2014 Investor Forum. Joe Harlan Chief Commercial Officer and Vice Chairman, Market Businesses November 13, Dow.com

Transcription

1 2014 Investor Forum Joe Harlan Chief Commercial Officer and Vice Chairman, Market Businesses November 13, 2014 Dow.com

2 SEC Disclosure Rules Some of our comments today 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 SEC filings. In addition, some of our comments reference non-gaap financial measures. Where available, presentation of and reconciliation to the most directly comparable GAAP financial measures and other associated disclosures are provided on the Internet at Trademark of The Dow Chemical Company or an affiliated company of Dow. EBITDA is defined as earnings (i.e., Net Income ) before interest, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding the impact of Certain items. Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentage of reported net sales. Adjusted EPS is defined as earnings per share excluding the impact of Certain items. Net Debt equals total debt ( Notes payable plus Long-term debt due within one year plus Long-Term Debt ) minus Cash and cash equivalents. Net Debt to Total Capitalization ratio is defined as Net Debt divided by Net Capital. Net Capital is defined as Total Equity + Redeemable Noncontrolling Interest + Net Debt. Net Debt to EBITDA is defined as Net Debt divided by Adjusted EBITDA. TTM is defined as trailing twelve months. Total Capital is defined as total assets minus non-interest bearing liabilities. Adjusted Return on Capital is defined as TTM Adjusted Net Operating Profit After Tax divided by average Total Capital. Adjusted Sales for joint ventures is defined as sales for joint ventures less sales to Dow and/or other Dow joint ventures. Net Debt for joint ventures excludes debt owed to Dow and/or other Dow joint ventures. Total Shareholder Return is defined as stock price appreciation plus dividends paid.

3 Our Priorities Going Forward Fully capitalize on growth levers Make further strategic choices: Go deeper and narrower to drive the next level of long-term growth Maintain strong focus on rewarding shareholders

4 Announcing New Segments Aligned to Dow s Strategy Agricultural Sciences Consumer Solutions Infrastructure Solutions Performance Materials & Chemicals Performance Plastics Crop Protection Seeds Revenue: $7.2B Adj. EBITDA: $0.9B Consumer Care Dow Automotive Systems Dow Electronic Materials Revenue: $4.6B Adj. EBITDA: $1.0B Dow Building & Construction Dow Coating Materials Energy & Water Solutions Performance Monomers Revenue: $8.5B Adj. EBITDA: $1.1B Chlor Alkali and Vinyl Chlorinated Organics Epoxy Industrial Solutions Polyurethanes Revenue: $14.9B Adj. EBITDA: $2.1B Foundation of Core Strengths Support the Entire Franchise Cost Advantaged Feedstocks in Every Region Scale & Operational Excellence Molecular and Physical Integration Dow Elastomers Dow Electrical and Telecommunications Dow Packaging and Specialty Plastics Energy Hydrocarbons Revenue: $22.6B Adj. EBITDA: $4.4B Global Reach Marketing, Business & Operations Expertise in Science & Technology Strong Brand Value 3Q14 Trailing Twelve Months Revenue and Adj. EBITDA data

5 COMMODITY Running an Integrated Enterprise Sell Out, Sell Up APPLY BEST OWNER MINDSET CREATE STRUCTURAL ADVANTAGES Low Cost, Technology, Targeted Marketing CapEx Selling and R&D DIVEST Performance Monomers Dow Coating Materials Energy & Water Solutions Dow Building & Construction Dow Automotive Systems Base Crop Protection Products Seeds Consumer Care Dow Electronic Materials New Crop Protection Products SPECIALTY RETAIN FOR INTEGRATION / RUN FOR CASH INNOVATE BACK TO SPECIALTY

6 ($MM) Leading Position in the Agriculture Industry Crop Protection Growth Driven by Targeted Investments Untreated Insecticides Herbicide program* with the Enlist Weed Control System Herbicides Fungicides Focused investment in innovation and channel drives growth; balanced across platforms Created a world-class Seeds business Best-in-class Crop Protection pipeline Row Crops Niche Crops Seeds Traits Germplasm $1B Revenue Target From New Products by 2018 Crop Protection Seeds ** *Dow AgroSciences field trials data **Subject to regulatory approval; Stewarded introduction

7 Doubling Dow Agricultural Science s EBITDA Seeds EBITDA Growth Driven by Enlist Crop Soybeans Acres Sold >50MM Sales at Maturity >$600MM Crop Protection EBITDA Growth Driven by Commercialization of New Products Product Estimated Sales at Launch Year Maturity Isoclast 2013* ~$400MM Corn >40MM >$300MM Arylex * ~$400MM Cotton <10MM <$100MM Broad Spectrum Herbicide * ~$200MM Estimated Launch Year Crop Geo 2015** Corn N. America 2016* Corn S. America 2016* Soybean N. America 2016* Soybean S. America 2016* Cotton N. America *Subject to regulatory approval Cereal Fungicide 2018* ~$200MM Additional Modeling Details New crop protection products generate 20 30% higher margins Enlist receives incremental acre margin in corn and cotton; full acre economics in soybeans Licensing to multi-nationals and regional seed companies provides additional value **Stewarded introduction

8 2006 Investor Day Innovating for Growth Record Pace of U.S. Patents Granted U.S. Patents Granted U.S. Patent Applications BETAMATE Platform Q14 TTM BETAMATE Gen 1 Steel to Steel: BMW 7 Series BETAMATE Gen 4 Aluminum Bonding: Ford F-150 Innovation Engine Accelerates the Pace of Effective Commercialization of Differentiated Solutions New Innovation Delivers Higher Margins Patent-advantaged products represent >20% of Dow s revenue Patent-advantaged sales deliver >1,000 bps margin premium Nearly 35% of Dow s revenue comes from new products TTM defined as Trailing Twelve Months

9 Consumers Crave Improved Displays and Novel Form Factors New Technologies Provide Great Growth Opportunities for Display Technologies Major Display Market Trends (2014+) Growing desire for close to natural light, moving away from LED s high-energy blue light LED QD OLED Sunlight The rise of China in both mobile and large flat panel display arenas Strategic Focus of Dow Electronic Materials High-yield/performance OLED materials Quantum Dots LED display (including QD films) Dye-based color filter Aggressively pursue Chinese producers with current technology, demonstrating excellence in both LCD and OLED materials New form factors enabled by new materials technologies Flexible and wearable displays Auto-stereoscopic 3D displays Organic layers that enable foldable as well as bendable displays 3D Films Organic Growth with Current Portfolio Continues to Provide Top-Notch Technology via Tight Customer Engagements and Aligned Technology Roadmaps

10 R&D Investment and Margin High Reliance on Technically Differentiated Offerings Tiered Offerings Aligned with Returns Finding Our Place in the Value Chain All Acrylic Coatings Styrene Coatings Tiered Products and Services Capture Value Throughout Market Performance Monomers Level of Competition Energy & Water Solutions Differentiation Dow Coating Materials Dow Building & Construction Vinyl Acrylics Coatings Value Chain Dimensions of differentiation: Quality, Service, Reliability, etc. Multi-Generational and Tiered Approach Maximizes Value

11 Driving Growth in Energy and Water Focus on Down the Chain Solutions Business groupings create unique capability combinations to generate unique solutions to address significant end market issues Increase technical resources to sell higher value-added solutions in focused applications Global Reach with a Local Approach Identifying and building a strong presence in promising, high potential regions Localization approach enables Stronger customer relationships Agile research and development Tailored solutions to meet customer needs OBJECTIVE: Co-inject chemical additives with steam Reduce energy consumption and GHG emissions Increase oil production rate Collegeville, Pennsylvania, USA Horgen, Switzerland Dubai, United Arab Emirates Shanghai, China APPROACH: Build application expertise Taking learnings directly to major oil sands operators Querétaro, Mexico São Paulo, Brazil Warsaw, Poland Mumbai, India Singapore Altona, Australia Soma, Japan Localized Marketing and R&D with Global Expertise Maximizes Returns

12 IDEATION STRONG INNOVATION PLAYBOOK Innovation Pipeline Optimization How We Do It Highly-Targeted, Commercial-Ready Innovation Key Learnings & Practices Narrower innovation aligned with market strategy Consistent addition of innovative ideas to pipeline and cross-business synergies enable successful projects Unparalleled material science research capabilities Disciplined project analysis throughout ensures proper resource allocation Continuous optimization of innovation pipeline necessary for success

13 Priorities Target attractive markets and grow our businesses Deliver front-end commercial excellence Continuously refine market choices and product offerings Rely heavily on differentiated technical offerings Narrow and Targeted Focus will Grow Top Line and Expand Margins

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