieved substantial growth in sales and earnings both sequentially and year-over-year. Team Dow maintained its focus on execution and cost discipline, resulting in continued margin expansion. With our deliberate approach to capital allocation, we reduced gross debt by more than $1 billion; advanced our incremental, high-growth investments; returned cash to shareholders through our industry-leading dividend; and resumed our share repurchase program. And, we released our consolidated ESG report, "INtersections", which provides enhanced transparency on our environmental, social and governance priorities and performance."

SEGMENT HIGHLIGHTS

Packaging & Specialty Plastics

Packaging & Specialty Plastics segment net sales were $7.1 billion, up 78% versus the year-ago period. Local price increased 70% due to strong supply and demand fundamentals, with gains in both businesses and across all regions. Currency increased net sales by 4%. Volume increased 4%, primarily driven by gains in olefins, coproducts, and elastomers, partially offset by lower polyethylene volumes due to supply constraints. On a sequential basis, the segment recorded a 17% net sales improvement, driven by continued local price gains across both businesses and in all regions.

Equity earnings for the segment were $130 million, up $110 million compared to the year-ago period. Gains were driven by improved integrated polyethylene margins at the Kuwait, Thai, and Sadara joint ventures. On a sequential basis, equity earnings increased by $24 million due to margin expansion at the Thai and Kuwait joint ventures.

Operating EBIT was $2 billion, compared to $318 million in the year-ago period, reflecting margin improvement and increased equity earnings. Op. EBIT margins were up 2,040 basis points year-over-year. Sequentially, Op. EBIT was up $786 million, expanding Op. EBIT margins by 810 basis points.

Packaging and Specialty Plastics business reported a net sales increase versus the year-ago period, led by local price gains in industrial & consumer packaging, and flexible food & beverage packaging applications. Volumes declined year-over-year due to lower polyethylene supply volumes from lingering effects of Winter Storm Uri and planned maintenance turnarounds. Compared to the prior quarter, the business delivered local price gains in all regions, driven by strong supply and demand fundamentals. Sequential volumes declined due to continued supply constraints from weather-related production outages and planned maintenance turnarounds.

Hydrocarbons & Energy business reported a net sales increase compared to the year-ago period. These gains were driven by higher local prices and volumes in hydrocarbons and energy and in all regions except Asia Pacific. Sequentially, the business delivered sales gains, primarily due to local price increases in olefins.

Industrial Intermediates & Infrastructure

Industrial Intermediates & Infrastructure segment net sales were $4.2 billion, up 74% versus the year-ago period on significant recovery from the height of the pandemic in 2020. Local price improved 53% with double-digit gains in both businesses and in all regions, led by increases in consumer durable goods & appliances end markets. Segment volumes increased by 15% as strong demand in infrastructure, mobility and furniture & bedding end markets was partially offset by supply constraints in solvents and intermediates. Currency increased net sales by 6% year-over-year. On a sequential basis, the segment recorded a net sales increase of 17%, driven by double-digit price gains in both businesses and in all regions as well as solid volume growth in Polyurethanes & Construction Chemicals.

Equity earnings for the segment were $144 million, an increase of $257 million compared to the year-ago period, driven by margin expansion at the Sadara and Kuwait joint ventures. On a sequential basis, equity earnings increased by $29 million due to margin improvement at the Sadara and Thai joint ventures.

Operating EBIT was $648 million, an increase of $868 million compared to the year-ago period, primarily due to pandemic recovery combined with strong supply and demand fundamentals in both businesses. Op. EBIT margins were up 2,450 basis points year-over-year. Sequentially, Op. EBIT was up $322 million, expanding Op. EBIT margins by 640 basis points, driven by margin improvement across both businesses.

Polyurethanes & Construction Chemicals business increased net sales compared to the pandemic lows of the year-ago period due to strong local price, demand recovery and currency. Local price increased in all key value chains, end-market applications and regions on tight supply and demand fundamentals. Volume growth was primarily due to robust consumer demand in durable goods & appliances and construction end markets. Sequentially, the business delivered sales growth on increased local price and volumes from continuing strong underlying market dynamics, particularly in infrastructure applications.

Industrial Solutions business net sales increased from the year-ago period as a result of local price gains in offerings for coatings, industrial and electronics end markets across all regions. Volume increases in materials for industrial manufacturing, coatings, and infrastructure were more than offset by planned turnarounds, third-party supply constraints, and lingering effects of Winter Storm Uri. Net sales increased sequentially, driven by local price gains in all regions and were partially offset by lower volumes due to supply constraints from Winter Storm Uri.

Performance Materials & Coatings

Performance Materials & Coatings segment net sales were $2.5 billion, up 33% over the year-ago period. Local price increased 16% with gains in both business and in all regions. Volume increased 13% as mobility, electronics and building & infrastructure end markets saw significant demand recovery from the impacts of the pandemic in the year-ago period. Currency increased net sales by 4% year-over-year. On a sequential basis, the segment recorded a 16% increase in sales with price gains in both businesses and in all regions. Volume rose 8% sequentially due to lower planned maintenance activity and strong demand for silicones and coatings applications.   

Operating EBIT was $225 million, compared to $27 million in the year-ago period, as Op. EBIT margins increased 760 basis points due to pricing gains and strong consumer and industrial demand recovery. Sequentially, Op. EBIT was up $163 million, expanding Op. EBIT margins by 620 basis points on pricing momentum and lower planned maintenance costs.

Consumer Solutions business achieved higher net sales year-over-year, as demand recovery for silicones offerings led to local price and volume gains in all regions. Sequentially, the business achieved broad-based volume growth due to lower planned maintenance activity and strong demand for silicones applications, including personal care applications, as certain geographies began to experience an increase in travel, workplace and social activities.

Coatings & Performance Monomers business achieved higher net sales year-over-year primarily driven by local price gains in all regions. Volumes were in line with the year-ago period as increased demand for coatings applications was offset by limited supply availability due to lingering raw material and logistical constraints from Winter Storm Uri. Sequentially, the business experienced local price gains that were supported by supply and demand fundamentals and increased raw material costs. Volume increased sequentially due to strong seasonal demand for industrial and architectural coatings.

OUTLOOK

"Our first half performance reflects Team Dow's agility in responding to increased customer demand despite industry supply disruptions across many value chains," said Fitterling. "Looking ahead, we expect earnings momentum from additional improvements in consumer spending, international travel and industrial production. As the economic recovery broadens around the world, Dow is well positioned to continue capturing value with our differentiated materials science portfolio and participation in fast-growing end markets. We will share more about our strategic and financial priorities to continue creating long-term value for all of our stakeholders at our upcoming Investor Day on October 6, 2021."

Conference CallDow will host a live webcast of its second quarter earnings conference call with investors to discuss its results, business outlook and other matters today at 8:00 a.m. ET. The webcast and slide presentation that accompany the conference call will be posted on the events and presentations page of investors.dow.com.

About DowDow combines global breadth, asset integration and scale, focused innovation and leading business positions to achieve profitable growth. The Company's ambition is to become the most innovative, customer centric, inclusive and sustainable materials science company, with a purpose to deliver a sustainable future for the world through our materials science expertise and collaboration with our partners. Dow's portfolio of plastics, industrial intermediates, coatings and silicones businesses delivers a broad range of differentiated science-based products and solutions for its customers in high-growth market segments, such as packaging, infrastructure, mobility and consumer care. Dow operates 106 manufacturing sites in 31 countries and employs approximately 35,700 people. Dow delivered sales of approximately $39 billion in 2020. References to Dow or the Company mean Dow Inc. and its subsidiaries. For more information, please visit www.dow.com or follow @DowNewsroom on Twitter.

Cautionary Statement about Forward-Looking Statements

Certain statements in this communication are "forward-looking statements" within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements often address expected future business and financial performance, financial condition, and other matters, and often contain words or phrases such as "anticipate," "believe," "estimate," "expect," "intend," "may," "opportunity," "outlook," "plan," "project," "seek," "should," "strategy," "target," "will," "will be," "will continue," "will likely result," "would" and similar expressions, and variations or negatives of these words or phrases.

Forward-looking statements are based on current assumptions and expectations of future events that are subject to risks, uncertainties and other factors that are beyond Dow's control, which may cause actual results to differ materially from those projected, anticipated or implied in the forward-looking statements and speak only as of the date the statements were made. These factors include, but are not limited to: sales of Dow's products; Dow's expenses, future revenues and profitability; the continuing global and regional economic impacts of the coronavirus disease 2019 ("COVID-19") pandemic and other public health-related risks and events on Dow's business; capital requirements and need for and availability of financing; size of the markets for Dow's products and services and ability to compete in such markets; failure to develop and market new products and optimally manage product life cycles; the rate and degree of market acceptance of Dow's products; significant litigation and environmental matters and related contingencies and unexpected expenses; the success of competing technologies that are or may become available; the ability to protect Dow's intellectual property in the United States and abroad; developments related to contemplated restructuring activities and proposed divestitures or acquisitions such as workforce reduction, manufacturing facility and/or asset closure and related exit and disposal activities, and the benefits and costs associated with each of the foregoing; fluctuations in energy and raw material prices; management of process safety and product stewardship; changes in relationships with Dow's significant customers and suppliers; changes in consumer preferences and demand; changes in laws and regulations, political conditions or industry development; global economic and capital markets conditions, such as inflation, market uncertainty, interest and currency exchange rates, and equity and commodity prices; business or supply disruptions; security threats, such as acts of sabotage, terrorism or war; weather events and natural disasters; and disruptions in Dow's information technology networks and systems.

Risks related to Dow's separation from DowDuPont Inc. include, but are not limited to: (i) Dow's inability to achieve some or all of the benefits that it expects to receive from the separation from DowDuPont Inc.; (ii) certain tax risks associated with the separation; (iii) the failure of Dow's pro forma financial information to be a reliable indicator of Dow's future results; (iv) non-compete restrictions under the separation agreement; (v) receipt of less favorable terms in the commercial agreements Dow entered into with DuPont de Nemours, Inc. ("DuPont") and Corteva, Inc. ("Corteva"), including restrictions under intellectual property cross-license agreements, than Dow would have received from an unaffiliated third party; and (vi) Dow's obligation to indemnify DuPont and/or Corteva for certain liabilities.

Where, in any forward-looking statement, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and expectations of management and expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. A detailed discussion of principal risks and uncertainties which may cause actual results and events to differ materially from such forward-looking statements is included in the section titled "Risk Factors" contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. These are not the only risks and uncertainties that Dow faces. There may be other risks and uncertainties that Dow is unable to identify at this time or that Dow does not currently expect to have a material impact on its business. If any of those risks or uncertainties develops into an actual event, it could have a material adverse effect on Dow's business. Dow assumes no obligation to update or revise publicly any forward-looking statements whether because of new information, future events, or otherwise, except as required by securities and other applicable laws.    

Non-GAAP Financial MeasuresThis earnings release includes information that does not conform to U.S. GAAP and are considered non-GAAP measures. Management uses these measures internally for planning, forecasting and evaluating the performance of the Company's segments, including allocating resources. Dow's management believes that these non-GAAP measures best reflect the ongoing performance of the Company during the periods presented and provide more relevant and meaningful information to investors as they provide insight with respect to ongoing operating results of the Company and a more useful comparison of year-over-year results. These non-GAAP measures supplement the Company's U.S. GAAP disclosures and should not be viewed as alternatives to U.S. GAAP measures of performance. Furthermore, such non-GAAP measures may not be consistent with similar measures provided or used by other companies. Non-GAAP measures included in this release are defined below. Reconciliations for these non-GAAP measures to U.S. GAAP are provided in the Selected Financial Information and Non-GAAP Measures section starting on page 11. Dow does not provide forward-looking U.S. GAAP financial measures or a reconciliation of forward-looking non-GAAP financial measures to the most comparable U.S. GAAP financial measures on a forward-looking basis because the Company is unable to predict with reasonable certainty the ultimate outcome of pending litigation, unusual gains and losses, foreign currency exchange gains or losses and potential future asset impairments, as well as discrete taxable events, without unreasonable effort. These items are uncertain, depend on various factors, and could have a material impact on U.S. GAAP results for the guidance period.

Operating earnings per share is defined as "Earnings (loss) per common share - diluted" excluding the after-tax impact of significant items.

Operating EBIT is defined as earnings (i.e., "Income (loss) before income taxes") before interest, excluding the impact of significant items.

Operating EBIT margin is defined as Operating EBIT as a percentage of net sales.

Operating EBITDA is defined as earnings (i.e., "Income (loss) before income taxes") before interest, depreciation and amortization, excluding the impact of significant items.

Free cash flow is defined as "Cash provided by operating activities - continuing operations," less capital expenditures. Under this definition, free cash flow represents the cash generated by the Company from operations after investing in its asset base. Free cash flow, combined with cash balances and other sources of liquidity, represent the cash available to fund obligations and provide returns to shareholders. Free cash flow is an integral financial measure used in the Company's financial planning process.

Cash flow conversion is defined as "Cash provided by operating activities - continuing operations," divided by Operating EBITDA. Management believes cash flow conversion is an important financial metric as it helps the Company determine how efficiently it is converting its earnings into cash flow.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE The Dow Chemical Company