DOW INC. Q2 FY2025 earnings call

• Announced a 50% dividend reduction effective in the third quarter. - Progressed near-term cash support levers, including $2.4 billion from strategic infrastructure asset partnership. - Announced 2 noncore product line divestitures totaling ~$250 million. - Accelerating $1 billion cost savings actions, now expecting ~$400 million this year. - In Packaging and Specialty Plastics, completed start-up of Poly-7 polyethylene train. - In Industrial Intermediates & Infrastructure, new alkoxylation unit started up. - In Performance Materials & Coatings, downstream silicones growth continued. - Shut down 3 upstream assets in Europe to address structural challenges.

In the second quarter, Packaging and Specialty Plastics had net sales down, operating EBIT of $71 million (decrease vs year ago and sequentially, driven by lower integrated margins). Industrial Intermediates & Infrastructure saw net sales decline both year-over-year and sequentially, operating EBIT decreased primarily due to lower prices and higher planned maintenance. Performance Materials & Coatings had net sales decrease vs last year, but operating EBIT was up compared to the year ago period, driven by margin expansion from lower input costs and better mix.

• Anticipate third quarter EBITDA to be approximately $800 million, a $100 million improvement from the second quarter. - Packaging and Specialty Plastics expects sequential EBITDA ~$95 million higher, driven by higher integrated margins and new polyethylene train, but offset by higher planned maintenance. - Industrial Intermediates & Infrastructure expects third quarter EBITDA ~$85 million higher due to start-up of new alkoxylation facility. - Performance Materials & Coatings expects lower sequential EBITDA ~$65 million due to reduced turnaround spending and seasonally driven demand decreases.

• Heightened trade and geopolitical uncertainties straining profitability. - Oversupply from newer market entrants exported to other regions and anticompetitive economics. - Tariffs and trade uncertainties impacting demand patterns in various end markets.

Q: Vincent Andrews asks about contextualizing dividend and operating net income on a go-forward basis.

A: Jeffrey Tate responds that mid-cycle earnings of the company haven't changed, but the timeline has.

Q: Hassan Ahmed asks about why keep a fixed dividend and polyethylene supply-demand fundamentals.

A: James Fitterling says dividend is important for investors, and on polyethylene, closures in Europe, new capacity coming, and polyethylene continues to grow above GDP rates.

Q: Michael Sison asks about adjusted EBIT and Dow's opportunity with 10 gigawatt power portfolio for AI data centers.

A: Karen Carter talks about integrated margins improving in third quarter due to price settlement and new polyethylene train, and James Fitterling mentions positioning for data center growth and environmental operations.

Q: Jeff Zekauskas asks about Alberta project and working capital.

A: James Fitterling says Path2Zero project will be revisited later, and Jeffrey Tate says working capital will improve in second half.

Q: David Begleiter asks about mid-cycle EBITDA and anticompetitive behavior.

A: James Fitterling talks about mid-cycle EBITDA range and anticompetitive behavior in various product chains, and Karen Carter mentions managing inventories.

Q: Matthew Blair asks about cash saved from dividend.

A: James Fitterling and Jeffrey Tate say cash saved is for flexibility, maintaining balance sheet strength, and looking at value-creating opportunities.

Q: Kevin McCarthy asks about normalized earnings power and cycle shape.

A: James Fitterling says normalized earnings power hasn't changed much but timing has, and flexing towards end of 2027-2030 period.

Q: Joshua Spector asks about operating rates for Dow within polyethylene.

A: Karen Carter says operating rates are up, expecting EBITDA improvement in third quarter due to price increases and new polyethylene train.

Q: Patrick Duffy Fischer asks about anticompetitive product chains and July price increase.

A: James Fitterling talks about anticompetitive product chains like polyurethanes, and Karen Carter says July price increase is incorporated into Q3 guide.

Q: John Roberts asks about duration of overcapacity in polyethylene, siloxanes, and polyurethanes.

A: James Fitterling says isocyanate in polyurethane is decent, PO will take longer, and demand will recover quicker.