Dow : 2024 Annual Report Annual Benchmarking

Published: 2025-05-07 04:13:56 ET DOW

Published on 05/07/2025 at 04:13

April 24, 2025

Total Dow

P&SP

II&I

PM&C

Olefins & Polyolefins Chemical Products

Intermediates & Derivatives Corporate

Silicones Acetyl Chain Solutions & Specialties

Corporate

Polyolefins

Corporate

Functional

Materials

Benchmarking conducted against segment level peers if sufficient information disclosed, otherwise corporate level

Benchmarking: Strengths & Gaps

Total

Dow

FY24 YoY Adj. Op. EBITDA growth in-line with the peer median driven by resilient demand in key end markets such as

packaging, energy, electronics and home & personal care

FY24 Adj. Op. EBITDA margin above the peer group median leveraging our cost advantaged footprint, leading feedstock flexibility, low cost-to-serve operating model, and efficient innovation engine

Cash Flow Conversion trailed the peer median driven by a working capital use of cash (sales volume increased +3% YoY)

Free Cash Flow Yield 3-year average ~+300bps above the peer median

SG&A + R&D as a % of Sales remains best in the peer group from continued cost discipline

Operating Return on Invested Capital 3-year average ~+100bps above peer median, but below our across the cycle target of

>13% driven by a prolonged economic downturn

Shareholder yield in-line with the peer median

Five-Year debt reduction best-in-class as a result of disciplined and balanced capital allocation approach

Source: Dow data, FactSet, Company disclosures

Peers are Total Dow peers as defined earlier in this presentation

See appendix for definition of Non-GAAP Measures 3

Year-over-Year volume growth of 3% excludes Hydrocarbons and Energy

Adj. Op. EBITDA Adj. Op. EBITDA Cash Flow SG&A + R&D

Growth Margin Conversion (as a % of Sales)

FY24 vs. FY23

Median Excl. Dow

FY23 vs. FY22

Median

Excl. Dow

FY24

FY23

FY24

FY23

FY24

FY23

20%

120%

20%

10%

110%

100%

15%

-10%

-20%

15%

90%

80%

Median Excl. Dow

10%

Median Excl. Dow

Median

Excl. Dow

-30%

Median

-40%

10%

Excl. Dow

70%

Median Excl. Dow

-50%

60%

-60%

50%

-70%

40%

Hallmark safety performance and operational excellence

Global asset footprint with integrated value chains providing a low-cost to serve model with in-region presence

Differentiated portfolio delivers a broad suite of offerings to attractive end markets growing faster than GDP

Innovative product and technology pipeline to provide sustainable solutions to address world challenges

Source: Dow data, FactSet, Company disclosures

FY24 UPDATE & FY23

Execute on Decarbonize & Grow and Transform the Waste strategies to deliver

>$3B of underlying earnings growth

Maintain and grow leadership positions in key markets and advantaged regions with a top-quartile cost structure

Drive operational excellence and preserve a strong financial foundation

Optimize our portfolio for growth by advancing our Fort Saskatchewan Path2Zero project and higher-return organic growth investments

Peers are Total Dow peers as defined earlier in this presentation

See appendix for definition of Non-GAAP Measures 4

DOW

Dow

‌Delivering on Disciplined and Balanced Capital Allocation Approach

Operating Return on Capital (%)

2022-2024 Annual Average

Median Excl. Dow

~8%

Peer 2

Peer 1

Peer 3

Peer 4

Peer 6

Peer 5

Peer 7

Free Cash Flow Yield (%)

2022-2024 Annual Average

Median Excl. Dow

~5%

Peer 2

Peer 4

Peer 6

Peer 5

Peer 3

Peer 1

Peer 7

Dow

Source: Dow data, FactSet, Company disclosures

Peers are Total Dow peers as defined earlier in this presentation

See appendix for definition of Non-GAAP Measures 5

Net Debt Change ($B)

5-Year Debt Reduction

Median Excl. Dow

~-$0.7B

~-$3B

Peer 3

Peer 6

Peer 2

Peer 5

Peer 1

Peer 4

Peer 7

Shareholder Yield (%)

2022-2024 Annual Average

Median Excl. Dow

~9%

Peer 5

Peer 2

Peer 6

Peer 3

Peer 1

Peer 4

Peer 7

‌Culture of Benchmarking: Summary of Observations

Segment

Benchmarking: Strengths & Gaps

P&SP

YoY Adj. Op. EBITDA growth trailed the peer median driven by an unplanned outage at our Texas-8 cracker in the USGC and a moderation of Functional Polymers margins to historical spreads over polyethylene (PE)

II&I

YoY Adj. Op. EBITDA growth was below the peer median driven by continued weakness in the building & construction and durables end markets.

Dow's higher relative exposure to long market fundamentals in PO & Derivatives will improve with our 4Q25 USGC PO shutdown

Adj. Op. EBITDA margin trailed the peer median driven by limited supply of higher-value purified ethylene oxide derivatives in the first half of 2024

(Glycol-2 in Louisiana started back up mid-2024 and was fully ramped up as of year end)

Free Cash Conversion performance below the peer median driven by higher-value alkoxylation investments, which will enable Op. EBITDA growth beginning in 2025

PM&C

YoY Adj. Op. EBITDA growth outperformed the peer median driven by downstream silicones growth across all end markets and share gain activities in architectural coatings and road pavement markings applications

Adj. Op. EBITDA margin trailed the peer median driven by margin pressure in upstream siloxanes

Free Cash Conversion performance above the peer median

Adj. Op. EBITDA margin delivered best-in-class performance driven by a differentiated portfolio and 1st quartile cost positions

Op. EBITDA per pound of polyolefin capacity ahead of peers driven by differentiated Functional Polymers applications

Free Cash Conversion performance in-line with peer median while advancing our Fort Saskatchewan Path2Zero project

SG&A + R&D as a % of Sales continue to be top quartile

SG&A + R&D as a % of Sales remained top quartile, highlighting a continuous focus on cost discipline

SG&A + R&D as a % of Sales remained best-in-class, well below next peer, driven by scale, cost discipline and digital capabilities

SG&A + R&D reflects corporate level for peers where segment level data is unavailable

Peers are P&SP peers as defined earlier in this presentation 6

See appendix for definition of Non-GAAP Measures

World-class packaging franchise with leading market positions in Ethylene & PE, Ethylene Copolymers, Elastomers & Plastomers and Licensing

Leading purpose-built feedstock flexibility and geographically advantaged assets delivering low costs at scale

Flexible derivative assets with differentiated co-monomer capability

Proprietary catalyst and process technology

Source: Dow data, FactSet, Company disclosures

Adj. Op. EBITDA Adj. Op. EBITDA Free Cash SG&A + R&D Growth Margin Conversion (as a % of Sales)

FY24 vs.

FY23

Median Excl. Dow

FY23 vs.

FY22

Median Excl. Dow

FY24

FY23

FY24

FY23

FY24

Median Excl. Dow

FY23

60%

25%

80%

15%

40%

20%

60%

Median

20%

Excl. Dow

10%

15%

40%

Median

-20%

10%

Excl. Dow

Median

Excl. Dow

20%

Median Excl. Dow

-40%

-60%

-80%

-20%

Execute on Decarbonize & Grow and Transform the Waste strategies to deliver earnings growth

Capitalize on first mover advantage with first net-zero CO2e emissions integrated ethylene and derivatives complex (Fort Saskatchewan Path2Zero)

Advance low-carbon emission footprint and circular and renewable offerings to capture growing demand and differentiated pricing

Develop low-carbon and circular solutions and capitalize on licensing opportunities

SG&A + R&D reflects corporate level for peers where segment level data is unavailable

Peers are P&SP peers as defined earlier in this presentation 7

See appendix for definition of Non-GAAP Measures

Op. EBITDA Per Pound of Polyolefins Capacity1 (cpp)

Generating Higher Margins vs. Peers Across the Cycle

Dow's P&SP Delivers Superior Returns vs. Peers

Annual Op. EBITDA Margins

30%

25%

20%

15%

10%

Avg.

~21%.

Avg.

~15%.

2017 2018 2019 2020 2021 2022 2023 2024

Dow P&SP Peer Median2(Excl. Dow)

Dow P&SP maintains leading position in Op. EBITDA per pound:

Enhanced value driven by feedstock-to-polymer integration

1st Quartile cost positions and purpose-built feedstock flexibility

Flexible downstream assets and superior mix vs. peers with a focus on higher-value grades of PE and specialty resins such as elastomers and wire & cable

Dow P&SP has delivered higher annual Op. EBITDA margins:

>+500bps Op. EBITDA Margin advantage through the economic cycle

Consistently outperforming the peer median and growing our advantaged Functional Polymers business over this period

16 17

9 8

FY24

FY23

FY24 FY23

FY24

FY23

Dow P&SP Lyondell O&P Borealis Polyolefins

Source: Peer company reported capacities, CMA

Segment Op. EBITDA based on reported figures including equity income from affiliates/JVs. Dow Capacity based on latest company reported nameplate for PE and Functional Polymers (2024 Investor Day including proportionate share of JVs); Lyondell and Borealis based on CMA reported capacity including proportionate share of JVs

Peers are P&SP peers as defined earlier in this presentation

See appendix for definition of Non-GAAP Measures

Advantage over Peers

FY24

FY23

FY24

FY23

Lyondell O&P Borealis Polyolefins

Leading producer of Purified Ethylene Oxide, Amines, Solvents, Glycol Ethers, Propylene Oxide, Propylene Glycol and Polyols

Broad portfolio of solutions for key end markets and applications such as energy, consumer health, automotive, appliances, furniture, bedding, agriculture, cleaning, fluids for heat transfer & aircraft deicing

Industrial Solutions contains products with some of the highest returns to ethylene

Innovation pipeline driven through customer collaboration and in-region presence

Adj. Op. EBITDA Adj. Op. EBITDA Free Cash SG&A + R&D Growth Margin Conversion (as a % of Sales)

FY24 vs. FY23

Median Excl. Dow

FY23 vs. FY22

Median Excl. Dow

FY24

FY23

FY24

FY23

FY24

Median Excl. Dow

FY23

20%

80%

20%

10%

70%

-10%

15%

Median

Median Excl. Dow

60%

50%

Median

Excl. Dow

Median Excl. Dow

15%

Median Excl. Dow

-20%

Excl. Dow

10%

40%

10%

-30%

30%

-40%

-50%

-60%

20%

10%

-70%

Source: Dow data, FactSet, Company disclosures

Execute on Decarbonize & Grow strategy and deliver growth investments

Investing in purified EO and downstream derivatives supporting growth in consumer, pharma and energy applications

Targeted investments in high-value downstream polyurethanes applications to improve margin resiliency, while reducing our footprint in PO & Derivatives

Capitalize on circular and low carbon solutions in key end markets such as mobility, building & construction and energy

SG&A + R&D reflects corporate level for peers where segment level data is unavailable

Peers are II&I peers as defined earlier in this presentation 9

See appendix for definition of Non-GAAP Measures

CORE STRENGTHS BENCHMARKING SNAPSHOT

FOCUS AREAS

Leading producer of Silicones and Acrylic Binders

Low cost global siloxanes producer with backward integration capabilities

World-scale acrylic monomers and leading coatings solution provider

Industry leadership enabled by in-depth application expertise and innovative digital platforms

FY24 UPDATE & FY23

Execute on Decarbonize & Grow strategy and deliver growth investments

FY24 vs. FY23

FY23 vs. FY22

FY24

FY23

FY24

FY23

FY24

FY23

20%

50%

35%

100%

30%

80%

10%

25%

60%

15%

Median

Excl. Dow

Median Excl. Dow

-10% 20% 40%

Median Excl. Dow

-30%

15%

20%

10%

-50%

10%

-70%

-20%

SG&A + R&D

(as a % of Sales)

Free Cash

Conversion

Adj. Op. EBITDA

Margin

Adj. Op. EBITDA

Growth

Median Excl. Dow

Continue to expand downstream capacity in silicones with higher-return, faster-payback projects tailored to higher-growth end markets

Targeted investments in coatings to deliver next generation of sustainable solutions

Optimizing our upstream Siloxanes footprint to improve margins

Source: Dow data, FactSet, Company disclosures

SG&A + R&D reflects corporate level for peers where segment level data is unavailable

Peers are PM&C peers as defined earlier in this presentation 10

See appendix for definition of Non-GAAP Measures

‌General Comments

General Comments

Unless otherwise specified, all financial measures in this presentation, where applicable, exclude significant items.

Benchmarking Groups

Segment level financial benchmarking group as per November 2018 Investor Day and adjusted for a) Changes in ownership/reporting precluding sufficient data to continue utilizing peer or b) Changes in peer external reporting structure Total Dow financial benchmarking group as per 2020 Annual Benchmarking enhancement to provide additional transparency on relative financial performance of entire enterprise

S&P 500 Chemicals; S&P 500 Materials; S&P 500 aggregates as defined per FactSet

Trademarks

The Dow Diamond, logo and all products, unless otherwise noted, denoted with , ℠ or ® are trademarks, service marks or registered trademarks of The Dow Chemical Company or its respective subsidiaries or affiliates. Solely for convenience, the trademarks, service marks and trade names referred to in this communication may appear without the , ℠ or ® symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, service marks and trade names. This presentation may also contain trademarks, service marks and trade names of certain third parties, which are the property of their respective owners. Our use or display of third parties' trademarks, service marks, trade names or products in this communication is not intended to, and should not be read to, imply a relationship with or endorsement or sponsorship of us.

‌Safe Harbor

Cautionary Statement about Forward-Looking Statements

Certain statements in this presentation are "forward-looking statements" within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements often address expected future business and financial performance, financial condition, and other matters, and often contain words or phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "opportunity," "outlook," "plan," "project," "seek," "should," "strategy," "target," "will," "will be," "will continue," "will likely result," "would," and similar expressions, and variations or negatives of these words or phrases.

Forward-looking statements are based on current assumptions and expectations of future events that are subject to risks, uncertainties and other factors that are beyond Dow's control, which may cause actual results to differ materially from those projected, anticipated or implied in the forward-looking statements and speak only as of the date the statements were made. These factors include, but are not limited to: sales of Dow's products; Dow's expenses, future revenues and profitability; any sanctions, export restrictions, supply chain disruptions or increased economic uncertainty related to the ongoing conflicts between Russia and Ukraine and in the Middle East; capital requirements and need for and availability of financing; unexpected barriers in the development of technology, including with respect to Dow's contemplated capital and operating projects; Dow's ability to realize its commitment to carbon neutrality on the contemplated timeframe, including the completion and success of its integrated ethylene cracker and derivatives facility in Alberta, Canada; size of the markets for Dow's products and services and ability to compete in such markets; Dow's ability to develop and market new products and optimally manage product life cycles; the rate and degree of market acceptance of Dow's products; significant litigation and environmental matters and related contingencies and unexpected expenses; the success of competing technologies that are or may become available; the ability to protect Dow's intellectual property in the United States and abroad; developments related to contemplated restructuring activities and proposed divestitures or acquisitions such as workforce reduction, manufacturing facility and/or asset closure and related exit and disposal activities, and the benefits and costs associated with each of the foregoing; fluctuations in energy and raw material prices; management of process safety and product stewardship; changes in relationships with Dow's significant customers and suppliers; changes in public sentiment and political leadership; increased concerns about plastics in the environment and lack of a circular economy for plastics at scale; changes in consumer preferences and demand; changes in laws and regulations, political conditions, tariffs and trade policies, or industry development; global economic and capital markets conditions, such as inflation, market uncertainty, interest and currency exchange rates, and equity and commodity prices; business, logistics, and supply disruptions; security threats, such as acts of sabotage, terrorism or war, including the ongoing conflicts between Russia and Ukraine and in the Middle East; weather events and natural disasters; disruptions in Dow's information technology networks and systems, including the impact of cyberattacks; risks related to Dow's separation from DowDuPont Inc. such as Dow's obligation to indemnify DuPont de Nemours, Inc. and/or Corteva, Inc. for certain liabilities; and any global and regional economic impacts of a pandemic or other health-related risks and events on Dow's business.

Where, in any forward-looking statement, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and expectations of management and expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. A detailed discussion of principal risks and uncertainties which may cause actual results and events to differ materially from such forward-looking statements is included in the section titled "Risk Factors" contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2024, and the Company's subsequent Quarterly Reports on Form 10-Q. These are not the only risks and uncertainties that Dow faces. There may be other risks and uncertainties that Dow is unable to identify at this time or that Dow does not currently expect to have a material impact on its business. If any of those risks or uncertainties develops into an actual event, it could have a material adverse effect on Dow's business. Dow Inc. and The Dow Chemical Company and its consolidated subsidiaries assume no obligation to update or revise publicly any forward-looking statements whether because of new information, future events, or otherwise, except as required by securities and other applicable laws.

‌Non-GAAP Financial Measures & Definitions

Non-GAAP Financial Measures

This presentation includes information that does not conform to GAAP and are considered non-GAAP measures. Management uses these measures internally for planning, forecasting and evaluating the performance of the Company's segments, including allocating resources. Dow's management believes that these non-GAAP measures best reflect the ongoing performance of the Company during the periods presented and provide more relevant and meaningful information to investors as they provide insight with respect to ongoing operating results of the Company and a more useful comparison of year-over-year results. These non-GAAP measures supplement the Company's GAAP disclosures and should not be viewed as alternatives to GAAP measures of performance. Furthermore, such non-GAAP measures may not be consistent with similar measures provided or used by other companies. Dow does not provide forward-looking GAAP financial measures or a reconciliation of forward-looking non-GAAP financial measures to the most comparable GAAP financial measures on a forward-looking basis because the Company is unable to predict with reasonable certainty the ultimate outcome of pending litigation, unusual gains and losses, foreign currency exchange gains or losses and potential future asset impairments, as well as discrete taxable events, without unreasonable effort. These items are uncertain, depend on various factors, and could have a material impact on GAAP results for the guidance period.

See investors.dow.com for a reconciliation of the most directly comparable GAAP financial measure.

Definitions

Operating EBITDA is defined as earnings (i.e. "Income (loss) from continuing operations before taxes") before interest, depreciation and amortization, excluding the impact of significant items. Adjusted Operating EBITDA is defined as Operating EBITDA less equity earnings.

Adjusted Operating EBITDA Margin is defined as Adjusted Operating EBITDA divided by net sales, excluding certain transactions with nonconsolidated affiliates.

Free Cash Flow (FCF) is defined as "Cash provided by (used for) operating activities - continuing operations", less capital expenditures. Under this definition, free cash flow represents the cash generated by the Company from operations after investing in its asset base. Free cash flow, combined with cash balances and other sources of liquidity, represent the cash available to fund obligations and provide returns to shareholders. Free cash flow is an integral financial measure used in the Company's financial planning process.

Free Cash Flow Yield is defined as Free cash flow divided by market capitalization.

Shareholder Remuneration is defined as Dividends paid to stockholders plus Purchases of treasury stock. Shareholder Yield is defined as Shareholder Remuneration divided by market capitalization.

Operating Return of Capital (ROC) is defined as Operating net operating profit after tax, excluding the impact of significant items, divided by total average capital, also referred to as ROIC.

Cash Flow Conversion is defined as "Cash provided by (used for) operating activities - continuing operations" divided by Operating EBITDA. Management believes cash flow conversion is an important financial metric as it helps the Company

determine how efficiently it is converting its earnings to cash flow.

Free Cash Conversion at on operating segment level is defined as Adjusted Operating EBITDA less capital expenditures divided by Adjusted Operating EBITDA.

Net Debt is defined as "Notes payable" plus "Long-term debt due within one year" plus "Long-term debt" less "Cash and cash equivalents" and "Marketable securities."

‌

Disclaimer

Dow Inc. published this content on May 06, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 07, 2025 at 07:48 UTC.