2014 investor forum -...

Dow.com

2014 Investor Forum

Joe Harlan Chief Commercial Officer and Vice Chairman, Market Businesses November 13, 2014

Some of our comments today 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 reference non-GAAP financial measures. Where available, presentation of and reconciliation to the most directly comparable GAAP financial measures and other associated disclosures are provided on the Internet at www.dow.com/investors.

SEC Disclosure Rules

™Trademark of The Dow Chemical Company or an affiliated company of Dow. “EBITDA” is defined as earnings (i.e., “Net Income”) before interest, income taxes, depreciation and amortization. “Adjusted EBITDA” is defined as EBITDA excluding the impact of Certain items. “Adjusted EBITDA margin” is defined as “Adjusted EBITDA” as a percentage of reported net sales. “Adjusted EPS” is defined as earnings per share excluding the impact of Certain items. “Net Debt” equals total debt (“Notes payable” plus “Long-term debt due within one year” plus “Long-Term Debt”) minus “Cash and cash equivalents.” “Net Debt to Total Capitalization” ratio is defined as “Net Debt” divided by “Net Capital.” “Net Capital” is defined as “Total Equity” + “Redeemable Noncontrolling Interest” + “Net Debt.” “Net Debt to EBITDA” is defined as “Net Debt” divided by “Adjusted EBITDA.” “TTM” is defined as trailing twelve months. “Total Capital” is defined as total assets minus non-interest bearing liabilities. “Adjusted Return on Capital” is defined as TTM “Adjusted Net Operating Profit After Tax” divided by average “Total Capital.” “Adjusted Sales” for joint ventures is defined as sales for joint ventures less sales to Dow and/or other Dow joint ventures. “Net Debt” for joint ventures excludes debt owed to Dow and/or other Dow joint ventures. “Total Shareholder Return” is defined as stock price appreciation plus dividends paid.

Our Priorities Going Forward

Fully capitalize on growth levers

Make further strategic choices: Go deeper and narrower to drive the next level of long-term growth

Maintain strong focus on rewarding shareholders

Announcing New Segments Aligned to Dow’s Strategy

3Q14 Trailing Twelve Months Revenue and Adj. EBITDA data

Performance Materials & Chemicals Performance Plastics

Revenue: $14.9B Adj. EBITDA: $2.1B


Chlor Alkali and Vinyl

Chlorinated Organics

Epoxy

Industrial Solutions

Polyurethanes

Dow Elastomers Dow Electrical and

Telecommunications Dow Packaging and

Specialty Plastics Energy Hydrocarbons

Agricultural Sciences Consumer Solutions Infrastructure Solutions



Crop Protection

Seeds

Consumer Care

Dow Automotive Systems

Dow Electronic Materials

Dow Building & Construction

Dow Coating Materials

Energy & Water Solutions

Performance Monomers


Foundation of Core Strengths Support the Entire Franchise Cost Advantaged Feedstocks in Every Region Scale & Operational Excellence Molecular and Physical Integration

Global Reach ― Marketing, Business & Operations Expertise in Science & Technology Strong Brand Value

SP

ECIA

LTY

DIVEST

RETAIN FOR INTEGRATION / RUN FOR CASH

CREATE STRUCTURAL ADVANTAGES ― Low Cost, Technology, Targeted Marketing

APPLY ‘BEST OWNER’ MINDSET

CO

MM

OD

ITY

Selling and R&D CapEx

INNOVATE BACK TO SPECIALTY

Running an Integrated Enterprise… Sell Out, Sell Up


Dow Automotive Systems



Dow Electronic Materials

Consumer Care

Dow Building & Construction

Seeds

Base Crop Protection Products

New Crop Protection Products

Insecticides Herbicides

Row Crops

Fungicides

Niche Crops

Leading Position in the Agriculture Industry

Traits Germplasm

Seeds

Crop Protection

Untreated

*Dow AgroSciences’ field trials data

Herbicide program* with the Enlist™ Weed Control System

Growth Driven by Targeted Investments

Focused investment in innovation and channel drives growth; balanced across platforms

— Created a world-class Seeds business

— ‘Best-in-class’ Crop Protection pipeline

**Subject to regulatory approval; Stewarded introduction

0

200

400

600

800

1000

2015 2016 2017 2018**

($M

M)

Crop Protection Seeds

$1B Revenue Target From New Products by 2018

Doubling Dow Agricultural Science’s EBITDA

Soybeans

Acres Sold Sales at Maturity Crop

Corn

Cotton

>50MM

>40MM

<10MM

>$600MM

>$300MM

<$100MM

Estimated Launch Year Crop Geo

2015** Corn N. America

2016* Corn S. America

2016* Soybean N. America

2016* Soybean S. America

2016* Cotton N. America

Seeds EBITDA Growth Driven by Enlist™

Additional Modeling Details

Crop Protection EBITDA Growth Driven by Commercialization of New Products

New crop protection products generate 20‒30% higher margins

Enlist™ receives incremental acre margin in corn and cotton; full acre economics in soybeans

Licensing to multi-nationals and regional seed companies provides additional value

Isoclast™

Estimated Launch Year

Sales at Maturity Product

Arylex™

Broad Spectrum Herbicide

2013*

2014‒15*

2017‒18*

~$400MM

~$400MM

~$200MM

Cereal Fungicide 2018* ~$200MM

**Stewarded introduction *Subject to regulatory approval

Innovating for Growth

Record Pace of U.S. Patents Granted

Innovation Engine Accelerates the Pace of Effective Commercialization of Differentiated Solutions

2006 2014

BETAMATE™ Platform

20

06

Inve

sto

r D

ay

BETAMATE™ Gen 1 Steel to Steel: BMW 7 Series

BETAMATE™ Gen 4 Aluminum Bonding: Ford F-150

0

500

1000

1500

2009 2010 2011 2012 2013 3Q14 TTM

U.S. Patents Granted

U.S. Patent Applications

Patent-advantaged products represent >20% of Dow’s revenue

Patent-advantaged sales deliver >1,000 bps margin premium

Nearly 35% of Dow’s revenue comes from new products

New Innovation Delivers Higher Margins

TTM defined as Trailing Twelve Months

Consumers Crave Improved Displays and Novel Form Factors New Technologies Provide Great Growth Opportunities for Display Technologies

Organic Growth with Current Portfolio Continues to Provide Top-Notch Technology via Tight Customer Engagements and Aligned Technology Roadmaps

Strategic Focus of Dow Electronic Materials

High-yield/performance OLED materials

Quantum Dots LED display (including QD films)

Dye-based color filter

Aggressively pursue Chinese producers with current technology, demonstrating excellence in both LCD and OLED materials

Organic layers that enable foldable as well as bendable displays

3D Films

Growing desire for close to natural light, moving away from LED’s high-energy blue light

New form factors enabled by new materials technologies − Flexible and wearable displays − Auto-stereoscopic 3D displays

The rise of China in both mobile and large flat panel display arenas

LED OLED Sunlight QD

Major Display Market Trends (2014+)

High Reliance on Technically Differentiated Offerings R

&D

Inve

stm

en

t an

d M

argi

n

Level of Competition

Differentiation

Value Chain

Dimensions of differentiation: Quality, Service, Reliability, etc.

All Acrylic Coatings

Tiered Offerings Aligned with Returns Finding Our Place in the Value Chain


Multi-Generational and Tiered Approach Maximizes Value

Styrene Coatings

Tiered Products and Services Capture Value Throughout Market

Vinyl Acrylics Coatings



Dow Building &

Construction

Driving Growth in Energy and Water

Localized Marketing and R&D with Global Expertise Maximizes Returns

Global Reach with a Local Approach

Identifying and building a strong presence in promising, high potential regions

Localization approach enables… ― Stronger customer relationships ― Agile research and development ― Tailored solutions to meet customer needs

Focus on “Down the Chain” Solutions

Business groupings create unique capability combinations to generate unique solutions to address significant end market issues

Increase technical resources to sell higher value-added solutions in focused applications

OBJECTIVE: Co-inject chemical additives with steam

Reduce energy consumption and GHG emissions

Increase oil production rate

APPROACH:

Build application expertise

Taking learnings directly to major oil sands operators

Shanghai,

China

Singapore Mumbai,

India São Paulo,

Brazil

Dubai,

United Arab

Emirates

Querétaro,

Mexico

Horgen,

Switzerland Collegeville,

Pennsylvania,

USA

Soma,

Japan

Warsaw,

Poland

Altona,

Australia

Innovation Pipeline Optimization… How We Do It ST

RO

NG

INN

OV

ATI

ON

PLA

YB

OO

K

IDEA

TIO

N

Narrower innovation aligned with market strategy

Consistent addition of innovative ideas to pipeline and cross-business synergies enable successful projects

Unparalleled material science research capabilities

Disciplined project analysis throughout ensures proper resource allocation

Continuous optimization of innovation pipeline necessary for success

Key Learnings & Practices

Highly-Targeted, Commercial-Ready Innovation

Priorities

Target attractive markets and grow our businesses

Deliver front-end commercial excellence

Continuously refine market choices and product offerings

Rely heavily on differentiated technical offerings

Narrow and Targeted Focus will Grow Top Line and Expand Margins

2014 investor forum -...

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