Dow Announces Second Quarter 2022 Financial Results

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The Dow Company released its second quarter 2022 financial report on July 21. The summary is as follows:

Financial Summary

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Earnings per share on a GAAP basis were $2.26; operating earnings per share were $2.31, compared to $2.72 a year ago and $2.34 last quarter. Operating EPS excludes certain significant project costs of $0.05 per share for the quarter, primarily related to digital project-related charges.

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Net sales were $15.7 billion, up 13% year over year, with growth across all operating segments and regions. All regions except Asia Pacific achieved net sales growth of 3% sequentially, which was mainly affected by the new crown epidemic in China.

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Local prices rose 16% year-on-year, with increases across all operating segments, business segments and regions. Currency factors reduced the year-over-year increase in net sales by 3 percentage points due to a generally stronger dollar. Local prices rose 6% sequentially, with increases across all operating segments and regions.

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Volumes were flat year-over-year, with higher volumes in the Packaging & Specialty Plastics segment largely offset by a decline in the Industrial Intermediates & Infrastructure segment. Sales fell 2% sequentially, mainly due to lower sales in Europe and China.

● Equity income was US$195 million, down US$83 million year-on-year, mainly due to the impact of the outbreak in China. Equity gains were up $21 million sequentially, primarily driven by the Sadara project.

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GAAP net income was $1.7 billion. Operating earnings before interest and taxes (EBIT) were $2.4 billion, down $453 million year over year. Growth in the Performance Materials and Coatings segment was outpaced by higher raw material and energy costs and lower equity earnings across the company. Operating EBIT fell 2% sequentially as earnings in the Packaging & Specialty Plastics segment were less than offset by a decline in the Industrial Intermediates and Infrastructure segment.

● Cash from operating activities (ie, continuing operations) was $1.9 billion, down $165 million year-on-year and up $244 million sequentially. Free cash flow was $1.4 billion.

● The company moved aggressively to redeem outstanding notes totaling $750 million, reducing annual interest expense by $27 million, and has no material long-term liabilities due until 2027.

● Total return to shareholders for the quarter was $1.3 billion, including $800 million in dividends and $505 million in share repurchases.

CEO Comments

Mr. Jim Fitterling, Chairman and CEO of Dow Corporation

“The Dow team once again delivered year-over-year and quarter-over-quarter growth in net sales, with price increases across all operating segments and regions. Our competitive advantage and relentless focus on operational rigor have enabled us to respond to the outbreak in China, continued logistics constraints, and A lot of the impact of higher energy and raw material costs. Ultimately, our cash flow was up sequentially and our share repurchases were higher than last quarter.

“We continue to advance our corporate strategy to grow our core business earnings throughout the economic cycle through projects with higher return on investment and faster return on capital, while capturing long-term growth opportunities. As part of these efforts, we are announcing today a A series of circular economy projects. These projects will achieve approximately two-thirds of our 2030 ‘End Waste’ target; Seize this growth opportunity.”

Prospects

“Looking ahead, the long-term fundamentals driving growth in our end markets remain attractive,” said Fitterling. “Despite recent changes in market conditions, we will continue to leverage Dow’s diverse product portfolio and flexible operating model to capture Attractive growth opportunities. Our aggressive actions to enhance the resilience of our business position us well to create value in a variety of economic environments. Our disciplined and balanced capital allocation strategy has delivered higher medium-term returns , improved credit profile, and improved cash flow generation, all of which have surpassed pre-COVID-19 levels. The Dow team will maintain a favorable competitive advantage and continue to advance our “decarbonize and grow” strategy while providing Attractive shareholder returns.”