According to the company’s website press release on October 20, 2022,
FINANCIAL HIGHLIGHTS
- GAAP earnings per share (EPS) was $1.02; Operating EPS was $1.11, compared to $2.75 in the year-ago period and $2.31 in the prior quarter, reflecting margin compression due to higher energy costs, primarily in Europe, the Middle East, Africa and India (EMEAI).
- Net sales were $14.1 billion, down 5% versus the year-ago period, as gains in Performance Materials & Coatings were more than offset by declines in Industrial Intermediates & Infrastructure and Packaging & Specialty Plastics. Sequentially, sales were down 10% with declines in all operating segments and regions.
- Local price increased 3% versus the year-ago period, driven by Performance Materials & Coatings and Industrial Intermediates & Infrastructure. Sequentially, local price decreased 6% with declines in all operating segments and regions.
- Currency decreased net sales by 4% year-over-year and 1% versus the prior quarter due to broad-based strength of the U.S. dollar.
- Volume was down 4% versus the year-ago period, as a 12% decline in EMEAI more than offset 2% volume growth each in the U.S. & Canada and Asia Pacific. Sequentially, volume was down 3%, led by an 8% decline in EMEAI.
- Equity losses were $58 million, compared to equity earnings of $249 million in the year-ago period and $195 million in the prior quarter, led by margin compression in polyurethanes at Sadara and MEG at the Kuwait joint ventures.
- GAAP Net Income was $760 million. Operating EBIT was $1.2 billion, down from $2.9 billion in the year-ago period, as gains in Performance Materials & Coatings were more than offset by higher raw material and energy costs as well as lower equity earnings. Operating EBIT decreased from $2.4 billion in the prior quarter due to margin compression across all operating segments.
- Cash provided by operating activities – continuing operations was $1.9 billion, down $779 million year-overyear and up $84 million compared to the prior quarter. Free cash flow was $1.5 billion.
- Returns to shareholders totaled $1.3 billion, comprised of $800 million in share repurchases and $493 million in dividends in the quarter.
CEO QUOTE
Jim Fitterling, chairman and chief executive officer, commented on the quarter:
“In the third quarter, Team Dow managed significant macroeconomic headwinds as we swiftly initiated actions and aligned production with supply chain and logistics constraints, prioritized resources toward higher-value products, and reduced operational costs across the enterprise. As a result, we maintained our focus on cash flow generation and continued to execute on our capital allocation strategy, returning $1.3 billion to shareholders.
“Underlying demand remains resilient in the U.S., while high energy and feedstock costs are driving record inflation and impacting demand in the Eurozone, and ongoing lockdowns in China continue to pressure both consumer spending and infrastructure investments. Moving forward, our global scale, geographic diversity, and advantaged feedstock and derivative flexibility will continue to be the source of our distinct advantages. Our track record of employing a disciplined and balanced approach to capital allocation, focus on cash flow generation, and our strengthened balance sheet provide a solid foundation as we continue managing through these dynamic global conditions.”
SEGMENT HIGHLIGHTS
Packaging & Specialty Plastics
Packaging & Specialty Plastics segment net sales in the quarter were $7.3 billion, down 5% versus the year-ago period. Local price decreased 2% year-over-year, as gains in functional polymers were more than offset by lower polyethylene prices. Volume was flat year-over-year and currency decreased net sales by 3%. On a sequential basis, net sales decreased by 11%, primarily driven by lower polyethylene prices and reduced volumes due to continued global logistics constraints and dynamic market conditions in EMEAI.
Equity earnings were $55 million, down $69 million compared to the year-ago period and down $83 million versus the prior quarter, primarily due to lower integrated polyethylene margins at the Company’s principal joint ventures.
Operating EBIT was $785 million, compared to $2 billion in the year-ago period, down primarily due to higher raw material and energy costs. Sequentially, Op. EBIT was down $651 million and Op. EBIT margins decreased by 670 basis points primarily due to lower local prices.
Packaging and Specialty Plastics business reported a net sales decrease versus the year-ago period as price gains and resilient demand in functional polymers were more than offset by lower polyethylene prices and reduced demand for industrial and consumer packaging in EMEAI. Sequentially, net sales decreased on lower polyethylene prices and reduced volumes due to continued global logistics constraints and dynamic market conditions in EMEAI.
Hydrocarbons & Energy business reported a net sales increase compared to the year-ago period, driven primarily by higher electricity sales and partly offset by currency impacts. Sequentially, net sales decreased due to lower olefin prices in EMEAI and the U.S. & Canada.
Industrial Intermediates & Infrastructure
Industrial Intermediates & Infrastructure segment net sales were $4.1 billion, down 9% versus the year-ago period. Local price improved 5% year-over-year with gains in both businesses. Currency decreased net sales by 5%. Volume was down 9% year-over-year, as declines in Polyurethanes & Construction Chemicals were partly offset by gains in Industrial Solutions due to demand strength in pharmaceutical, agricultural, and energy applications. On a sequential basis, the segment recorded a net sales decline of 7% on lower local price and currency with stable volume.
Equity losses for the segment were $114 million, a decrease of $236 million compared to the year-ago period. Competitive pricing pressures in propylene oxide derivatives and MEG due to supply additions in China, as well as lower demand in EMEAI were the main impacts. On a sequential basis, equity earnings decreased by $171 million primarily due to lower price at Sadara and the Kuwait joint ventures.
Operating EBIT was $167 million, compared to $713 million in the year-ago period and $426 million in the prior quarter, as lower EMEAI demand and increased energy and raw material costs were partly offset by higher prices. On a sequential basis, operating EBIT margins declined 560 basis points on lower price and higher energy costs.
Polyurethanes & Construction Chemicals business reported a net sales decrease compared to the year-ago period, as local price gains were more than offset by lower volumes due to inflationary pressures on demand in EMEAI and currency impacts. Sequentially, net sales declined as improved demand in mobility end-markets was more than offset by lower price and inflationary impacts on demand for consumer durables, industrial, and building & construction applications.
Industrial Solutions business reported a net sales increase compared to the year-ago period, driven by local price gains and strong demand for pharmaceutical, agricultural, and energy applications. Sequentially, net sales decreased as strong demand in energy, pharmaceutical, and mobility end-markets and increased catalyst sales were more than offset by price declines and currency impacts.
Performance Materials & Coatings
Performance Materials & Coatings segment net sales in the quarter were $2.7 billion, up 5% versus the year-ago period. Local price increased 15% year-over-year, with gains in both businesses and all regions. Currency decreased net sales by 5%. Volume declined 5% year-over-year, as resilient demand in mobility and home care end-markets was more than offset by declines in building & construction. On a sequential basis, net sales were down 12% driven primarily by lower demand and decreased local price for siloxanes due to supply additions in China along with planned maintenance turnaround activity.
Operating EBIT was $302 million, compared to $284 million in the year-ago period, as Op. EBIT margins expanded by 20 basis points due to price gains for both silicones and coatings applications. Sequentially, Op. EBIT declined $259 million driven by lower prices for siloxanes and increased raw material and energy costs.
Consumer Solutions business reported higher net sales versus the year-ago period, with local price gains across all regions and end-markets. Volume declined year-over-year as lower siloxane demand and planned maintenance turnaround activity was partly offset by resilient demand for performance silicones applications. Sequentially, net sales declined due to lower siloxane demand and pricing as well as planned maintenance turnaround activity, which more than offset demand strength for performance silicones in electronics, home care and mobility end-markets.
Coatings & Performance Monomers business reported lower net sales compared to the year-ago period, as local price gains were more than offset by lower demand primarily in EMEAI and Asia Pacific. Sequentially, net sales declined as increased demand for monomers was more than offset by lower demand for coatings applications in the U.S. & Canada and EMEAI.
OUTLOOK
“In the near-term, we expect the macro environment to remain dynamic. As a result, we have outlined a playbook of actions that have the potential to deliver more than $1 billion in cost savings in 2023 while we continue to leverage our scale, geographic diversity and feedstock and derivative flexibility,” said Fitterling. “At the same time, we remain focused on advancing our Decarbonize and Grow strategy with higher-return investments that will extend our competitive advantages and industry leadership positions. Our strong financial position and balance sheet as well as our continued focus on cash flow generation give us ample flexibility to execute on our capital allocation priorities, including attractive shareholder remuneration, as we maximize value creation over the longer-term.”
Conference Call
Dow will host a live webcast of its third quarter earnings conference call with investors to discuss its results, business outlook and other matters 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 Dow
Dow (NYSE: DOW) combines global breadth; asset integration and scale; focused innovation and materials science expertise; leading business positions; and environmental, social and governance (ESG) leadership to achieve profitable growth and deliver a sustainable future. The Company's ambition is to become the most innovative, customer centric, inclusive and sustainable materials science company in the world. 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 applications. Dow operates 104 manufacturing sites in 31 countries and employs approximately 35,700 people. Dow delivered sales of approximately $55 billion in 2021. References to Dow or the Company mean Dow Inc. and its subsidiaries.
