Dow reports second quarter 2024 results
MIDLAND, Mich., July 25, 2024 /PRNewswire/ -- Dow (NYSE: DOW):
FINANCIAL HIGHLIGHTS
- GAAP earnings per share was $0.62; operating earnings per share (EPS)1 was $0.68, compared to $0.75 in the year-ago period and $0.56 in the prior quarter. Operating EPS excludes significant items in the quarter related to restructuring and efficiency costs totaling $0.06 per share.
- Net sales were $10.9 billion, down 4% versus the year-ago period. Sales were up 1% sequentially, driven by gains in Performance Materials & Coatings and Packaging & Specialty Plastics.
- Volume increased 1% versus the year-ago period, with gains led by the U.S. & Canada. Sequentially, volume increased 1%, with gains in all regions except Asia Pacific, which was flat. Excluding Hydrocarbons & Energy, volume increased 4% year-over-year and 2% sequentially.
- Local price decreased 4% year-over-year. Sequentially, local price increased 1%, led by gains in Europe, the Middle East, Africa and India (EMEAI).
- Currency decreased net sales by 1% both year-over-year and sequentially.
- Equity earnings were $26 million, an $83 million improvement compared to the year-ago period, driven by gains at the Kuwait and Sadara joint ventures. Sequentially, equity earnings were up $9 million.
- GAAP net income was $458 million. Operating EBIT1 was $819 million, down $66 million year-over-year, primarily driven by lower integrated margins and higher planned maintenance activity, which were partly offset by improved equity earnings. Sequentially, Op. EBIT was up $145 million, reflecting gains in Performance Materials & Coatings and Packaging & Specialty Plastics.
- Cash provided by operating activities – continuing operations was $832 million, down $515 million year-over-year and up $372 million compared to the prior quarter due to stronger cash flow conversion1 and a release of working capital.
- Returns to shareholders totaled $691 million in the quarter, including $491 million in dividends and $200 million in share repurchases.
SUMMARY FINANCIAL RESULTS
Three Months Ended Jun 30 | Three Months Ended Mar 31 | ||||
In millions, except per share amounts | 2Q24 | 2Q23 | vs. SQLY [B / (W)] | 1Q24 | vs. PQ [B / (W)] |
Net Sales | $10,915 | $11,420 | $(505) | $10,765 | $150 |
GAAP Income, Net of Tax | $458 | $501 | $(43) | $538 | $(80) |
Operating EBIT¹ | $819 | $885 | $(66) | $674 | $145 |
Operating EBIT Margin¹ | 7.5 % | 7.7 % | (20) bps | 6.3 % | 120 bps |
Operating EBITDA¹ | $1,501 | $1,534 | $(33) | $1,394 | $107 |
GAAP Earnings Per Share | $0.62 | $0.68 | $(0.06) | $0.73 | $(0.11) |
Operating Earnings Per Share¹ | $0.68 | $0.75 | $(0.07) | $0.56 | $0.12 |
Cash Provided by Operating Activities – Cont. Ops | $832 | $1,347 | $(515) | $460 | $372 |
1. Op. Earnings Per Share, Op. EBIT, Cash Flow Conversion, Op. EBIT Margin and Op. EBITDA are non-GAAP measures. See page 6 for further discussion |
CEO QUOTE
Jim Fitterling, chair and chief executive officer, commented on the quarter:
"In the second quarter, Team Dow delivered sequential earnings improvement and our third consecutive quarter of year-over-year volume growth," said Fitterling. "The pace of the global macroeconomic recovery has been slower than expected. We remain focused on working capital, reducing costs, and matching our operating rates to current demand. We're innovating with our customers, which was evident in the quarter as we captured growing demand in packaging, electronics, and home & personal care. With a continued focus on cash generation, we delivered cash flow from operations of $832 million and free cash flow of $109 million. This enabled us to return $691 million to shareholders while progressing our higher-return growth investments."
SEGMENT HIGHLIGHTS
Packaging & Specialty Plastics
Three Months Ended Jun 30 | Three Months Ended Mar 31 | ||||
In millions, except margin | 2Q24 | 2Q23 | vs. SQLY [B / (W)] | 1Q24 | vs. PQ [B / (W)] |
Net Sales | $5,515 | $5,940 | $(425) | $5,430 | $85 |
Operating EBIT | $703 | $918 | $(215) | $605 | $98 |
Operating EBIT Margin | 12.7 % | 15.5 % | (280) bps | 11.1 % | 160 bps |
Equity Earnings | $55 | $19 | $36 | $25 | $30 |
Packaging & Specialty Plastics segment net sales in the quarter were $5.5 billion, down 7% versus the year-ago period. Local price decreased 4% year-over-year, due to lower downstream polymer prices primarily in Asia Pacific. Currency was flat. Volume decreased 3% year-over-year, driven by lower merchant hydrocarbon sales, partly offset by higher demand for functional polymers and polyethylene. On a sequential basis, net sales increased by 2%, led by gains in EMEAI.
Equity earnings were $55 million, an increase of $36 million compared to the prior year, led by gains at our principal joint ventures, including Sadara which had planned maintenance turnaround activity in the prior year. Sequentially, equity earnings were up $30 million, driven by gains at our non-principal joint ventures.
Operating EBIT was $703 million, a decrease of $215 million compared to the year-ago period, driven by lower integrated margins, higher planned maintenance activity, and lower non-recurring licensing sales. Sequentially, Op. EBIT increased by $98 million, primarily due to higher integrated margins.
Packaging and Specialty Plastics business reported a net sales decline versus the year-ago period as higher demand for industrial, consumer, and flexible food packaging was more than offset by lower prices, primarily in infrastructure and mobility end-markets, and lower non-recurring licensing sales. Sequentially, net sales increased, led by higher polyethylene sales in the U.S. & Canada, EMEAI, and Latin America.
Hydrocarbons & Energy business reported a net sales decline compared to the year-ago period, driven by lower merchant olefin and aromatic sales primarily due to lighter feedslate cracking in EMEAI. Sequentially, net sales decreased slightly due to lower third-party power and steam sales in the U.S. & Canada.
Industrial Intermediates & Infrastructure
Three Months Ended Jun 30 | Three Months Ended Mar 31 | ||||
In millions, except margin | 2Q24 | 2Q23 | vs. SQLY [B / (W)] | 1Q24 | vs. PQ [B / (W)] |
Net Sales | $2,951 | $3,177 | $(226) | $3,008 | $(57) |
Operating EBIT | $7 | $(35) | $42 | $87 | $(80) |
Operating EBIT Margin | 0.2 % | (1.1) % | 130 bps | 2.9 % | (270) bps |
Equity Losses | $(31) | $(83) | $52 | $(15) | $(16) |
Industrial Intermediates & Infrastructure segment net sales were $3 billion, down 7% versus the year-ago period. Local price declined 7% year-over-year. Currency decreased net sales by 1%. Volume was up 1% year-over-year, driven by gains in Polyurethanes & Construction Chemicals. On a sequential basis, net sales decreased 2% as volume gains in Industrial Solutions were more than offset by lower volumes in Polyurethanes & Construction Chemicals, primarily in the U.S. & Canada, including the impact of a third-party supplier outage.
Equity losses for the segment were $31 million, an improvement of $52 million versus the year-ago period, driven by improved MEG margins at the Kuwait joint ventures. Equity losses in the prior quarter were $15 million. Sequentially, the earnings decline was primarily driven by lower prices and volumes at Sadara.
Operating EBIT was $7 million, an improvement of $42 million versus the year-ago period, driven by improved equity earnings, partly offset by lower integrated margins. On a sequential basis, operating EBIT decreased $80 million, driven by higher planned maintenance activity and equity losses, as well as lower volumes.
Polyurethanes & Construction Chemicals business reported a net sales decrease compared to the year-ago period, driven by local price declines, which were partly offset by volume gains in EMEAI, led by building & construction. Sequentially, net sales decreased as price gains in all geographic regions except Latin America were more than offset by lower volumes in the U.S. & Canada, including the impact of a third-party supplier outage.
Industrial Solutions business reported a decrease in net sales compared to the year-ago period, driven by local price declines and the impact of an outage at Louisiana Operations, which successfully restarted at the end of June. Sequentially, net sales increased, led by volume gains in Asia Pacific and local price gains in EMEAI and Latin America.
Performance Materials & Coatings
Three Months Ended Jun 30 | Three Months Ended Mar 31 | ||||
In millions, except margin | 2Q24 | 2Q23 | vs. SQLY [B / (W)] | 1Q24 | vs. PQ [B / (W)] |
Net Sales | $2,243 | $2,197 | $46 | $2,152 | $91 |
Operating EBIT | $146 | $66 | $80 | $41 | $105 |
Operating EBIT Margin | 6.5 % | 3.0 % | 350 bps | 1.9 % | 460 bps |
Equity Earnings | $2 | $6 | $(4) | $6 | $(4) |
Performance Materials & Coatings segment net sales in the quarter were $2.2 billion, up 2% versus the year-ago period. Local price decreased 4% year-over-year, with declines in both businesses. Currency decreased net sales by 1%. Volume was up 7% year-over-year, driven by gains in both businesses and all geographic regions. On a sequential basis, net sales were up 4%, driven by higher volumes in both businesses, primarily in the U.S. & Canada and Asia Pacific.
Operating EBIT was $146 million, an improvement of $80 million compared to the year-ago period, driven by broad-based business and geographic volume growth. Sequentially, Op. EBIT increased $105 million, driven by volume gains in both businesses and lower planned maintenance activity.
Consumer Solutions business reported a decrease in net sales versus the year-ago period, as higher volumes in all geographic regions and most end-markets, including home & personal care and consumer electronics, were more than offset by lower prices. Sequentially, net sales increased, driven by volume gains across all end-markets as well as price gains in the U.S. & Canada and EMEAI, which were partly offset by lower prices in Asia Pacific.
Coatings & Performance Monomers business reported an increase in net sales compared to the year-ago period, driven by volume gains in all geographic regions, which were partly offset by lower prices. Sequentially, net sales increased, driven by seasonally higher demand for pavement markings and architectural coatings.
OUTLOOK
"As we look to the second half of the year, Team Dow is focused on continuing to deliver sequential earnings improvements while navigating through the slower macro environment we remain in," said Fitterling. "While near-term demand in many markets that we serve is growing, building & construction and consumer durables are unlikely to significantly change in 2024. We will continue driving higher sales through our innovation portfolio and diverse product mix. And, through leveraging our global scale, strategically advantaged cost positions, and counter-cyclical growth investments, we remain on track to enable higher earnings and shareholder returns."
Conference Call
Dow will host a live webcast of its quarterly 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 Dow
Dow (NYSE: DOW) is one of the world's leading materials science companies, serving customers in high-growth markets such as packaging, infrastructure, mobility and consumer applications. Our global breadth, asset integration and scale, focused innovation, leading business positions and commitment to sustainability enable us to achieve profitable growth and help deliver a sustainable future. We operate manufacturing sites in 31 countries and employ approximately 35,900 people. Dow delivered sales of approximately $45 billion in 2023. References to Dow or the Company mean Dow Inc. and its subsidiaries. Learn more about us and our ambition to be the most innovative, customer-centric, inclusive and sustainable materials science company in the world by visiting www.dow.com.
Cautionary Statement about Forward-Looking Statements
Certain statements in this press release 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; any global and regional economic impacts of a pandemic or other public health-related risks and events on Dow's business; any sanctions, export restrictions, supply chain disruptions or increased economic uncertainty related to the ongoing conflicts between Russia and Ukraine and in the Middle East; capital requirements and need for and availability of financing; unexpected barriers in the development of technology, including with respect to Dow's contemplated capital and operating projects; Dow's ability to realize its commitment to carbon neutrality on the contemplated timeframe, including the completion and success of its integrated ethylene cracker and derivatives facility in Alberta, Canada; 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 public sentiment and political leadership; increased concerns about plastics in the environment and lack of a circular economy for plastics at scale; 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, including the ongoing conflicts between Russia and Ukraine and in the Middle East; weather events and natural disasters; disruptions in Dow's information technology networks and systems, including the impact of cyberattacks; and risks related to Dow's separation from DowDuPont Inc. such as Dow's obligation to indemnify DuPont de Nemours, Inc. and/or Corteva, Inc. 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, 2023, and the Company's subsequent Quarterly Reports on Form 10-Q. 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 Inc. and The Dow Chemical Company and its consolidated subsidiaries assume 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 Measures
This earnings release includes information that does not conform to 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 GAAP disclosures and should not be viewed as alternatives to 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 GAAP are provided in the Selected Financial Information and Non-GAAP Measures section starting on page 11. Dow does not provide forward-looking GAAP financial measures or a reconciliation of forward-looking non-GAAP financial measures to the most comparable 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 GAAP results for the guidance period.
Operating Earnings Per Share is defined as "Earnings per common share - diluted" excluding the after-tax impact of significant items.
Operating EBIT is defined as earnings (i.e., "Income 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 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.
Operating Return on Capital (ROC) is defined as net operating profit after tax, excluding the impact of significant items, divided by total average capital, also referred to as ROIC.
Dow Inc. and Subsidiaries Consolidated Statements of Income | ||||
In millions, except per share amounts (Unaudited) | Three Months Ended | Six Months Ended | ||
Jun 30, | Jun 30, | Jun 30, | Jun 30, | |
Net sales | $ 10,915 | $ 11,420 | $ 21,680 | $ 23,271 |
Cost of sales | 9,591 | 9,875 | 19,079 | 20,504 |
Research and development expenses | 196 | 205 | 400 | 419 |
Selling, general and administrative expenses | 390 | 408 | 832 | 836 |
Amortization of intangibles | 77 | 81 | 158 | 162 |
Restructuring and asset related charges - net | — | 8 | 45 | 549 |
Equity in earnings (losses) of nonconsolidated affiliates | 26 | (57) | 43 | (105) |
Sundry income (expense) - net | 76 | 31 | 137 | 110 |
Interest income | 42 | 66 | 107 | 142 |
Interest expense and amortization of debt discount | 197 | 172 | 396 | 357 |
Income before income taxes | 608 | 711 | 1,057 | 591 |
Provision for income taxes | 150 | 210 | 61 | 163 |
Net income | 458 | 501 | 996 | 428 |
Net income attributable to noncontrolling interests | 19 | 16 | 41 | 36 |
Net income available for Dow Inc. common stockholders | $ 439 | $ 485 | $ 955 | $ 392 |
Per common share data: | ||||
Earnings per common share - basic | $ 0.62 | $ 0.68 | $ 1.35 | $ 0.55 |
Earnings per common share - diluted | $ 0.62 | $ 0.68 | $ 1.35 | $ 0.54 |
Weighted-average common shares outstanding - basic | 703.8 | 707.0 | 704.1 | 707.6 |
Weighted-average common shares outstanding - diluted | 705.3 | 709.9 | 705.5 | 710.7 |
Dow Inc. and Subsidiaries Consolidated Balance Sheets | ||
In millions, except share amounts (Unaudited) | Jun 30, | Dec 31, |
Assets | ||
Current Assets | ||
Cash and cash equivalents | $ 3,341 | $ 2,987 |
Accounts and notes receivable: | ||
Trade (net of allowance for doubtful receivables - 2024: $96; 2023: $81) | 5,098 | 4,718 |
Other
Visual performance / price development - Dow Inc.
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