Dow recently released its financial results for the second quarter of 2019. Net sales were $11 billion, in line with the company’s guidance and down 14% vs. pro forma results in the 2018 second quarter, driven primarily by local price declines in polyethylene, siloxanes, and isocyanates, as well as lower sales of hydrocarbon co-products.
Volume in the 2019 second quarter declined 3% vs. pro forma results in the year-ago period, driven primarily by higher ethane feedstock usage and lower hydrocarbon co-product sales, due to increased ethylene integration from the startup of new downstream assets. This was partly offset by demand growth in plastics packaging applications, supported by new capacity on the U.S. Gulf Coast.
Local price declined 9% vs. pro forma results in the year-ago period, with declines in all segments. Currency decreased sales by 2%, driven primarily by Europe, Middle East, Africa and India (EMEAI).
“In spite of challenging market conditions, our results reflect the benefits of Dow’s streamlined and more focused portfolio, continued cost synergy savings and stranded cost removal,” said Jim Fitterling, CEO. “In the quarter, we faced margin compression in our intermediate products in both our core business and equity earnings. However, we achieved demand growth in packaging applications, supported by new capacity on the U.S. Gulf Coast. We delivered more than $175 million of savings from cost synergies and stranded cost removal. We also moved quickly to further tighten our expense and capital spending in response to the macro environment. We delivered higher cash flow from operations. And on a sequential basis, after adjusting for higher planned maintenance spending, the Dow team achieved core earnings growth. This result underscores our discipline and focus on agile operational and financial management.”
Dow’s Performance Materials & Coatings segment’s net sales in the second quarter of 2019 were $2.4 billion, down 12% vs. pro forma results in the year-ago period. Volume and local price each declined 5%. Currency decreased net sales by 2%.
Consumer Solutions net sales declined as gains in the U.S. and Canada were more than offset by declines in all other regions. Local price declines were driven by ongoing siloxane price pressures, primarily in Asia-Pacific. Volume decreased modestly, reflecting slower demand, particularly in automotive and consumer electronics end markets.
Coatings & Performance Monomers net sales also declined, driven primarily by lower volume and local price. Coatings demand was impacted by wet weather in the U.S. and Europe, which led to delays in seasonal demand. Performance Monomers sales were impacted by shipping restrictions from a facility in Deer Park, Texas, due to ongoing repairs at a nearby third-party storage and terminal facility.
In the company’s Industrial Intermediates & Infrastructure segment, 2019 second quarter net sales were $3.3 billion, down 16% vs. pro forma results in the 2018 second quarter. Volume declined 1%, local price decreased 12%, and currency decreased net sales by 3%.
Polyurethanes & Construction Chemicals reported a net sales decline, primarily driven by lower isocyanate prices, as well as currency headwinds in EMEAI. Volume gains in isocyanates and systems applications were offset by declines in polyols and propylene oxide/propylene glycol.
Industrial Solutions reported lower net sales, led by a decline in local price. Volume growth in Asia-Pacific and Latin America was more than offset by declines in the U.S. and Canada and EMEAI, primarily driven by soft demand in agriculture, automotive, and electronics end markets.
In Dow’s Packaging & Specialty Plastics segment, 2019 second quarter net sales were $5.2 billion, down 15% vs. pro forma results in the year-ago period. Volume declined 4%, driven primarily by feedstock selection in the U.S. and Europe, as well as a planned maintenance turnaround at an ethylene production facility in Germany, both of which reduced net sales of Hydrocarbons & Energy co-products. Local price declined 9%, and currency decreased net sales 2%.
Packaging and Specialty Plastics net sales declined due to reduced polyethylene product prices and currency headwinds. Volume grew, led by double-digit gains in Asia-Pacific and demand growth in EMEAI, supported by new capacity additions. The business reported the strongest end-market growth in industrial and consumer packaging and health and hygiene applications.
Net sales for Hydrocarbons & Energy declined on both price and volume. Sales volume declined primarily due to increased ethylene integration from the startup of new downstream assets, as well as a lighter feedstock slate in the U.S. and Europe, as well as a planned maintenance turnaround at an ethylene production facility in Germany, both of which led to reduced hydrocarbon co-product production.
“Looking ahead, we still see global growth, but the pace of that expansion has slowed, as buying patterns remain cautious due to ongoing trade and geopolitical uncertainties,” said Fitterling. “In this environment, we will maintain cost and operating discipline by continuing cost synergy and stranded cost removal actions, by reducing our planned capital expenditures for the year from $2.5 billion to $2 billion, without sacrificing high-return growth projects, and by continuing with disciplined margin management. These near-term steps are responsive to the current market environment.
“Over the longer-term, our purpose-built portfolio and leading business positions, combined with a leaner cost structure and a suite of incremental, high-return growth investments, will continue to differentiate Dow and drive our earnings growth trajectory.”
Additional details are available at www.dow.com.
