DOW - Earnings call 3 2023

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Operator

Greetings, and welcome to the Dow Third Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I will now turn the call over to Dow Investor Relations Vice President, Pankaj Gupta. Mr. Gupta, you may begin.

Pankaj Gupta

Good morning. today. joining for you Thank The accompanying on webcast posted through are website. provided our this and slides I'm Investor Chief the contained Gupta, Officer. Please are Jim slides. Howard Pankaj subject Dow and President earnings note Fitterling, me and Ungerleider, related forward-looking Dow's news are our joining to comments release Chair statements Chief the in and and Executive contain and Relations Officer; Financial Vice and President, statements cautionary uncertainties. Unless otherwise refer about and Please our principal exclude applicable, for public all information further specified, significant to filings where financials, risks items.

Howard X, most measures. the We of agenda other financial Jim comparable refer our and segment creation and associated financial an Jim and road close, you to To as outlook call. will are our Slide and performance. on results news to earnings challenging also dynamics. our A long-term review will non-GAAP our we map and reconciliation measure see that our share will in of quarter third the actions continues on slides cost directly the short-term value position disclosures will and release contained are enable growth posted our GAAP website. On will how provide sustainability outline guidance. savings modeling navigate operating update and

that, your Following we questions. take will

Now let me Jim. turn the call over to

James Fitterling

Pankaj. you, Slide X. Beginning Thank on

due billion, sales slow XX% reduce quarter, particular, improvement to ago more flow activity continued macroeconomic in In $X to versus cash third in period savings sequential the and and costs strategy and actions was with year-over-year, sequentially feedstock & face merchant X% Volume global gains down action prices. up all by than to volume offset Infrastructure decreased were down sequential XXXX operating we year was taking gains X% maximize delivered Performance lower in macroeconomic of of Materials the deliver in targeted and while a hydrocarbons sequentially, continue Energy cash were local Intermediates to & For by Hydrocarbons excluding Sales $XX.X lower billion slower Volume all due implement $XXX million. Net across merchant more reflecting to Volume sales. to Coatings. gains global advance energy our to segments. segments operating and & cost mainly X% also long-term sequentially, activity. up as led we costs. sales generation operating in higher the in declines than Industrial were X%

in Europe, down regions, India Local price energy lower feedstock the decreased in price with due Sequentially, and East, X%, primarily declines primarily Africa Middle was all XX% to segments year-over-year EMEA. and and operating costs. or

EBIT for period the $XXX year billion Operating ago down the and million, quarter $XXX the prior quarter. in in $X.X million from was

cash from $X.X generation to resulting flow and on and a Our a XXX% trailing of consistent of cash conversion flow focus in working operations cash management basis. team enabled on generate for flow Dow capital XXX% billion, quarter XX-month the

dividends we've invest We million strategic Year-to-date, $X continue to billion shareholders $XXX our to in share in priority returning repurchases. nearly while through the quarter returned also shareholders. long-term and to

sheet to due by substantive continues investment-grade ratings credit best our its strong decades, in cover to enable generation no flow allocation Dow debt And supported priorities. XXXX. remains X cash Our balance fully long-term with has maturities been capital it the until

lower margins, more & all prices to year the of by increased operating In to on million, and compared Specialty volumes the by $XXX our offset in million integrated driven olefin were Sequentially, and a than result all ago in as lower $XXX Packaging declines licensing X. Slide primarily polyethylene polyethylene segment, segment lower energy in driven million EBIT across global was Hydrocarbons by lower increased merchant activity performance decreased lower operating revenue. Local Volume costs. price period. demand $XXX declined sales. polyethylene regions, turning was Energy Now as EBIT planned & by operating maintenance Plastics regions

Infrastructure supply Moving event Industrial both were lower costs, year the operations. EBIT were availability and both down gains to Solutions and Louisiana as driven by were & Materials in the Performance to period. up Intermediates million Sequentially, at & businesses in construction. Sequentially, markets $XXX segment, coatings $XXX compared price and savings. driven Volume Louisiana period, Coatings to compared residential due in EBIT EBIT local higher offset million our gains operating was ago as offset million, $XXX in the lower for and demand $XXX prices ago segment, was operating to operating and unplanned end an more and by in lower driven Industrial million businesses. operating Results by was as demand rates operating declines was by applications volume million million cost year event. And than $XX which in by well care by construction increased building reduced partly in the the $XX commercial driven EBIT personal

actions Next, outlook to review on I'll and to Howard X. it turn Slide our over

Howard Ungerleider

Jim. you, Thank

demand challenging China. slower-than-expected in activity. quarter, Europe in Global continue and It sluggish consecutive has PMI We dynamics in recovery including to expect manufacturing industrial September. declined XXth for month the macroeconomic through a fourth also includes the the weak

consumer seeing sales manufacturing through months. at tighter elevated that With resilience. signs consecutive U.S., last remains and Retail September, policy. In for for While demand confidence In of a weak of continuation demand and consumer declined levels, XX.X. Europe, despite consumer automotive is PMI indicators low. has showing inflation. said, monetary improved mixed resulting X growth PMI sharply a to remains positive, remains moderate, remains lower continues to XX while industrial contracted confidence the as inflation some we're the it in months has September

China in in in while PMI production PMI the in September. than are the manufacturing bright exports while and a territory Mexico, September, XX in rest remains sequentially for straight over fell of prior India's expansionary, year the industrial more and August, world, China, In rose months sales Automotive Around spot, August. manufacturing for fifth in remained month. expansionary production rising both the

X time this disciplined cost-advantaged in continue diverse leveraging to contracted assets. in while backdrop, our our However, the global approach a ASEAN Against operations will years manufacturing PMI and portfolio managing take to our we first September. for macroeconomic

Slide X. to Turning

and commitment continues Our deliver XXXX. $X financial proactive million commitment cost and reflected flow. our operational to track year-to-date costs cash billion on We maximize savings be implementing to to lower our remain in discipline are in to in we achieved $XXX the and actions

our allocation cycle. we enhancing addition, capital financial In flexibility across are the we priorities economic on our further execute as

capital implementing flow. actions we're example, to our cash continued For to maximize working improve

has cash million X unlocked approximately pre-COVID of from by levels, result, in improved working and we our conversion from days the a have quarter. cash As capital third cycle approximately $XXX

strengthen derisk Dow actions taken while net discount made has improved, our the our ample debt balance plans. billion sheet, have in take reducing greatly we and actions ensuring $X pension pension primarily liabilities, and to to voluntary liquidity we contribution rate continuing spin, Since pension-funded are further the and to in driven we changes status by XXXX.

at the liability. Our freeze decision pension plans to deferred the 'XX further reduced year-end U.S. benefit

ability to our more onetime actions targeted the income continue XXXX. pursue All If nonoperating growth billion range have $X above we well the investing a to our in, quarter while and our of our XX% back million risk pension of fourth the opportunities to annuitization quarter, these additional to of liabilities. for in noncash expect expect XX% transfer us operating charge in of to some than and settlement record given pension $XXX including plans are in in delivering We shareholders, derisking transactions fourth target. executed, the

fourth in quarter the segment, in resilient Packaging polyethylene generate spreads Coast Slide market the our continue Higher & Turning domestic oil shows favor strength. on prices export expected In to levels, Gulf cost gas million driven are elevated inventory advantaged the continued quarter. decline $XXX for to industry demand Specialty to footprint and data outlook Plastics by X. and our a U.S. and to tailwind

activity St. our cracker we expect complete Louisiana. $XX maintenance million we Charles, tailwind Additionally, at a in planned as

venture a Thailand. at We to earnings in $XX also to a headwind expect due turnaround our million planned joint equity

Intermediates Industrial segment, In offset deicing to declines and Infrastructure in expect building in we increases seasonal seasonal construction volume markets. the & demand fluid end

million headwind Construction & consumer Europe Coatings Chemicals conditions impacting $XX to segment, our Polyurethanes Additionally, in Materials Performance current due expect we limit costs, the discretionary we areas. and and businesses. In particularly nonservice energy our elevated in a feedstock macroeconomic to expect spending of the

competitive $XX expect also in from We margin pressure continue upstream supply in siloxanes result additions, will million headwind. to which a

approximately demand expected fourth is in the an quarter. contribute the million to to we with seasonal the expect All Additionally, third headwind line $XX be quarter. in in, quarter in and earnings building construction decline

Jim. I'll Next, it turn to back

James Fitterling

you, Howard. Thank

Slide to Moving X.

by XXXX tons $X commercializing million underlying us reducing emissions of on and Grow more progress We renewable greenhouse and The & deliver Transform X Waste while and which our both tons billion continue Decarbonized annually. strategies, metric circular metric million make solutions by than to in earnings, gas X to position

we & Dow's in September, replaces MDI Starting Porte, demand more than also asset. and expand polyurethane supply emissions systems at reducing Porte growth by the facility new existing with Grow. La Decarbonize additional This the and to our manufacturing achieved in support XX% to site greenhouse Freeport, site startup XX% in while high-value new Texas by at distillation our an of In gas pre-polymers La facility a Texas. capacity compared

track. in project Alberta PathXZero Our on remains

incentives and year-end, the investment decision with federal final government. the our subsidies Canadian of pending expect We by completion

Additionally, drive purchase time hydrogen. solar Argentina, that PathXZero Terneuzen. in power power by a from to we of carbon will more element announced us agreement Dutch Terneuzen, public-private for critical its crucial is the with partnership XX% capture sources informed rules Bahía they electric Green government the Energy to clean and adjustments Blanca, certain site XXXX. In which at renewable regulations effort need recently of a enabling our MSU source to The and supply

collaboration, a regulatory timing and depend of subsidies the Dow level investment available framework. and will on clear

recycled to U.S. SURLYN our to support to for a cosmetics perfume leveraged We Transform accomplishing with applications bio production a and the continue successfully key This enabler third direct our engage packaging. to quarter, these assets continue Dutch we scale the of circular And the launch like utilize products. efforts. government strategy. and Gulf milestone we advance sustainable to assets of high-end bio-based was feedstock Coast existing advance which and commercial the quickly Ionomers, In our Waste to processing, will

long-term balanced to disciplined generate approach rate expect while XXXX. to continued Technology a run maintaining and the future develop our more Mura and to we Altogether, than focus France ecosystem that in by year-end. sustainable mechanical their of confident in in will All with more in, growth and Valoregen on allocation. our advanced track recycling $XXX U.K. a on facilities million up remain a remain incremental start circular addition, In initiatives capital EBITDA respective by we

Construction X. Slide also Dow start-up on advancing project Alberta, our long-term Saskatchewan, Fort growth emissions XXXX. sustainable in will year capture project reduction next XXXX begin to neutrality opportunities Phase PathXZero of enable XXXX The delivering while our expected in by targets on expected and update on gas and an XXXX. Phase is Next, in goal our to X with planned X greenhouse carbon

an annually to project XXXX key we We expect period time billion and as to the above spend ramping total in CapEx depreciation average $X on with phase. this implement XXXX CapEx amortization growth levels enterprise first of of the

We committed to economic project. our the to as keeping the cycle and we DNA levels complete CapEx expect those remain within across fully to return

line bottom Texas-X investment. equal PathXZero to are Alberta our than or our expecting We better project returns on

XX. to Turning Slide

for scale capital of value recycling, chain and to We a and solutions lead expected decade. for through are to outpace partnering minimizing the also feedstock us bio-based more strategically these to owners This become off-taker Robust circular to with circular allows the supply across recycling management is major solutions. mechanical through demand end enable brand way economy outlay industry Dow. the a leaders advanced waste and of transformation while and this

to create than result We on in opportunities Slide more in XXXX. Continuing million by XX. portfolio will expect incremental Dow's that differentiated $XXX innovation earnings

increasing X brand Our partnerships. to by robust solutions enable These million renewable innovative strategic a tons us of are annually owner actions collaborations to demand. to metric of solutions deliver driven pipeline commercialize meet circular and

priority partnership recycled matching P&G the packaging e-commerce recent have and Mercedes-Benz products air efficient enable circular performance collaboration on system polymers consistently we in the capsule first is strategic with the our uses our For cosmetics delivers This of Dow's industry materials And has operational in with quarter. Closing excessive to LVMH protect an XX, SPECFLEX discipline. existing packaging then, of of to Beauty industry. and the while against packaging. Dow's executed for E-Class. avoiding sales circular sustainable pioneering and Slide example, in and of enabled feedstocks demonstrated automotive CIR polyurethane-based launch way since advanced bio-based products recycling third China from the the as seen waste financial our recyclability produce to effective foam

proactive levels, As our flow generations the it's the cycle. a is underlying result and ever of well cash strongest our in balance of especially our earnings been, are and actions, sheet this above pre-COVID part

our scale with across paired our long-term Our evolving advantages industry-leading well positions and will our global growth while above leading key also cost-advantaged quickly enable market These our us value feedstock attractive demand flexibility Dow verticals. to and shareholders. capture to capital distinct competitive and growth respond priorities trends to continue chains assets execute across value GDP for positioned market to driving allocation

to strategic partner, to and company business XX following through this want he's of an Q&A, a most and accomplishments that over significant to like thank friend. Howard guided move morning to last his for has colleague service. we before Finally, dedicated and team He's contributions the would decades. from the financial a that to and X I personally tremendous incredible and speak numerous company importantly, announcement elected created retire leadership Howard Dow been I years our the to challenges been

recognizing to to effective pleased Howard, share X, CFO that has Board elected role the the XXXX. to are of we and Jeff Tate November addition In thanking the

was of also Investor X-year auditor. the we We're of Jeff, honor will CFO excited and that, time Prior to Many team. with as years Dow Dow's a there years Relations had to for in will Leggett As back Dow. following including welcome to Jeff Howard for stint Plastics recognize you roles, and for Packaging & various of us and led XX to finance service, to our Platt. thank Finance returns & He who of his remember, Jeff previously him lead VP Specialty that. be

all we'll his our Jeff to as us look call follow earnings here In this transition. and work today, next joining forward is through role. him we joining more to formal together in meantime, the

the this become will I will As will retire stay noted, through January from November Howard early handover support Dow. to change and X, effective when he formally on

few to the now Howard, over I'll for you turn comments. mic a

Howard Ungerleider

I a Thank and And personal my would those I of appreciate the you, few comments to of had an roles for really thoughts thoughts. Jim. own. good fortune being like a I've nearly share CFO Dow's Jim, they the career. President been and and the serve for team. the have absolute with the and to honor last decade rest of you truly my X, leadership best of it was

not a for accomplished of and extremely what together, deal also delivered it. Dow We great have our great I done company. am we a have of is have proud but how all we only stakeholders,

are over incredibly none. balanced and hard-working and disciplined the every decades it's the as right each as sheet, all Our our X Decarbonize the is and the world, absolutely forward, Growth in day smart been you've strategy path culture The is who said, of capital & our second absolutely balance best Dow shape people, and embrace result it direct and approach. in a to allocation that's

at After move not Dow, moment to finance each more for and my than for on have more to to right XX Jeff excited known I Jeff other is I years years. than the chapter, reins Tate. this the next be hand XX could to over more and me

well And heading the that beach am together leadership excited golf not great chapter and course, help worked as I'm lie level I'm to is with next next him to my to Dow, the be have the Dow I the he right Jim absolutely leader consider of a to as other, or retiring from alongside ahead. opportunities performance while a We and the professional each and and friend, team. take about the I

those Pantone be friend Dow. With bleed supporter, checking the you to a always to said, With a the it a wheel, I color for that Dow, I Red XXX and of of I'll open turn that, will and Pankaj Q&A. Team fan

Pankaj Gupta

Thank you, Howard.

remind Q&A statements and you I forward-looking questions. the Operator, our like remarks to apply would instructions. Q&A. our prepared please the to following Now on let's your to both move that provide

Operator

of comes first of Global. [Operator line Your Ahmed Instructions] the Hassan Alembic from question

Hassan Ahmed

see wishing the But of to leave. for sort sorry you best endeavors. your future wishes obviously, Howard, you

my baking deeper question, a want regime of on that. talked little pricing for And tailwind sort delve to ethane into sort regime expanding $XXX oil -- million you baking into terms into you guys tailwind that? the gas you are sort natural just In you cited obviously EBIT about What things. P&SP What side of of ratios. of are pricing worth for to of polyethylene that? of I

James Fitterling

Yes.

I of underlying year-over-year, third Latin line at a quarter. It Specialty merchant had be fact turnaround Asia, were the Plastics be the They had When mentioned, we the look they ethylene obviously in fourth were volumes, sequentially expect different Packaging for in you third up. X% weight them quarter. they the regions and obviously, the up with mix. market. the guided of volumes Charles and on were out quarter, America And in that we & EMEA. to will As also we core all up in the the St. polyethylene

good are signs. those So

versus that a you we September. and previous in The right up to a the have right got margins I'm headwind X% quarter was and Charles of up outlook into it up the But be that's the flat. We've ethane as slightly integrated before. the a We in Gulf prices is bit turnaround. for inventories exports in back previous obviously the up in P&SP, about U.S. plastics, It down have St. better X.X% take quarters for United fourth quarter versus turnaround should the we've saw expecting States were Thailand Things to Coast I QX about now consecutive and be expecting mostly quarter, got X in We're could than we $X.XX for -- flat. now, from account of the that. little quarter. do don't is pricing. on in be think

heavily I all some $XXX volumes think all, expect be and factor quarter assets a our Europe you Pro-nap guide the back good, cost ton, of are back in would at the in Europe. is spread think in lowest we'll market delivery. I about for the in So in, when is extent. all fourth that for to the merchant the be I ethylene P&SP positive And on

Operator

Deutsche of comes David next the from question Your Begleiter of line Bank.

David Begleiter

pleasure and $X second Howard absolute little grow increase if maybe more Jim, do been same Again, an the running you materially year? EBITDA is next annualized, that. -- a billion of bit has it is around best does half Howard, as EBITDA stays today, how luck. the than macro How

James Fitterling

we're people's back direction. the we new minds $XXX line. On agreements to Obviously, this XX to our And of invest mid to run continuing of year, are things well the XX and got costs. is saw bottom it EBITDA positive and once holding They face growth, thing made rate months, incremental those We're workers. the segments, XX should the X the top when time, year, our we're like we even relatively an plant centers, economic year. to now. like while automotive, the see and at all up Inflation strength million is underlying right to investments. on about areas both between in last UAW strikes auto view million organic $XXX question. in the well. investments into XX this as a we data start a see This the bounce good David, months telecommunications of that through about slowdown, up and weighing typically, to to that, slowdown, in start continuing will expect mid-cycle we We've turn starting is same to that's our as in investments manage see

Our good. cost positions are

moderate for so to that direction. our I better positioned that of XXXX. the once a shape that And weight be is we in that start turn think things view we're to positive inflation in a could starts back And

billion $X taken spin. we've since Additionally, cost of out

improvement we're financing quarter. cash operating still So free a today, of the to all flow buy in quarter cash flows, where were in third saw and allocation before breakeven, be we we're this shares if you you capital think able operating our opportunistically requirements, about able million to $XXX back meet some

and our our the best us benefit we've the to done bottom to to cycle, next investments organic the manage in really to for get to So through it's the the of make time up get able continue right be cycle. to

Howard Ungerleider

thing every question EBITDA is flow well. we our your David, improvements or Howard. I doing Look, And Hassan, don't same EBITDA Jim you year have I really The you as to forget your but thanks David, add, other since spin, laid this mean improvements, about if for So comments, right? out about cash, cash think is been would only it. equally to

year, last can We'll able we've been couple So that year. the X things. X or increase see we But this cash to years, flow. do of if every a

continue what our we year, priorities of inclusive Dow We structural are that levers. expect year. When $X to in I our can $X able every projects get tranche, EBITDA you likely about to billion million would additional of allocation plus last to finally call of of low cover back even joint levels. pursue that billion capital improvements, And ventures, to judgment next And all capital on cash we unique we stock buy cash like these pipeline. that we've out have working the will the currently at the Nova had that other continued continuing $XXX and from to we and think into between

that should So of $X out organic investments levers talked billion on next to you Dow about. cash another year of at Jim flow top expect least unique of coming the

Operator

Morgan next comes from line Vincent Your Andrews of question the of Stanley.

Vincent Andrews

that that sure exciting we is I Howard. bit want a to at speak I could just a 'XX make you a of CapEx, on obviously, the range sort is, mean, going have that upper you, 'XX the 'XX to maybe understand Alberta also Very a we of at little I to zone sure end line. range? have see the define for like would what lower it go you there. of X or us could in and Because -- like I models the And of our If quite do Could at right make end 'XX, let prior sort is a to and looks it to about of I Slide going in of we $X -- bit maybe congratulations CapEx range the looking ask and to year, remarks echo should the looks where about And be there's a those you. me it just but to billion that time? chunkier how during some know then to thinking Or be the period there's you cadence give that years? it just D&A of

James Fitterling

it starts yes, Phase X we project, up into project. that 'XX peak is will 'XX Alberta construction in Vince, of get to be the as the 'XX. that

bit that in peaked the expect project, and We're Industrial Solutions, we're were business. a than the is we where Alberta for very in also during but to just PathXZero, That's we our Consumer CapEx kind to would growth high-value in You to different Solutions growth same frame. incremental growth 'XX funding get X.X somewhere Gulfstream X spot Obviously, which during level. we that we to we're range downstream at in Gulfstream. little doing would at similar 'XX were time of that

expectations what on to as And to like. titrate is be specifically going dates, CapEx we'll some will it year-over-year we so try those to more closer manageable. think that you get very I look have So

Operator

JPMorgan. comes of from Zekauskas of Your the Jeff line next question

Jeffrey Zekauskas

the R&D? it how that the of count program, SG&A the you third you that billion quarter, In XXX rounding? XXX.X cost-cutting quarter slides, out million million. in up? say much in your is your in And fourth and Are going count Or $X was share your share and comes of is

James Fitterling

Jeff, SG&A our on and research SG&A time to sales, the both we making also during in this we've our percent come obviously, utilities which a reduced labor invest purchase cost, still sure doing about down cost been And logistics we're cost of obviously includes there what include as costs, spend, our operating to On like and $XXX is like in out things of things would material controlling contract that period. and costs headcount. the model, we're costs it's side, down Yes. down, It of as half while operating cost structural about being raw million. forward. go continuing turnaround is which

count? do touch share want you Howard, to on the

Howard Ungerleider

Yes, Jeff, was I smiling.

count just I Year-on-year, went actually million yes, down million And went down it quarter-on-quarter. X about would it So shares things. share X The shares. say is purely XX rounding.

We are have cash believe going to have we before investment. be flow as continue continue when opportunistic continue free and/or dilution, as to cash a also financing at we will buy the we to and to long we it's available, great

And so fourth in on we're you and quarter. shares continue that continuing a expect regular to should basis, buy to the

Operator

of Frank question next from from the Your Fermium. line Mitsch comes

Frank Mitsch

was XXXX? a your congrats. as finish the volumes. and that Howard, to the into Is what your wondering continue Thanks all sequentially This in we quarter row to the forward trend expectations I looking over for quarter was third help third -- this and the see? friendship can next chapter. the are we years higher year and of a certainly

James Fitterling

still that fact positive polyethylene cetera. volumes we've demand in and the around on be regions, Yes. a lot P&SP, of centers, would the I demand all et Frank, see we also data what in I telecommunications, in think seen on infrastructure, mentioned

will once is so is back very cable demand up that, And there and plant -- that Industrial the Solutions quarter limited I in be of and positive. the bit would is is a other demand outage because business Plaquemine. one say the But running. wire than fourth the in which

Consumer been pretty say -- has sales In holding But first better in we've than had was third third coatings. X seen in see that to than demand with we core demand Solutions going were I That's the it for the better PM&C, This St. all typically can in is up Charles, cracker we merchant other that that, last architectural away quarter X the we ethylene you're the the volumes in segments you see quarter for if first year. coatings, time quarter take downstream silicones the mean, fourth quarter underlying segments in which slowdown, down years. year-over-year. downstream the all because we several was underlying for well.

We optimistic that. I'm see So strike resolved. with the can automotive

the in see think as polyurethanes a demand X. up up P&SP, tick quarter-over-quarter to we'll saw down slightly in slightly good up in that well. just I flat in quarter-over-quarter, demand China to be in a China Consumer in Solutions. good. And continues We other

Operator

Your the next Mike comes Sison line of question Wells from of Fargo.

Richard Garchitorena

could industry, are Richard, This the on to And to operating where the we Mike. demand your EBITDA you rates up up see those for just polyethylene? optimal follow do across was and rates operating you on next you if how your give think do in I segments? specifically ramp Where is if that, us for wondering environment levels? color year, stronger should about on them improvement we a get potential can for some

James Fitterling

Yes.

take a north it at greater see than by XX%. Tarragona versus Just taking the segments, rates their of competition but obviously, East also when advantages a Coast, of Europe. Canada, look -- both operating at to And a look at I going substantially I'll you're look to a by think Terneuzen Gulf have think take advantaged you In it P&SP, ton, -- Middle that even you cost $XXX pro-nap all within assets, with U.S. about our spreads $XXX and Argentina, positions, them regions.

Solutions, there. We segments, pretty polyurethanes, see Gulf footprint. good. market. European able which even the all the has a been little heavy that and see We're be into strong. you So in see have that a not obviously we're those And lower Where to bit softer, so continue well rates building rates meet operating you'll export on see move inventory. as operating rates Industrial I things to think Coast. In operating We obviously, construction-related

Our the that silicones, on out. down Solutions, operating are thing the own then demand capacity year-end look at if tend And Plaquemine PM&C, take And see coatings. the because Consumer rates typical in in good that in is of in in above issue slowdown has you we XX%. to those a slightly quarter

we're And strong, up will us positioned be would for comes you So into meet all up cost closely I all, to continuing in signals that able are we're watching that feel as to XXXX. demand ramp demand it run the pull good our advantaged expect. as regions to to

Operator

Research of line next question the Partners. from Your of Kevin McCarthy comes Vertical

Kevin McCarthy

Jim, for construction-facing I'd your heading businesses appreciate Dow's XXXX. outlook into

benefits companies are we Some meaningful reshoring-related and from pointing that infrastructure fiscal stimulus. investments, the to cover basically of

and effect. rising rates, typically chilling has hand, a On we've the other got that

how you're So and those you the future? the trends Dow netting see countervailing way affecting for out do for planning

James Fitterling

and to tick But for rates on see, noncommercial see obviously, good. put we'll the think residential that's starting there what the would that's been have some Yes. up rates relatively as I to on Kevin, as the things, there out which on on has We're on projects construction builds. were on been things new the work obviously, flight. we is on a applications completion for going commercial just on question lot watch in a permit builds construction, say on long to I pyramids on, going existing continue will that of because strong side of rates year a and there's this in residential a lid rise, commercial construction.

terms seeing movement step infrastructure, biggest that are permitting. rate-limiting some In of would I space. in infrastructure is on the say we

phase for right could people the we but the be Overall, in cabling, we 'XX. get some limitations and for that's be could which whether that if can there, through the positive keep toughest and fact it pipelines, name that. be could construction transmission at U.S., in on us speed it permits, markets in it upside will be see eye you now. I an about And -- could good it, come back there for China the nice the feel some of moving growth that So a for we're

Operator

comes from of Byrne America. question Bank line next the of Steve of Your

Steve Byrne

have sequential each end? you've quarter. improvement end businesses firming think you by in in that customers? your seen of your I'm how each showed have Or What relative do your how weakness? some market market businesses, sequential X months Is about is, of XX And view their customers to coming of destocking is this your your underlying intriguing. XX, chart that on you to versus is Yes. curious for demand. just demand an much is do Slide really you destocking products inventory a destocked that the this third end decline just You The have much to thus, some as demand

James Fitterling

downstream of been hand their sector, much on glean go chart consumer because public Steve, into rate-limiting ability it's mouth we Obviously, chips. to see get the things data computer we industry there to with a we like have brands reported pretty reports. keep good to But few comes to get and to retailer the auto been there. that the published we that the data OEMs, when that space, example, other a just question. that have steps get in you We the in mind. for it the it's we When on out know

We position up because haven't strikes ramp with be continuing to seen seen We've in the a OEMs. get they the to a to big settled. when run want restocking the OEMs

So companies don't feel brands stocking say like lately on inventory I going watching or on the them, there's obviously, get I any would the of consumer going I big sense there. seen on restocking levels. would don't lot I and any say pharma a there. destocking of

to more running it's think meet I demand.

other the then is don't much bit we a I into with we the downstream. on construction It's a And published harder. the thing obviously rely as mentioned. little But a segments, bit at little We going have when fuzzier what's data as get look on. to just take it's

We comment we look We So filings. their more in look more on they look at at retail PMI. sales. at what more public

Operator

Capital of of comes question next Markets. from McNulty John BMO the line Your

John McNulty

And Howard, again, congratulations.

huge over years. a been You've the help

outlook you -- looks on the on So solidly be better expecting like kind would came question it gave the the II&I what It segment. the XQ call. just than were when you in of

drove reasonable kind looking out were it? run a curious way out terms you're of at problem, we that what I Is operations a back of that you XXXX? factors And at think guess, rate EBITDA. the the how $XXX million So in about if to start

James Fitterling

Industrial still are we strong than ago more lower they demand goods energy Yes. side. Solutions Durable which saw is side, year the the which polyurethane obviously On in the and a mobility side, period. is II&I, the were in

had rates some had time, that. little because coming and better had operating also out Sadara back some We maintenance from a it's of bit lower

be a some positive impact in pressure to So I capacity there. price positive going the see Freeport, which upside. We're be from obviously continue on down will There's will to new think that polyurethanes. isocyanates

The on costs. work did business their a also lot of

costs. saw see on EBITDA their think asset also We up of their try to see in fourth get So $XXX was I higher in impact and don't quarter, running is about then unplanned they're third And Plaquemine the million target because managing to quarter. you'll that fourth any quarter, in quarter to flat that up second kind the the year. the you'll next event.

Operator

UBS. Spector Your of next question comes from of the line Josh

Joshua Spector

to Howard want echo and my I congrats [indiscernible]. to

kind the normal last level? all what PMC, So supply. of few a I year, as months? next about for that been get I you wanted on some on added much within to mean Or year you've some anything have just to healthy you've that in reiteration pressure improve think increased side to under is the changed did And made siloxanes Has business in ask seen? to a how back just things there. from that pressure of comments business

James Fitterling

XXXX Europe or start prices, pressure and Asia, to at quarter, quite improve market at That's we'll 'XX. and at Josh, good some in and coming significant silicon that moderate we start bit in XXXX, expect in some capacity the kind pricing, think that grow related in been some what to on was that some move put to They're you're downstream rates is a going to obviously absorb But there new moving I less demand obviously, continues things related, starting 'XX, to and higher time. upstream to which rates, are on, up siloxanes in and they've start which going of you're levels up. beyond. XXXX we'll in have to capacity to of the to see primarily see pricing, metals and siloxanes, silicones lowest fourth operating that the in is

Operator

Your next question the of from of line Citigroup. Patrick Cunningham comes

Patrick Cunningham

weaker On subsidies, green strategy, seems tackle the incentives to abroad? risk in what public-private the how the appetite and decarbonization about to in the given transition, long-term to North America macro think do be some you partnerships, deceleration and

James Fitterling

working a price the on There's Alberta the carbon our question. Yes. that's on portion environment And Obviously, of project we're in Canada. is infrastructure. view some there's the of obviously an decarbonization. project. hydrogen carbon capture credits investment in Good for There's existing supportive

positive. all are those so And

supply is asset also As standpoint. though, mentioned, we be have capability this mind that very going to to we keep ethane a in an low-cost from

in expectation our we above at the returns say is why cracker, that Texas-X our or we've best had history. that's So which ever project be is the our will

always on, build partnerships will that they're projects. And be we mechanical we incentives. waste, that we to not to recycling We're will projects, wide the open long-term, to sure and the the they we that make talk where going on Having the our we keep make to going said low-cost of is into what's We've we about got where eyes market. access thing term have our back that, are position to make have on low-cost access have to to access get advanced and advantaged have to true same when and investments looking -- feedstocks, going space. sure the that incentive got the when they operating we That's just we've market. and circularity investments have long the are right

absolutely So we X that year. we're right get project timing the Alberta this looking the on convinced with of Canadian our at nailed have project. them FID is issue We're should down by final end government, project. We before federal the the

Operator

comes Viswanathan line Arun Markets. next from Your question RBC of Capital the of

Arun Viswanathan

Maybe definitely just update guess question working seeing most years. I over my you're us I of congrats had to markets. there. pleasure with for your important what a you you, on I I'll on China. Howard, Obviously, the just insights. you appreciate could your a very add Yes,

your the of up on your I But ethylene across were you if impacts Maybe volumes would from seeing in be you that are merchant remove that construction what noted China? demand, consumer You businesses year-on-year well polyethylene sales. as -- kind characterize maybe outlook? the X side as guess could great some in if you

James Fitterling

back that's the been government's expected consumer GDP on mean I demand, slowdown. been be consumer-driven question. this is about to position year that's of from the Good really X%, the as Yes. recovery growth obviously, and

things going on stimulus moving there. some oil we've some and up. up, we in looked terms of for September. of rise pressure at the well always plants, could. year-over-year refined Our up September would year-to-date. the sales the there about Retail a expectation clothes as is coming in that Manufacturing up products. I get be of saw were as will one textiles in and things construction sale was what's the of PMI September, some markets, say XX% slowdown in sales things sales a consecutive And which rate were because right It's are operating price the the on Automotive X.X% about MEG. EV X.X% to of housing in the on in activity second month MEG is up is drives one the now. of which the the polyester out of of are price XX% government that is above

quite time. seen We in that some haven't

keep of an as that turn, medical of the consumer day-to-day in the I an on. think but it's items. typically economic slowdown up Packaging a does volume really bit something the early packaging, are And to nature nondurable held call moved packaging, food And little it quarter-over-quarter well. to because has it's eye good.

Operator

comes Goldman the of next Fischer of Duffy line Sachs. from Your question

Patrick Fischer

sequentially in In both down but each is both SBUs, EBITDA was iCube up if yet in could pricing you and segments PMC [ of you out through, ], walk the sequentially. called

take materials spread And as tell walk kind of you where and trying kind through would was in the that permanent? than you the costs us falling of like out that much better are that getting price raw put was could guys So how because to down? were just structural more was we of

James Fitterling

Yes.

look were costs better. Sadara a and then was Variable some obviously tailwinds little bit propylene million. then And $XX the benzene cost had savings, if II&I, you there. side a you the on really and about outage equity So earnings compress turnaround from headwind. Louisiana And at

from you were the about parts. those So In in $XX million moving turnaround tailwinds PM&C, of the savings. cost had

So to positive. the that's

acrylates supply strong some siloxane coating monomer had also in negative, the business, the we were opportunistic the and side some availability had to of and in quarter. lower improved You of prices sales and siloxanes seasonality the

net-net -- were X things So the in segments. swing those that that made was those the

Operator

of from KeyBanc. of line comes Aleksey question Yefremov Your next the

Aleksey Yefremov

Howard, congratulations.

sounded up follow It pretty Just Is wanted were good previous in we use can year? answer, thinking there this would a I the level that on sales. just a healthy say next to some number. about opportunistic PMC. for

forward of the is coming sort think this about question going a in that's where So real segment? to earnings from. the Is number sustainable

James Fitterling

Yes.

think be some Consumer strong. improve, demand silicones. The as siloxanes Solutions I to downstream you and has can see continued uptick positive in

like So demand that hasn't been the primary we're continued commercial good in sector, the and EVs construction watch downstream to issue. things the signs battery markets. And still seeing production. positive We'll have

will residential space. beauty, and think personal in I household to that products, improve positive and be health say, care, I but start to somewhat, consumer going continue would are to

due has to slow Coatings been construction.

resolved the a strong strikes big permits to I seen here to construction of bright That's stimulus think the in watch GDP say, I year. slow a again for and be of has demand see builds competing get would U.S.-centric And kind the that And UAW get spite in the pretty with automakers, share. you'll is are because would step-up start say, spot there. Automotive, there through going there's they'll construction. Europe, globally, once we have to automotive up in a to the market if signs for pick view. China, even applications markets I some think starting on a that any we'll starting I are

Operator

from comes Laurence of Jefferies. of Your next the Alexander question line

Laurence Alexander

revisit want level. the I inventory to just

days If Howard, for And think next ramped learned from see on just getting up shaking help this you separately, mid-cycle? thank the your Dow. lessons capital cycle, about working at out inventory in where days you you do

James Fitterling

Yes. touch Maybe to Howard, inventories. do you want

working You the team, pretty capital focused throughout. been all there's this and got on

Howard Ungerleider

proud as as and the in of hopefully, Laurence, on cash -- we're EU operating an think I managing very rate Sure, made, and been the really cash EBITDA done leadership everything just Yes. is thanks Yes, and Jim. we've big team of [ ]. X or I've managing you we've we'll we've and how years really about over cover one look, Dow step organization and and changes if appreciate -- you've well whole to the that as I margins And time, continue. last in organization X a as change think a been big

structurally days more cash the cycle a the you about about When days. cycle. improvements spin, X and conversion have taken other since structural out been X We on has been it think around have

Jeff's leadership, cycle taken normalized on capital probably you overall, with billion X I expect and down day, expect So the think, far. out -- head eventually next will is the into use we've target we out another we've leadership together we I from year to good could head macro the into future, revenue will so under into $X a releasing that out, as peak maybe of the cycle would would cash. But obviously, cyclical another cycle, X a working out team, this And $X I expect a of X about days cash days at billion and Jim or least headed as into that just continue as in come structurally. period,

but about end -- to working thinking gives on businesses OMP you the to it the it, the range. that's now we've implementing good So all is XX almost of cycle implemented We've I cycle really really -- been a think a a nice and of is days or end customer in that from our team structural process standpoint. OMP target back, in still from

James Fitterling

to to for you say off cut before any going make him. Jeff targets is me you more

Howard Ungerleider

it. X. maybe Just X more That's day,

Operator

from Your line of comes last Mike Barclays. Leithead question of the

Michael Leithead

Appreciate here. me you squeezing Great. in

packaging. on briefly Just

million almost I in us $XXX million was about Can the better sales, on through. quarter lower you help $XXX pieces XXX% understand down think sequentially, EBIT drop moving the there?

James Fitterling

of third quarter. due becomes We as fourth Sure. sales the for a Charles cracker. of impact. ethylene that the we quarter being cost turnaround primarily We in drag surge increase market, quarter us costs were then the happened into in the some were which the previous the equity that the feedstock pricing quarter. the in a so were positive and and the a the the in on energy The then the stronger St. had in and an that drag, from was merchant And third feedstock to the and obviously had big out earnings, And up lower that go ran the cost. impact came pricing third kind Prices delta. quarter. of energy up lagged September, But in really of which the had

And that so margin squeeze. saw you

I go think get $X.XX we'll we're back to as I bit And ahead like that, I quarter. the and said, expect that. we into of fourth even about little improvement margin a integrated with

Operator

There are at no closing remarks. further will turn this question call time. I now Gupta to for the Mr. over

Pankaj Gupta

our today, Thank Dow. call in and appreciate Yes. everyone, Thanks, joining you, Jay. your interest for we

For be Dow's of very posted approximately call. will concludes website our copy transcript your hours. reference, This you within our on XX much. Thank a

Operator

You disconnect. may now

Dow (DOW) 24 Oct 232023 Q3 Earnings call transcript