Dow s Transformation In Action Geoffery E. Merszei Executive Vice President & Chief Financial Officer September 17, 2008
Agenda Who Is Dow Financial Performance Transformational Strategy Strategy in Action Formation of K-Dow Petrochemicals Acquisition of Rohm and Haas Summary 2
Diversified Portfolio 2007 Sales by Segment 2007 Sales by Geography Unallocated & Other 1% Hydrocarbons & Energy 13% Latin Performance America Basic Plastics 11% North Chemicals 28% America 11% Asia 38% Pacific 12% $54 B India, Middle East and Africa 2% $54 B Basic Plastics 24% Agricultural Sciences 7% Performance Chemicals 16% Europe 37% 3
A Strong Basics Franchise LyondellBasell SABIC Sinopec Dow Chemical Royal Dutch Shell Exxon Mobil INEOS Group Formosa Plastics Grp Total SA BASF 2007 Sales* - $29B 8,800 Dow people 6,000 global customers 35 Dow sites; 6 JV sites Renowned product brands Operational/safety excellence Technology leadership Reliance Industries Chevron Phillips PetroChina OAO Gazprom Source: Public Company Reports 4 *Includes Dow s proportionate share of joint venture revenues. 4
Market-driven Performance Businesses BASF Dow Chemical DuPont Akzo Nobel Hexion (inc. Huntsman) Evonik Industries AG Bayer PPG 2007 Sales $27B 22,800 employees 12,500 global customers 158 countries 41 R&D sites 94 Manufacturing sites Royal DSM NV Rohm & Haas Eastman Lubrizol Celanese Cytec Source: Public Company Reports 5 5
Agenda Who Is Dow Financial Performance Transformational Strategy Strategy in Action Formation of K-Dow Petrochemicals Acquisition of Rohm and Haas Summary 6
First Half 2008 Financial Performance 6 months ended 6 months ended June 30, 2008 June 30, 2007 Change Sales $31,204 $25,697 21% Price 18% Volume 3% Purchased feedstock & energy cost 42% Equity earnings $525 $532 (1%) EBIT* $2,535 $2,876 (12%) Earnings per share $1.80 $2.07 (13%) *See www.dow.com for Reconciliation of Non-GAAP Financial Measure Dollars in millions (except per share amounts) 7
Financial Goals Return on Capital* Financial Metrics Return on Equity* Earnings per Share* 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2007: 14% 10-year average: 12% 1995 2005 average: 12% 2007: 19% 10-year average: 18% 1995 2005 average: 19% 2007: $3.76 10-year average growth: 4% 1995 2005 growth: 5% * Non-GAAP data; excludes certain items; excludes Union Carbide prior to 2001. See www.dow.com for more information. 8
Agenda Who Is Dow Financial Performance Transformational Strategy Strategy in Action Formation of K-Dow Petrochemicals Acquisition of Rohm and Haas Summary 9
Dow s Transformational Strategy FEEDSTOCKS JOINT VENTURES JOINT VENTURES BASICS PERFORMANCE MARKET FACING Products Solutions Systems Innovation, Technology and R&D Grow Performance and Specialties Strengthen competitiveness of Basics 10
Building the Dow of Tomorrow Themes Health & Nutrition Energy Transportation & Infrastructure Consumerism Opportunity Areas Agriculture Functional Foods Alternative Energy & Feedstocks Energy Production & Efficiency Construction Transportation Apparel & Furnishings Electronics & Communications Healthcare Energy Storage Water Home & Personal Care Biotechnology Insulation Building Materials Optical Materials Key Dow Capabilities Chemistry Applied Energy Efficiency Integrated Photovoltaics Advanced Materials Science Filter/Membrane Elements Printed Circuit Board Materials Rapid Formulation Development Material Science Feedstock & Energy Management High Throughput Formulations 11 Polymer Performance Modeling
Shareholder Remuneration Share Repurchase Amount ($Millions) $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 71 Million Shares Repurchased $3.0 Billion Spent Largest Program In A Decade $0 2005 2006 2007 2Q08 YTD 12
Consistently Rewarding Shareholders 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 Q2 YTD PAYOUT 13
Agenda Who Is Dow Financial Performance Transformational Strategy Strategy in Action Formation of K-Dow Petrochemicals Acquisition of Rohm and Haas Summary 14
K-Dow Petrochemicals 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 Estimated pre-tax cash to Dow $9.5B TRANSACTION VALUE - $19.1 billion (on 100% basis) 15
Creating A World-Class Petrochemicals Company Polyethylene, Polypropylene, Polycarbonate, Ethyleneamines and Ethanolamines All related technologies Fully dedicated hydrocarbon assets Fort Saskatchewan, Canada (cracker) Bahia Blanca, Argentina (cracker) Tarragona, Spain (cracker and octene manufacturing facility) Ethylene supply agreements from Dow s other crackers Number 1 position in Polyethylene 16
Exceptional Returns From JVs Equity Earnings ($ millions) Cash Distributions ($ millions) Return on Investment* $1,122 $923 $964 $959 $837 40% 39% 38% 39% $536 $622 $430 $322 $205 19% 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 *Equity earnings/average investment in nonconsolidated affiliates 17
Agenda Who Is Dow Financial Performance Transformational Strategy Strategy in Action Formation of K-Dow Petrochemicals Acquisition of Rohm and Haas Summary 18
About Rohm and Haas Premier advanced materials and specialty chemicals company 2007 sales of $8.9 billion Leading positions in electronics and coatings Headquartered in Philadelphia, located in 27 countries 15,700 employees Established in 1909 19
Strategic Rationale 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 20
A Powerful New Dow 2/3 Specialties Feedstock-Driven Businesses Market-Driven Businesses Asset Light Joint Ventures Chemicals, Petrochemicals & Feedstocks Performance Products Health & Agriculture Rohm and Haas Advanced Materials Electronic Materials Specialty Materials Coatings Adv. Elec. Materials Dow Coating Solutions Designed Polymers Specialty Packaging Epoxy Systems Polyurethane Systems 21
Growth Potential Accelerates revenue growth and improves margins Increases percentage of revenues from higher margin, higher growth specialty business Reduces volatility and increases growth in earnings 2007 2012 Industry Growth Rates Dow 4% Rohm and Haas 5 9% Dow + Rohm and Haas 5 7% SOURCE: SRI Consulting, CMAI, Company filings and presentations 22
Significant Cost Synergies At least $800 million in annual pre-tax synergies Phased in over two years Shared Services and Governance 35% 35% Purchasing, including Raw Materials 10% 20% Corporate Business Development Overlap Manufacturing / Supply Chain Work Process Improvements 23
Dow Synergy Track Record Cost synergies as a percent of target revenue Union Carbide 18% delivered Rohm and Haas Ag 16% delivered Angus Chemicals 15% delivered EniChem Polyurethanes 14% delivered Gurit-Essex 16% delivered Rohm and Haas 9% target 24
In Summary Committed to, and implementing, our strategy K-Dow Petrochemicals Day One before year-end On-track to close Rohm and Haas in early 2009 Committed to delivering solid results in 2008 Dow will be a transformed company! 2008 Credit Suisse Chemical Conference 25
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. Bank of America 38th Annual Investment Conference 26
Q&A 2008 Credit Suisse Chemical Conference 27