Dow Reports Q2 2023 Financial Results, Focuses on Cost Intervention and Long-Term Strategic Priorities Amid Challenging Macro Environment

Dow released its financial report for the second quarter of 2023 on July 25. The key points are as follows:

Financial Summary:

- Earnings per share calculated according to Generally Accepted Accounting Principles (GAAP) were $0.68, while operating earnings per share were $0.75, down from $2.31 in the same period last year, but up from $0.58 in the previous quarter. The operating earnings per share exclude major items in the quarter, totaling $0.07 per share, mainly related to costs associated with the company's restructuring project in 2023.

- Net sales were $11.4 billion, down 27% year-on-year due to decreased demand and prices caused by slower macroeconomic activity, resulting in a decline in sales for all operating segments. Sales were down 4% sequentially, despite an increase in sales volume, which did not offset the decline in local prices.

- Sales volume was down 8% year-on-year, mainly due to a 14% decline in sales in the Europe, Middle East, Africa, and India (EMEAI) region. Sales volume was up 1% sequentially, driven by an increase in sales volume in the Asia-Pacific and Latin America regions.

- Local prices were down 18% year-on-year and 5% sequentially due to decreased demand and lower global energy and raw material costs, resulting in declines in all operating segments and regions.

- Net sales were down 1% year-on-year due to currency factors, but were flat sequentially.

- Equity losses were $57 million, mainly due to a decline in earnings from the Sadara joint venture. In the same period last year, equity earnings were $195 million. The increase in equity losses from the previous quarter was mainly due to lower product prices caused by the slow recovery of the Chinese economy.

- GAAP net income was $501 million. Operating income before tax (EBIT) was $885 million, down from $2.4 billion in the same period last year, with declines in all operating segments due to lower local prices. Operating income before tax was up $177 million sequentially, mainly driven by the packaging and specialty plastics operating segment.

- Cash generated from operating activities (i.e., continuing operations) was over $1.3 billion, down $509 million year-on-year, but up $816 million sequentially. The cash flow conversion rate over the past 12 months was 98%.

- The total return to shareholders for the quarter was $743 million, including $493 million in dividend returns and $250 million in stock repurchases.

CEO Comment:

Jim Fitterling, Chairman and CEO of Dow, said, "Dow's team delivered sequential earnings growth and generated over $1.3 billion in operating cash flow in the second quarter. We are executing on our cost intervention actions as planned, leveraging our raw material advantage, and participating in attractive end-markets to proactively address the challenging macro environment. To date, we have returned nearly $1.4 billion to shareholders through industry-leading dividend returns and stock buybacks, which reflects our ongoing commitment to building strong cash flow. Overall, we remain well-positioned to execute on our financial and operational plans, advance our 'decarbonization and growth' strategy, and create value for all stakeholders."

Outlook:

Fitterling said, "Looking ahead, while we anticipate macroeconomic headwinds in the second half of this year, we will continue to execute on our recent cost intervention actions and advance our long-term strategic priorities. We are on track to deliver $1 billion in cost savings this year through the action plan we announced in January, and we will continue to benefit from our solid financial position since the company's spin-off, as well as our focus on generating cash flow. Additionally, we are further implementing rigorous and balanced capital allocation priorities that will continue to support our investments in projects under our 'decarbonization and growth' and 'waste-to-value' strategies, creating long-term value for our stakeholders."