dow’s transformation in action - iis windows...
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Dow’s Transformation In ActionGeoffery E. MerszeiExecutive Vice President & Chief Financial Officer
December 2, 2008
19th Annual Citi Chemicals Conference
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Agenda
►Strengthening Basics
►Preferentially Investing in Performance Businesses
►Business Portfolio Management
►Financial Discipline
►Remunerating Our Shareholders
19th Annual Citi Chemicals Conference
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Delivering On Our Commitments –K-Dow Joint Venture Formation Agreement
19th Annual Citi Chemicals Conference
►A Binding, Definitive Agreement
►Expected To Begin Operations By January 1, 2009
4
► Polyethylene, Polypropylene, Polycarbonate, Ethyleneamines and Ethanolamines, Ethylene Glycol and PET
► All related technologies► Fully dedicated hydrocarbon assets
• Fort Saskatchewan, Canada (cracker)• Bahía Blanca, Argentina (cracker)• Tarragona, Spain (cracker and octene manufacturing facility)
► Ethylene supply agreements from Dow’s other crackers► Number 1 position in Polyethylene
A New, World Class Petrochemicals Company
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K-Dow Transaction Proceeds
►Total Enterprise Value $17.4 B
►EBITDA Multiple on 2006 Basis 7.1x
►Special Cash Distribution by K-Dow $1.5 B
►Gross Proceeds $9.0 B
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DowMore than 100 years of experience and leadership
A recognized global brand and franchise
Technology and market leadership
Global reach
#1 position in PE and amines, leader in PP, PC, and technology/catalyst licensing
Innovation, application and operational expertise
KPC / PICFeedstock integration
Expertise in oil and gas
Regional leadership and global relationships
Resources and desire to grow downstream
Strong financial position and track record
Successful JV experiences
+
… all coming together in a focused, dedicated, agile company with the staying power to grow with our
customers in all regions of the world.
K-Dow Petrochemicals – Sound Partners
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KPC – A Strong Partner & Resource Owner
Source: CMAI, 2005 data
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50
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350
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hell
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Con
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Phill
ips
BP
Eni
National oil company (NOC)
Publicly traded company
Billion barrels of oil
equivalent
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The Company
Headquarters
Employees
Products
ManufacturingLocations
• A 50:50 joint venture between Dow and Petrochemicals Industry Company of Kuwait
• The world’s largest polyolefins producer and marketer• The world’s largest amines producer and marketer• Sales of approximately $15 billion worldwide
Southeast Michigan, USA
~ 5,000 people worldwide
Polyethylene, Polypropylene, Polycarbonates and blends, Ethanolamines, Ethyleneamines, Ethylene Glycols, PET,Technology Licensing and Catalyst
16 plant sites in 9 countries
19th Annual Citi Chemicals Conference
K-Dow Petrochemicals – Key Statistics
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K-Dow Sales by Product*
K-Dow Sales by Geography*
K-Dow Petrochemicals – Key Statistics
* Estimate based on 2007 sales
Polyethylene 58%Ethylene Glycol 20%
Polypropylene 11%
PET 3%Amines 4%
Licensing 1%Polycarbonate 3%
North America 35%
Latin America 14%
Europe 34%
Asia Pacific 13% IMEA 4%
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Current Production AssetsPlanned Assets
BrazilThailand
ChinaNorth Africa
Kuwait
K-Dow & EQUATE: Opportunities for Growth
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Preserving The Value of Dow’s Integration
Dow• Designed Polymers• Dow AgroSciences• Dow Automotive• Dow Building Solutions• Dow Epoxy• Dow Latex• Polyurethanes and PU
Systems• Specialty Chemicals• Specialty Plastics &
Elastomers• Technology Licensing
& Catalyst
K-Dow
• Polyethylene• Ethylene Glycol
(MEG & DEG)• Polypropylene• Polycarbonate• Ethyleneamines• Ethanolamines• PET
Building Blocks
• Benzene• Butadiene• Chlorine• Cumene• Ethylene• Ethylene
Dichloride• Ethylene Oxide• Propylene• Propylene Oxide• Styrene
►More Than 60 Service and Supply Agreements►Reliable and Secure long-term supply►Enabling Both Dow and K-Dow to Grow
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Agenda
►Strengthening Basics
►Preferentially Investing in Performance Businesses
►Business Portfolio Management
►Financial Discipline
►Remunerating Our Shareholders
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►Accelerates growth through strong operational and strategic fit
►Creates new leadership positions in key industry growth segments
►Well-known commitment to R&D
►Fuels Dow’s own innovation engine
►Delivers more stable earnings with higher growth
19th Annual Citi Chemicals Conference
Delivering On Our Commitments –A Transformative Move
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Rohm and Haas Integration Update
►Program Management Office– 21 Functional Implementation Teams– 6 Business Implementation Teams– 7 Clean Teams
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Rohm and Haas Cost Synergy Update
0 50 100 150 200 250 300
July 10 Commitment ($800 Million)
Shared Services & Governance
Purchasing Synergies, Including Raw Materials
Business Development Overlap
Manufacturing / Supply Chain
Run Rate Estimates
Will be at $100 Million Run Rate on Day 1Rohm & Haas’ $110 Million Savings is Additive
$170
$180
$70
$65
$280
$280
$160
$80
End Year 1
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End Year 2
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Synergy Opportunities
19th Annual Citi Chemicals Conference
Function Project Description
Purchasing Raw Materials
Information Technology IT Infrastructure Consolidation
Corp Business Dev Overlap Business Overlap Synergies
Supply Chain Logistics and Packaging
Information Technology I/S Organizational Consolidation
Manufacturing & Engineering Specific Mfg Footprint Optimization
Marketing & Sales Marketing and Sales Synergy Project
Manufacturing & Engineering MRO/Maintenance Equipment
Shared Services Corporate Services
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Rohm and HaasAdvanced Materials Division CEO
Pierre Brondeau
Rohm and Haas Advanced Materials Division
Paper & TextilesPhilippe Raynaud de Fitte
Vice President
Dow Chairman and CEOAndrew Liveris
AsiaMark DouglasVice President
Electronic MaterialsYi Hyon PaikVice President
Building & ConstructionTorsten KraefVice President
Designed Polymers & Separation Technologies
Peter DaviesVice President
CoatingsLuis FernandezVice President
Specialty Packaging & FilmsPatrice Barthelmes
Vice President
Marketing Ruby Chandy*Vice-President
LegalKen FitzpatrickVice President
FinanceAlfonso Escudero
Vice President
Manufacturing and EH&SDon Taylor
Vice President
Human ResourcesRich Lovely
Vice President
CommunicationsBrian McPeakVice President
Shared Services Jim Varilek
Vice President
Marketing Ruby ChandyVice President
R&DA. N. SreeramVice President
This organization alignment is pending all regulatory approvals and closing of the transaction. Until that time, Rohm and Haas and Dow will remain separate entities and will operate independently.
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The New Dow – A Significant Portfolio Shift!
19th Annual Citi Chemicals Conference
Dow (pre K-Dow) Pro Forma Dow (post K-Dow)
2 Non-GAAP financial measure. Excludes certain items. See www.dow.com for additional information.
2007
Rev
enue
1
49% 37%63%
Pro Forma Dow (post K-Dow) + ROH
31%69%
2007
EB
ITD
A1,
2
48%52% 41%59% 33%67%
1 Data excludes Unallocated and Other. Performance (Includes Ag)
Basic
51%
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Agenda
►Strengthening Basics
►Preferentially Investing in Performance Businesses
►Business Portfolio Management
►Financial Discipline
►Remunerating Our Shareholders
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Delivering On Our Commitments –Business Portfolio Management►Divest or shut down non-competitive, unproductive or
non-strategic assets (2003 – 2007)− 92 plant shutdowns− 42 site exits− 38 business divestitures
►Strategic Acquisitions− 26 since 2003− In the last two years ….
− Wolff Walsrode− Dow AgroSciences – 7 acquisitions− Epoxy Systems – 3 acquisitions− Polyurethanes – 3 acquisitions− Dow Building Solutions – Stevens Roofing Systems
19th Annual Citi Chemicals Conference
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Agenda
►Strengthening Basics
►Preferentially Investing in Performance Businesses
►Business Portfolio Management
►Financial Discipline
►Remunerating Our Shareholders
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Delivering On Our Commitments –Sound Financial Discipline
Debt Reduction
2002 2003 2004 2005 2006 2007Capex
0.01.02.03.0
2002 2003 2004 2005 2006 2007
Depreciation
Capex
$ Billi
ons
Debt/
Capit
al 55%48%
39%34% 32%
59%
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Managing Today’s Challenging Environment
Financial Flexibility►Sufficient liquidity – Credit lines of approximately $5 billion– Retail and Institutional bond access– Diversified funding sources throughout the world
Financial Discipline / Interventions►Targeted reductions by end of year– Discretionary spending reduction of $100 - $150 million– Capital spending reductions of $100 million– Working capital reductions
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Agenda
►Strengthening Basics
►Preferentially Investing in Performance Businesses
►Business Portfolio Management
►Financial Discipline
►Remunerating Our Shareholders
19th Annual Citi Chemicals Conference
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Delivering On Our Commitments –Remunerating Our Shareholders
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
2005 2006 2007 3Q08 YTD
Sha
re R
epur
chas
e A
mou
nt ($
Mill
ions
)
– 73 Million Shares Repurchased
– $3.0 Billion Spent– Largest Program
In A Decade
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1928 1938 1948 1958 1968 1978 1988 1998
Delivering On Our Commitments –Our Consistent & Reliable Dividend
1912 2008**
• A 96-Year History of Consistent Dividends– Maintained or Increased Each Year
– Increased 25% Since 2006
Quarterly Dividends Paid Per Share*
*ADJUSTED FOR STOCK SPLITS AND STOCK DIVIDENDS**2008 DIVIDEND ANNUALIZED BASED ON Q3 YTD PAYOUT
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Key Messages
►Strengthen Franchise Basics Business via K-Dow
►Preferentially Invest in Performance Businesses via Rohm and Haas
►Portfolio Management Continues
►Preserving Financial Flexibility
►Uninterrupted Dividend for 96 Years!
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SEC Disclosure Rules
►Some of our comments today may 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 may reference non-GAAP financial measures. Where available, a reconciliation to the most directly comparable GAAP financial measures and other associated disclosures are provided on the internet at www.dow.com in the Financial Reports page of the Investor Relations section.
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Q&A
19th Annual Citi Chemicals Conference