Dow (NYSE: DOW) reported Q3 EPS of $0.50, $0.17 better than the analyst estimate of $0.33. Revenue for the quarter came in at $9.71 billion versus the consensus estimate of $9.52 billion.

FINANCIAL HIGHLIGHTS

• GAAP loss per share was $0.04; Operating EPS¹ was $0.50 and excludes significant items in the quarter totaling $0.54 per share, primarily related to restructuring and asset-related charges, net of a gain on the divestiture of non-revenue generating rail infrastructure assets.
• Net sales were $9.7 billion, down 10% versus the year-ago period, primarily driven by decreased local prices due to lower global energy prices. Dow’s third quarter sales increased 16% versus the prior quarter.
• Local price declined 9% versus the year-ago period. Currency was flat. Local prices increased 5% sequentially, with an additional 2% benefit from currency.
• Volume declined 1% versus the year-ago period. Sequentially, volume increased 9% with all operating segments and regions delivering gains on improved industry demand trends across furniture & bedding, appliances, packaging, construction and automotive end markets.
• Equity earnings were $60 million, compared to an equity loss of $44 million in the year-ago period, a $104 million increase primarily driven by improved financial results at Sadara.
• GAAP Net Loss was $1 million. Operating EBIT1 was $761 million, down from $1.1 billion in the year-ago period. Targeted expense reductions were more than offset by Op. EBIT margin compression. Sequentially, Dow delivered a 710-basis point Op. EBIT margin improvement with gains in every operating segment.
• Cash provided by operating activities – continuing ops. was $1.8 billion, approximately flat compared to the year-ago period. Cash conversion increased to 119% in the period. Free cash flow1 was $1.5 billion, up $156 million year-over-year.
• Dividend returns to shareholders totaled $518 million in the quarter.
• Total cash and available committed liquidity at quarter-end was in excess of $13.5 billion, representing an increase of more than $1.5 billion over the prior quarter.
• The Company achieved a net debt improvement of more than $1.8 billion year-to-date, enabled by strong cash generation and prudent liquidity management. Dow also continued to take proactive liability management actions with a $2 billion debt neutral bond issuance resulting in no substantive long-term debt maturities due until the second half of 2024.
• Dow completed the divestiture of its North American rail infrastructure assets, receiving $315 million in the quarter. The Company also signed an agreement to divest certain U.S. Gulf Coast marine and terminal operations and assets, with expected cash proceeds of $620 million at close before year end.

CEO QUOTE

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

“The Dow team delivered improved sequential results well above second quarter lows and robust operating cash flow in line with the year-ago period, enabled by rebounding demand and the early actions we took to focus on cash, reduce expenses and pay down debt. We increased our operating rates to match rising demand as the recovery gained momentum. In polyethylene, we achieved pricing gains of 12% over the prior quarter as demand for packaging remained resilient, and in polyurethanes, we delivered higher volumes and margins underpinned by improving consumer durable demand.

"At the same time, we enhanced our competitiveness by implementing our restructuring program – set to deliver $300 million in annualized EBITDA benefit. We also announced a second infrastructure asset sale for select marine and terminal assets on the U.S. Gulf Coast aligned with our best-owner mindset. Throughout the quarter, we also advanced our sustainability initiatives, creating new opportunities for growth, driving innovative solutions for our customers, and increasing efficiencies throughout our operations.”

OUTLOOK

“We enter the fourth quarter with sequential momentum, improved financial flexibility, and a consistent focus on cash which will continue to benefit us as the gradual recovery strengthens and broadens," said Fitterling. "I am tremendously proud of the Dow team’s discipline in the face of the pandemic and multiple natural disasters. Although the third quarter rebound was significant, the recovery has been uneven across markets, and we expect this will continue in the near term. We are determined to continue delivering against our strategic and operational objectives. Our proactive and agile approach to evolving market conditions – combined with our fundamental competitive advantages of industry-leading feedstock flexibility, geographic breadth, and participation in diverse end markets and technologies – will enable us to continue to build on our performance and advance our ambition."

For earnings history and earnings-related data on Dow (DOW) click here.