Markus Wildi. President Dow Europe GmbH The Dow Chemical Company. April 3, Lehman Brothers Global Chemical Industry Leaders Conference, Budapest

Transcription

1 Markus Wildi President Dow Europe GmbH The Dow Chemical Company April 3, 2008

2 Agenda 2007 Financial Results Transformation to an Earnings-Growth Company What to Expect in

3 2007 Full-Year Financial Performance Dollars in millions (except per share amounts) Change Sales $53,513 $49,124 9% Price 7% Volume 2% Purchased feedstock & energy cost 11% Equity income $1,122 $959 17% Earnings per share (GAAP) $2.99 $3.82 (22%) Earnings per share excluding $3.76 $4.25 (12%) certain items* *Non-GAAP data; excludes certain items. See for more information. 3

4 Track Record Return on Capital* Financial Metrics Return on Equity* Earnings per Share* : 14% 10-year average: 12% average: 12% 2007: 19% 10-year average: 18% average: 19% 2007: $ year average growth: 4% growth: 5% * Non-GAAP data; excludes certain items; excludes Union Carbide prior to See for more information. 4

5 Strategy FEEDSTOCKS JOINT VENTURES JOINT VENTURES BASICS PERFORMANCE MARKET FACING Products Solutions Systems Technology and R&D Our Strategy: Preferentially invest in our Performance businesses and Strengthen our franchise Basics businesses by: Joint venturing Basics businesses to access advantaged feedstocks Focusing on higher-margin proprietary products Launching more Market Facing businesses 5

6 An Earnings-Growth Company Ethylene cycle no longer a key driver of earnings Earn above Dow s cost of capital Consistent earnings growth over the long term 6

7 Trough Earnings Innovation and M&A Premium over Share Buyback Target: EP Breakeven Share Buyback Portfolio Management Equity Earnings Margin Improvement Cost Control Volume Growth 2002 Next Industry Trough (2010/2011) 7

8 Volume Growth Innovation and M&A Premium over Share Buyback Target: EP Breakeven Share Buyback Portfolio Management Equity Earnings Margin Improvement Cost Control Volume Growth 2002 Next Industry Trough (2010/2011) 8

9 Geographic Sites and Sales North America 38% ($20.5bn) of Dow s global sales 26% ($1.74bn) of Dow s share of JV sales Europe 37% ($19.6bn) of Dow s global sales 20% ($1.34bn) of Dow s share of JV sales Latin America 11% ($5.7bn) of Dow s global sales 8% ($0.50bn) of Dow s share of JV sales India, Middle East, Africa 3% ($1.5bn) of Dow s global sales 7% ($0.46bn) of Dow s share of JV sales Asia Pacific 11% ($6.2bn) of Dow s global sales 39% ($2.55bn) of Dow s share of JV sales More than 100 employees Between 10 and 100 employees Multiple Dow sites within a radius of 100km Manufacturing R&D Business / sales centers Manufacturing and Business Manufacturing and R&D R&D and Business Manufacturing, R&D and Business 9

10 Geographic Growth Emerging Economies Brazil, Russia, India, China 35% 30% Rest of Dow BRIC Change in Sales vs. Prior Year 25% 20% 15% 10% 5% 0% -5% Adjusted for formation of MEGlobal

11 Dow Sales By End-Use (2007) Oil & Gas (18%) Food & Food Packaging (19%) Water & Waste Management (1%) Health & Medical (3%) Electronics (4%) Household/Personal Care (14%) Construction & Building Maintenance (12%) Furniture/Furnishings (3%) Paper & Publishing (7%) Transportation (8%) Home Care/Improvement (11%) 11

12 Financial Discipline Innovation and M&A Premium over Share Buyback Target: EP Breakeven Share Buyback Portfolio Management Equity Earnings Margin Improvement Cost Control Volume Growth 2002 Next Industry Trough (2010/2011) 12

13 Financial Discipline 10% SARD as % of Sales Days DSO $ Billion 5% 0% Working Capital Capex Days DSI Depreciation Capex 13

14 Margin Improvement Innovation and M&A Premium over Share Buyback Target: EP Breakeven Share Buyback Portfolio Management Equity Earnings Margin Improvement Cost Control Volume Growth 2002 Next Industry Trough (2010/2011) 14

15 Margin Improvement Downstream shift in Performance portfolio Polyurethane Components PU Systems Epoxy Intermediates Epoxy Systems Higher value offerings from Market Facing businesses Dow Automotive Dow Building Solutions Dow Coating Solutions Dow Water Solutions Significant improvement in Ag vs

16 Equity Earnings Innovation and M&A Premium over Share Buyback Target: EP Breakeven Share Buyback Portfolio Management Equity Earnings Margin Improvement Cost Control Volume Growth 2002 Next Industry Trough (2010/2011) 16

17 Joint Ventures Financial Contribution to Dow Equity Earnings ($ million) Cash Distributions ($ million) Return on Investment* (%) $923 $964 $959 $1,122 $1,122 $536 $622 $837 40% 39% 38% 39% $322 $322 $205 $430 19% *Equity earnings/average investment in nonconsolidated affiliates 17

18 Dow s Joint Venture Strategy Growth and access to low-cost feedstocks Enabler of two growth platforms: Basics and Performance Keeps Basics footprint Protects world-leading franchises Creates self-sustaining growth company Improves cash flow Shares capital costs / risks with strong regional partner Accelerates growth in emerging regions Retains the value of integration 18

19 Actions Taken 2006/2007 Projects Siam Cement Group (Thailand) Saudi Aramco (Saudi Arabia) Shenhua Group (China) National Oil Company (Libya) Crystalsev (Brazil) Gazprom/SIBUR (Russia) Existing Asset JVs CPChem (Americas) PIC (Kuwait) 19

20 The Dow-PIC Advantage Creates a world-class petrochemicals giant Introduces a new global player with enhanced capabilities to grow especially in China, India and the Middle East Opens the door to low-cost feedstocks for future growth Preserves vertical integration for Performance businesses Releases cash for Dow s continued transformation TRANSACTION VALUE - $19.1B (on 100% basis) 20

21 Active Portfolio Management Innovation and M&A Premium over Share Buyback Target: EP Breakeven Share Buyback Portfolio Management Equity Earnings Margin Improvement Cost Control Volume Growth 2002 Next Industry Trough (2010/2011) 21

22 Active Portfolio Management Divest or shut down non-competitive, unproductive or nonstrategic assets ( ) 92 plant shutdowns 42 site exits 38 business divestitures Strategic Acquisitions 22 since 2003 Accelerated in 2007 Wolff Walsrode Dow AgroSciences 4 acquisitions Epoxy Systems 3 acquisitions Polyurethanes 3 acquisitions 22

23 Share Buyback Innovation and M&A Premium over Share Buyback Target: EP Breakeven Share Buyback Portfolio Management Equity Earnings Margin Improvement Cost Control Volume Growth 2002 Next Industry Trough (2010/2011) 23

24 Share Buyback All Figures For Illustrative Purposes Only $7.2B $45/Share $ Million Shares Outstanding $ Million Shares Outstanding Trough EPS Pre-Buyback Trough EPS Post-Buyback 24

25 The New Dow Innovation and M&A Premium over Share Buyback Target: EP Breakeven Share Buyback Portfolio Management Equity Earnings Margin Improvement Cost Control Volume Growth 2002 Next Industry Trough (2010/2011) 25

26 The New Dow Themes Health Energy Infrastructure & Transportation Consumerism (Electronics & Communications) Nutrition & Wellness Alternative Energy & Feedstocks Construction Connectivity & Convenience Opportunity Areas Prevention Monitoring & Diagnostics Energy Production & Efficiency Transportation Safety & Security Energy Storage & Distribution Water Fashion & Comfort Biotechnology Insulation Building Materials Optical Materials Key Dow Capabilities Water Soluble Materials Advanced Packaging Materials Applied Energy Efficiency CO 2 Management Advanced Materials Science Filter/Membrane Elements PCB Materials Advanced Materials Science Crop Protection Building Integrated Photovoltaics High Throughput Formulations Capability Interlayer Dielectrics 26

27 Existing Business Strengths Health Agricultural Chemicals Food Packaging Energy Energy Efficiency Energy Production Infrastructure & Transportation Construction Channel Automotive Channel Water Platform Consumerism Electronics Fashion Fabric & Surface Care 27

28 Innovation - Pipeline Strengths Health Ag & Ag Biotech Energy Alternative feedstocks Energy efficiency insulation Solar Wire & Cable Infrastructure & Transportation Diesel particulate filters Membrane technology Consumerism Electrical laminates Fibers Fabric & Surface Care Epoxy Aligned Capabilities Catalysis High throughput Material science 28

29 M&A Disciplined Criteria Fit with our Performance/Market Facing portfolio Health Energy Infrastructure & Transportation Consumerism Accretive to earnings by end of second year Create more long-term value than share buyback 29

30 M&A Financial Metrics Measure financial fit with Dow s M&A metrics DCF IRR Pay-back period Accretion Ensure transaction is consistent with financial strategy 30

31 Balanced Use of Cash Capex M&A Share Repurchase Dividends Maintain Balance Grow the company Reward shareholders 31

32 Shareholder Remuneration Dividend Quarterly dividend maintained or raised for 96 years Dividend raised 25% since January 2006 Share Repurchase 50 million shares repurchased (2006 & 2007) Represents 5% of shares outstanding 32

33 What to Expect in 2008 Continued financial discipline Close on PIC JV; move forward in implementing other JVs Continue transformation of earnings profile 33

34 SEC Disclosure Rules Some of our comments today may include statements about our expectations for the future. Those expectations involve risks and uncertainties. Dow cannot guarantee the accuracy of any forecasts or estimates, and we do not plan to update any forward-looking statements if our expectations change. If you would like more information on the risks involved in forward-looking statements, please see our annual report and our filings with the U.S. Securities and Exchange Commission. In addition, some of our comments may reference non-gaap financial measures. Where available, a reconciliation to the most directly comparable GAAP financial measures and other associated disclosures are provided on the internet at in the Financial Reports page of the Investor Relations section. 34

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