Dow s Transformation In Action

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Transcription:

Dow s Transformation In Action Geoffery E. Merszei Executive Vice President & Chief Financial Officer December 2, 2008

Agenda Strengthening Basics Preferentially Investing in Performance Businesses Business Portfolio Management Financial Discipline Remunerating Our Shareholders 2

Delivering On Our Commitments K-Dow Joint Venture Formation Agreement A Binding, Definitive Agreement Expected To Begin Operations By January 1, 2009 3

A New, World Class Petrochemicals Company Polyethylene, Polypropylene, Polycarbonate, Ethyleneamines and Ethanolamines, Ethylene Glycol and PET All related technologies Fully dedicated hydrocarbon assets Fort Saskatchewan, Canada (cracker) Bahía Blanca, Argentina (cracker) Tarragona, Spain (cracker and octene manufacturing facility) Ethylene supply agreements from Dow s other crackers Number 1 position in Polyethylene 4

K-Dow Transaction Proceeds Total Enterprise Value $17.4 B EBITDA Multiple on 2006 Basis 7.1x Special Cash Distribution by K-Dow Gross Proceeds $1.5 B $9.0 B 5

K-Dow Petrochemicals Sound Partners Dow More than 100 years of experience and leadership A recognized global brand and franchise Technology and market leadership Global reach #1 position in PE and amines, leader in PP, PC, and technology/catalyst licensing Innovation, application and operational expertise + KPC / PIC Feedstock integration Expertise in oil and gas Regional leadership and global relationships Resources and desire to grow downstream Strong financial position and track record Successful JV experiences all coming together in a focused, dedicated, agile company with the staying power to grow with our customers in all regions of the world. 6

KPC A Strong Partner & Resource Owner Billion barrels of oil equivalent 350 300 250 200 150 National oil company (NOC) Publicly traded company 100 50 Saudi Aramco Iran NOC Qatar Petroleum Abu Dhabi NOC Iraq NOC Kuwait Petroleum Venezuela NOC Nigeria NOC Libya NOC Sonatrach (Algeria) Exxon Mobil Royal Dutch Shell Chevron Conoco Phillips BP Eni 0 Source: CMAI, 2005 data 7

K-Dow Petrochemicals Key Statistics The Company Headquarters A 50:50 joint venture between Dow and Petrochemicals Industry Company of Kuwait The world s largest polyolefins producer and marketer The world s largest amines producer and marketer Sales of approximately $15 billion worldwide Southeast Michigan, USA Employees ~ 5,000 people worldwide Products Manufacturing Locations Polyethylene, Polypropylene, Polycarbonates and blends, Ethanolamines, Ethyleneamines, Ethylene Glycols, PET, Technology Licensing and Catalyst 16 plant sites in 9 countries 8

K-Dow Petrochemicals Key Statistics K-Dow Sales by Product* Ethylene Glycol 20% PET 3% Amines 4% Polyethylene 58% Licensing 1% Polycarbonate 3% Polypropylene 11% K-Dow Sales by Geography* Latin America 14% Asia Pacific 13% IMEA 4% North America 35% * Estimate based on 2007 sales Europe 34% 9

K-Dow & EQUATE: Opportunities for Growth Brazil North Africa Kuwait China Thailand Current Production Assets Planned Assets 10

Preserving The Value of Dow s Integration K-Dow Polyethylene Ethylene Glycol (MEG & DEG) Polypropylene Polycarbonate Ethyleneamines Ethanolamines PET Building Blocks Benzene Butadiene Chlorine Cumene Ethylene Ethylene Dichloride Ethylene Oxide Propylene Propylene Oxide Styrene Dow Designed Polymers Dow AgroSciences Dow Automotive Dow Building Solutions Dow Epoxy Dow Latex Polyurethanes and PU Systems Specialty Chemicals Specialty Plastics & Elastomers Technology Licensing & Catalyst More Than 60 Service and Supply Agreements Reliable and Secure long-term supply Enabling Both Dow and K-Dow to Grow 11

Agenda Strengthening Basics Preferentially Investing in Performance Businesses Business Portfolio Management Financial Discipline Remunerating Our Shareholders 12

Delivering On Our Commitments A Transformative Move Accelerates growth through strong operational and strategic fit Creates new leadership positions in key industry growth segments Well-known commitment to R&D Fuels Dow s own innovation engine Delivers more stable earnings with higher growth 13

Rohm and Haas Integration Update Program Management Office 21 Functional Implementation Teams 6 Business Implementation Teams 7 Clean Teams 14

Rohm and Haas Cost Synergy Update Shared Services & Governance Run Rate Estimates End Year 1 End Year 2 $170 $280 Purchasing Synergies, Including Raw Materials $180 $280 Manufacturing / Supply Chain $70 $160 Business Development Overlap $65 $80 0 50 100 150 200 250 300 July 10 Commitment ($800 Million) Will be at $100 Million Run Rate on Day 1 Rohm & Haas $110 Million Savings is Additive 15

Synergy Opportunities Function Purchasing Information Technology Corp Business Dev Overlap Supply Chain Information Technology Manufacturing & Engineering Marketing & Sales Manufacturing & Engineering Shared Services Project Description Raw Materials IT Infrastructure Consolidation Business Overlap Synergies Logistics and Packaging I/S Organizational Consolidation Specific Mfg Footprint Optimization Marketing and Sales Synergy Project MRO/Maintenance Equipment Corporate Services 16

Rohm and Haas Advanced Materials Division Dow Chairman and CEO Andrew Liveris Rohm and Haas Advanced Materials Division CEO Pierre Brondeau Coatings Luis Fernandez Vice President Specialty Packaging & Films Patrice Barthelmes Vice President Marketing Ruby Chandy* Vice-President Human Resources Rich Lovely Vice President Building & Construction Torsten Kraef Vice President Designed Polymers & Separation Technologies Peter Davies Vice President R&D A. N. Sreeram Vice President Communications Brian McPeak Vice President Paper & Textiles Philippe Raynaud de Fitte Vice President Electronic Materials Yi Hyon Paik Vice President Legal Ken Fitzpatrick Vice President Shared Services Jim Varilek Vice President Asia Mark Douglas Vice President Manufacturing and EH&S Don Taylor Vice President Finance Alfonso Escudero Vice President This organization alignment is pending all regulatory approvals and closing of the transaction. Until that time, Rohm and Haas and Dow will remain separate entities and will operate independently. 17

The New Dow A Significant Portfolio Shift! Dow (pre K-Dow) Pro Forma Dow (post K-Dow) Pro Forma Dow (post K-Dow) + ROH 2007 Revenue 1 51% 49% 63% 37% 69% 31% 2007 EBITDA 1,2 52% 48% 59% 41% 67% 33% 1 Data excludes Unallocated and Other. 2 Non-GAAP financial measure. Excludes certain items. See www.dow.com for additional information. Performance (Includes Ag) Basic 18

Agenda Strengthening Basics Preferentially Investing in Performance Businesses Business Portfolio Management Financial Discipline Remunerating Our Shareholders 19

Delivering On Our Commitments Business Portfolio Management Divest or shut down non-competitive, unproductive or non-strategic assets (2003 2007) 92 plant shutdowns 42 site exits 38 business divestitures Strategic Acquisitions 26 since 2003 In the last two years. Wolff Walsrode Dow AgroSciences 7 acquisitions Epoxy Systems 3 acquisitions Polyurethanes 3 acquisitions Dow Building Solutions Stevens Roofing Systems 20

Agenda Strengthening Basics Preferentially Investing in Performance Businesses Business Portfolio Management Financial Discipline Remunerating Our Shareholders 21

Delivering On Our Commitments Sound Financial Discipline Debt Reduction $ Billions Debt/Capital 3.0 2.0 1.0 0.0 59% 55% 48% 2002 2003 2004 2005 2006 2007 Capex 2002 2003 2004 2005 2006 2007 39% 34% 32% Depreciation Capex 22

Managing Today s Challenging Environment Financial Flexibility Sufficient liquidity Credit lines of approximately $5 billion Retail and Institutional bond access Diversified funding sources throughout the world Financial Discipline / Interventions Targeted reductions by end of year Discretionary spending reduction of $100 - $150 million Capital spending reductions of $100 million Working capital reductions 23

Agenda Strengthening Basics Preferentially Investing in Performance Businesses Business Portfolio Management Financial Discipline Remunerating Our Shareholders 24

Delivering On Our Commitments Remunerating Our Shareholders Share Repurchase Amount ($Millions) $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 73 Million Shares Repurchased $3.0 Billion Spent Largest Program In A Decade $0 2005 2006 2007 3Q08 YTD 25

Delivering On Our Commitments Our Consistent & Reliable Dividend A 96-Year History of Consistent Dividends Maintained or Increased Each Year Increased 25% Since 2006 Quarterly Dividends Paid Per Share* 1928 1938 1948 1958 1968 1978 1988 1998 1912 2008** *ADJUSTED FOR STOCK SPLITS AND STOCK DIVIDENDS **2008 DIVIDEND ANNUALIZED BASED ON Q3 YTD PAYOUT 26

Key Messages Strengthen Franchise Basics Business via K-Dow Preferentially Invest in Performance Businesses via Rohm and Haas Portfolio Management Continues Preserving Financial Flexibility Uninterrupted Dividend for 96 Years! 27

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 SEC filings. 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 www.dow.com in the Financial Reports page of the Investor Relations section. 28

Q&A 29