Dow's Third Quarter Earnings Per Share Decline by 17%, Sales Growth Stalls!

Dow delivered solid financial performance in the third quarter despite macroeconomic challenges and geographies specific to its operations. Based on generally accepted accounting principles (GAAP), the company earned $0.30 per share, while operating EPS came in at $0.47, though slightly lower than $0.48 in the year-ago period and $0.68 in the prior year quarter. This difference was primarily attributable to restructuring and efficiency enhancement costs and expenses related to previously divested businesses, totaling $0.17 per share.

Net sales reached $10.9 billion, up 1 percent year over year, driven by higher sales in the U.S. and Canada, while sales were stable quarter over quarter. The 1% year-on-year increase in sales volume was mainly driven by higher sales volume in the Functional Materials & Coatings operating segment, while the 1% sequential increase in sales volume was driven by higher sales volume in the Packaging & Specialty Plastics and Industrial Intermediates & Infrastructure operating segments.

Local prices were flat year-on-year, with higher prices in the Packaging & Specialty Plastics operating segment offset by lower prices in the Functional Materials & Coatings operating segment. On a month-on-month basis, local prices were down 1%, with all operating segments Posting small declines. The impact of monetary factors on the year-over-year and quarter-on-quarter remains unchanged.

Equity income was $2 million, up $9 million year over year but down $24 million quarter over quarter. GAAP net income was $240m, while operating earnings before interest and tax (EBIT) was $641m, up $15m year on year, mainly driven by higher overall margins in the packaging & Specialty plastics operating segment, although this increase was partially offset by unplanned shutdowns and planned new maintenance activities at the Texas cracking unit. On a quarter-on-quarter basis, operating EBIT decreased by $178 million, mainly due to unplanned downtime of cracking units and lower local prices in the Europe, Middle East, Africa and India (EMEAI) and Asia Pacific regions.

Cash generated from operating activities was $800 million, down $858 million year over year, primarily due to inventory increases to support volume growth and address labor-related supply chain disruptions. On a sequential basis, cash generated from operating activities decreased by $32 million.

In terms of shareholder returns, the company's overall return to shareholders during the quarter was $584 million, including a dividend return of $490 million and stock repurchases of $94 million.

Jim Fitterling, Chairman and Chief Executive Officer of Dow Jones, said the company achieved four consecutive quarters of year-over-year volume growth in the third quarter despite continued macroeconomic weakness and the unplanned shutdown of the Texas cracker. He highlighted the cost advantage of the company's presence in the Americas, which provides the company with a strong competitive position that allows Dow to capture growth in demand. However, the European and Chinese markets have yet to witness a strong recovery, and the regulatory environment in Europe also poses challenges to the industry and value chain. Mr. Fitterling also mentioned that since 2023, the Company has moved aggressively to optimize the global asset layout and announced a strategic review of certain assets in Europe, primarily the polyurethane business, in order to maximize cash flow and make progress on high-return investments, resulting in long-term shareholder value.

Going forward, Mr. Fitterling said the company will continue to operate with rigor, take full advantage of opportunities in areas of strong demand, and leverage its global scale and cost advantages. As the economic cycle continues to improve, companies are well-positioned to deliver higher returns to shareholders. The company's financial strength will continue to support its anti-cyclical growth investments, which are focused on higher-value businesses and geographies, particularly those where demand is resilient and the company has a cost advantage. These investments are expected to deliver base gains of more than $3 billion by 2030.