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Dow Inc.
CEO : Mr. James R. Fitterling

Quarterly earnings growth(YoY,%)

Period	Revenue	Operating Income	EPS	Release Date
2022 Q4	-17.4% YoY	-55.5%	-64.4%	2023-01-26

Howard Ungerleider says,

Global Economic Outlook

• Majority of economic forecasts call for slower GDP growth globally relative to 2022, although dynamics differ by region, with most regions except Europe still forecasting positive year-on-year growth
• Inflation and rising interest rates impacted Building and construction end markets, with housing starts declining by more than 20% YoY in December
• Manufacturing PMI contracted for the third consecutive month of 48, while light vehicle sales in the U.S. were down for the full year by 8 percentage points
• Inflation and geopolitical tensions continue to weigh on consumer spending and industrial production

Cost Savings Actions

• Implementing actions to optimize labor and service costs, including a global workforce reduction of approximately 2,000 roles
• Increasing productivity with end-to-end process improvements while also shutting down select assets to ensure long-term competitiveness and cost efficiency in Europe
• Structural actions are expected to deliver a total of $500 million in EBITDA savings this year, while another $500 million of savings will be delivered through actions to maximize cash flow while reducing operational expenses such as decreasing turnaround spend, purchased raw materials, logistics, and utilities costs

Segment Performance Outlook

• Packaging & Specialty Plastics segment is expected to have a $75 million headwind sequentially due to lower demand levels in Asia and lower nonrecurring licensing activity from the prior quarter
• Industrial Intermediates & Infrastructure segment is expected to have a $25 million headwind due to a third-party outage causing supply disruption on the U.S. Gulf Coast from winter storm Elliott and lower seasonal volumes in building construction end markets
• Performance Materials & Coatings segment is expected to have a $25 million tailwind due to demand recovery for performance silicones following year-end customer destocking as well as improved supply availability and lower costs, but higher planned maintenance turnaround costs

Full Year Estimates

• Lower equity earnings in the year down approximately $300 million to $400 million
• Total turnaround spending is anticipated to be down by $300 million as the company implements its playbook of cost savings actions while maintaining safe and reliable operations
• Share count to remain relatively flat as the company plans to continue covering dilution
• Anticipating increasing capital expenditures to $2.2 billion while executing on the decarbonized and growth strategy

Macroeconomic Backdrop

• The company sees the potential for additional upside from higher oil to gas spreads, reopening in China following the Lunar New Year and easing inflation and supply chain constraints
• The company continues to pay close attention to a range of indicators, including pressure from higher interest rates on building and construction, PMI levels, global energy markets, and geopolitical dynamics

Jim Fitterling says,

Proactive Actions to Navigate Slower GDP Growth, Challenging Energy Markets and Customer Destocking

• Proactively lowered operating rates to manage working capital and implemented cost-saving measures
• Prioritized higher-value products in functional polymers, performance silicones, mobility, renewable energy, and pharma end markets
• Cash flow from operations in Q4 2022 was $2.1 billion with cash flow conversion of 166% and returned $620 million to shareholders

Resilience in the Face of Evolving Market Dynamics

• Cash flow from operations for the full year 2022 was $7.5 billion
• Delivered returns on invested capital of 15%, above the 13% target
• No substantive debt maturities due until 2027
• Returned a total of $4.3 billion to shareholders, including $2.3 billion in share repurchases and $2 billion in dividends

Operating Segment Performance

• Packaging & Specialty Plastics segment net sales were $6.1 billion, down 16% YoY due to lower polyethylene and olefin prices.
• Industrial Intermediates & Infrastructure segment net sales were $3.7 billion, down 20% YoY due to lower demand in Europe for industrial, consumer durables, and building and construction applications.
• Performance Materials & Coatings segment net sales were $2.1 billion, down 20% YoY due to lower prices for siloxanes and acrylic monomers.

Outlook and Actions

• Continued focus on Decarbonize and Grow strategy and circularity to create long-term shareholder value
• Expect challenging market conditions to persist in the near term
• Focusing on disciplined and balanced approach to capital allocation
• Investing in higher return, lower risk, and faster payback investments

Q & A sessions,

Secular trends and growth investments

• Attractive secular trends across market verticals of packaging, infrastructure, consumer, and mobility
• Investments in breakthrough propylene technology and alkoxylates capacity to generate $2 billion in run rate EBITDA by mid-decade
• Locking in supply contracts with several consumer and pharmaceutical customers to support the next wave of growth

Decarbonization and circularity

• Clear roadmap to reduce carbon emissions by 5 million metric tons by 2030
• Investing in innovative, renewable energy and efficiency technologies
• Transforming waste target to commercialize 3 million metric tons of circular and renewable solutions annually by 2030
• New collaboration to address hard-to-recycle plastic films and divert more than 120,000 metric tons of plastic film from landfills by 2025

Financial performance and resilience

• Tripled free cash flow performance on a trailing 12-month basis
• Improved liquidity position, ending the year with nearly $14 billion
• Reduced liability profile with a combined reduction of more than $11 billion in net debt and underfunded pension position since spin
• Plans to achieve $1 billion in savings through targeted actions to increase efficiency and maintain a low-cost structure that is best in class

Impact of destocking and energy policies

• Destocking in the fourth quarter represented about 50% to 60% of the slowdown
• Coatings and Performance Monomers got back to normal fourth quarter seasonality
• Long-term energy policies need to be addressed for long-term competitiveness in Europe

Supply and demand imbalances and margin expansion

• Expect to see margins expand with good momentum in price increases in the first quarter
• Margins in transforming waste target segment expected to expand with big imbalance between demand and supply