dow investor day 2009

The Earnings Power of The New DowInvestor Day 2009

Andrew N. LiverisChairman & Chief Executive OfficerNovember 2009

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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.

The Right Elements are in Place to …

• >10% revenue growth with new portfolio• EBITDA margins moving from 12% to 20%• Enabled by science-based innovation

Drive GROWTH

Accelerate Enhanced Earnings

RewardShareholders

• ~$2.5 billion in cost savings by 2011• Earnings power of >$10 per share

• Substantial cash flow to reinvest and reward shareholders

2009 Accomplishments

Structural and cost synergies are ahead

of schedule

OPERATIONAL

Financial discipline has been our

hallmark

FINANCIAL

The right portfolio, the right strategy, the right people

STRATEGIC



of schedule

OPERATIONAL

• Achieved >$1 B structural cost savings YTD

• Integrated Rohm and Haas and exceeded annual acquisition synergy run rate target

• Right-sized Basics footprint

OPERATIONAL



of schedule

OPERATIONAL

• Delivered consistently positive operating earnings and YTD cash flow

• Eliminated high cost preferred shares at par

• Paid off bridge ahead of schedule

• Reduced capex 50% to $1.4 B

FINANCIAL



of schedule

OPERATIONAL

• Successfully integrated Rohm and Haas

• Divested >$3 B of non-core assets

• Completed enterprise-wide strategic review

• Record R&D spend > capex

STRATEGIC


• Achieved >$1 B structural cost savings YTD

• Integrated Rohm and Haas and exceeded annual acquisition synergy run rate target

• Right-sized Basics footprint

OPERATIONAL

• Delivered consistently positive operating earnings and YTD cash flow

• Eliminated high cost preferred shares at par

• Paid off bridge ahead of schedule

• Reduced capex 50% to $1.4 B

FINANCIAL

• Successfully integrated Rohm and Haas

• Divested >$3 B of non-core assets

• Completed enterprise-wide strategic review

• Record R&D spend > capex

STRATEGIC

Agenda

• Enhanced Earnings Power

• Strengthened Financial Profile

• CEO Priorities

The Old Dow

Focus

Basics

Capital Intensive

(1) Based on 2008 heritage Dow results, excluding Hydrocarbons & Energy and Corporate.

Business Results(1)

10%

20%

30%

20% 40% 60% 80% 100%

Performance Plastics

Basic Plastics

Performance Chemicals

Ag Sciences

Average 12%EB

ITD

A a

s a

% o

f Sal

es

Sales

0%0%

BasicChem

• Operational excellence• Product integration• Focused execution

• Operational excellence• Product integration• Focused execution

Dow’s Business Model – Three Integrated Parts

Highly Differentiated

Tech

nolo

gy D

iffer

entia

tion

Customer Intimacy

Coatings & InfrastructureCoatings & Infrastructure

Performance ProductsPerformance Products

Basic ChemicalsBasic Chemicals

PerformancePerformance

BasicsBasics

Hydrocarbons & EnergyHydrocarbons & Energy

Basic PlasticsBasic Plastics

Electronic & Specialty MaterialsElectronic & Specialty Materials

Health & Agricultural SciencesHealth & Agricultural Sciences

Performance SystemsPerformance Systems

Market DrivenMarket Driven

The New Dow – Improvement in Normalized Earnings$ /

Sha

re

3Q 2009YTD

Earnings Power

~2012RunRate(1)

(1) Run rate estimate based on third quarter 2009 operating earnings and synergy run rate achieved by end of quarter.

Basics

Health and Agricultural Sciences

Performance Products and Performance Systems

Dow Advanced Materials

>$10

$4.00 - $4.50

~$1.25

$0.44

Growth Synergies/Innovation

Restructuring and Cost Synergies

Equity Earnings Growth

Divestitures

Dow Advanced Materials Portfolio

Electronic and Specialty MaterialsElectronic and Specialty Materials

(1) 2008 sales reflect pro forma data of Dow and Rohm and Haas combined.(2) EBITDA margin shown represents the range or the average margin for 2007, 2008 and the 9 months ended September 30, 2009.

Earnings Power:Advanced Materials

EBITDA MARGIN(2): 27% NORMALIZED EBITDA MARGIN: ~30%

2008 Sales(1): $5.7B | Growth: GDP x 2 Leading Industry PositionsElectronics (66% in Asia)

#1 CMP Pads#2 CMP Slurries #1 Display Technologies #1 Metallization #2 Photolithography Materials

Specialty Materials

#1 RO membranes & Ion Exchange Resins #1 Specialty cellulosics & biocides #1-2 Ingredients supplier to home &

personal care




Electronic Materials

Interconnect Technologies

SemiconductorTechnologies

DisplayTechnologies

• Growth driven by trends toward miniaturization, faster processing, multi-functional devices

• Production base continues to shift to Asia• >30% sales CAGR from 2008-2013 in smartphones and mini notebooks

Specialty Materials

• Addressable industry growing from $5 billion today to >$10 billion by 2020• Technologies to reduce the cost of desalination and reuse 35% by 2012• Innovation pipeline features breakthrough ultrafiltration technologies

Water & Process Solutions

Key Drivers of Profitability


Coatings and InfrastructureCoatings and Infrastructure


EBITDA MARGIN(2): 14% NORMALIZED EBITDA MARGIN: ~18-22%

Leading Industry Positions

#1 Architectural Binders

#1 Architectural Additives

#1 Acrylic & Styrene Acrylic Emulsions

#1 Epoxy Resins, Additives and Solvents Infrastructure

#1 XPS Foam Insulation and cellulose based products

2008 Sales(1): $6.2B | Growth: GDP x 1.5





Dow Coating Materials

Dow Building & Construction

• Significant growth drivers tied to regulatory requirements and consumer preferences for energy efficiency & lower environmental impact

• Integrated systems approach

Industry25%

Buildings48%

Transportation 27%

Waterborne EmulsionsEpoxy ResinsAdditivesGlycol EthersSolventsDispersantsParaloidsOther

50%22%12%4%3%3%3%3%

Broadest Technology Portfolio Available• Largest portfolio of coatings raw materials and broadest range of chemistries

• Robust innovation pipeline aligned to consumer preferences for low- and zero-VOC coatings

• Customer-centric model, expanding in emerging geographies



Health and Agricultural SciencesHealth and Agricultural Sciences


EBITDA MARGIN(2): 18% NORMALIZED EBITDA MARGIN: 25%


#1 Green Chemistry/Insecticides

• Sentricon

• Spinosad

• Spinetoram

#1 Silage Corn and Omega-9 naturally stable oils


Earnings Power:Health and Agricultural

Sciences


Key Drivers of Profitability• $1 billion corn business and >10% share in U.S. corn

0%

20%

40%

60%

Cotton

Corn

Soybeans

Dow AgroSciences Herbicide Tolerant Trait (DHT) Technology Targets for Share of U.S. Acres

0%

10%

20%

30%

40%

50%

2007 2010E 2012E

HERCULEX®

HERCULEX®

+ SmartStax™

launch

HERCULEX®

+ SmartStax™

SmartStax™ and HERCULEX®Traits Share of U.S. Corn Acres

• Shift from 90/10 to 50/50 portfolio of Ag Chemicals / Seeds, Traits & Oils

• Ag Chem pipeline full with high-value solutions for the next 10 years and proprietary formulations

• Seeds, Traits & Oils >20% sales CAGR 2008 to 2016

• SmartStax + DHT contribute >50% EBITDA margin

Earnings Power:Health and Agricultural

SciencesHealth and Agricultural Sciences

Performance Systems

Performance SystemsPerformance Systems




#1 Automotive glass bonding

#1 Specialty high performance sealants

#1 Wire & Cable compounds

#2 Polyurethane systems


Earnings Power:Performance

Systems



• Tailor-made formulations and flexible delivery systems

• Strong growth drivers tied to infrastructure investments, energyconservation, and automotive safety and light-weighting

• Bolt-on acquisitions continue to add value

2009 2014 20191Q 2007 1Q 2008 1Q 2009

Gro

ss M

argi

n %

Spr

ead

(Sys

tem

s vs

. C

ompo

nent

s)

Differentiated Solutions Drive Higher Margins

10 pe

rcenta

ge po

int im

prove

ment


Systems

Diesel Particulate Filter Demand Growth

Performance Systems

Performance Products

Performance ProductsPerformance Products


EBITDA MARGIN(2): 12% NORMALIZED EBITDA MARGIN: ~15%


#1 Polyols

#1 LER and Epichlorohydrin

#1 E- and P-Series Glycol Ethers

#1 Ethylene Amines and Ethylene Oxide Amines

#2 Performance Fluids



Products




Products

• Leading industry positions

• Strong supply network and R&D capabilities

• Building blocks maintain low-cost position and retain flexibility to fuel growth in downstream Performance derivatives

• Highly diverse portfolio of product lines, marketed to a broad collection of end-uses

• Targeted application development to further differentiate product offerings

Fuel growth in Downstream Performance Businesses

Target MarketSegments

Sell into Differentiated,Higher Margin Market Segments

Component Sales into Core Markets

• Electronic & Specialty Materials

• Coatings & Infrastructure

• Performance Systems


Innovation-Based Businesses Yield Higher Margins and Higher Growth

SEGMENTSEGMENT Revenue Growth (2009-2012 CAGR)Revenue Growth

(2009-2012 CAGR)Normalized

EBITDA MarginNormalized

EBITDA Margin

~ 30%10 – 15%

~ 18 - 22%5 – 8%

~ 25%7 – 10%

~ 15 - 18%13 – 17%

~ 15%10 – 15%



Performance Systems

Coatings and Infrastructure

Electronic and Specialty Materials

Advanced Materials

Health and Agricultural

Sciences

Performance Products and Performance

Systems

Basics

Basic PlasticsBasic Plastics


EBITDA MARGIN(2): 14-20% NORMALIZED EBITDA MARGIN: ~15%


#1 Polyethylene

• Dow is a producer of every major PE resin

• PE makes up one-third of total world polymer demand

• Most commonly used plastic in the world


Earnings Power:Basics

Basics




Basic Plastics

• Competitive cost position

• Differentiated product slate

• Leading process technology

• PE demand grows at >GDP rates across the cycle

7,000

8,000

6,000

5,000

4,000

3,000

2,000

1,000

0Dow Exxon-Mobil Lyondell

BasellSABIC Chevron

PhillipsSinopec Ineos

Top Polyethylene Producers: 2008In thousands of metric tons

Global PE Demand (CMAI)

Global GDP (Global Insight)

Average PE/GDP Multiple

Annual PE/GDP Multiple

Comparison of GDP and Polyethylene Growth - Global3.0

2.0

1.0

0.0

8%

6%

4%

0%

2%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Ann

ual C

hang

e (%

)

PE

/GD

P M

ultip

le

Dow Ethylene Advantaged Versus the Industry

U.S. Natural Gas is highly discounted to crude on an energy basis

Forecast

0

2

4

6

8

10

12

14

16

18

20

Cru

de O

il to

Nat

ural

Gas

Pric

e R

atio

(bbl

/MM

BTU

)

1990 1995 2000 2005 2010

Source: Dow

Dow versus Industry Feedstock Flexibility - 2009

Light Feed Flexibility Heavy Feed

Perc

enta

ge o

f tot

al fe

edsl

ate

0%

25%

50%

75%

100%

NorthAmericaIndustry

CanadaLatin

AmericaIndustry

LatinAmerica

EuropeIndustry Europe

Source: Dow

UnitedStates


More than $200/MT leverage to ethylene peak yields upside to EPS of > $1.40More than $200/MT leverage to ethylene peak yields upside to EPS of > $1.40

Basics

Basic ChemicalsBasic Chemicals




#1 Chlor-Alkali

World leader in purified EO

Successful asset light partnership (MEGlobal)

2008 Sales(1): $4.3B | Growth: GDP


Basics




Basic Chemicals• Right-sizing footprint to match downstream derivative demand

• Chlorine integration provides competitive advantage

• Purified EO a key feedstock for downstream Performance businesses

Chlor-Alkali

EthyleneDichlorideand VinylChloride

Polyure-thanes,

Epoxy Resins,Chlorinated

Organics, andAgriculturalChemicals

By-ProductRecovery

and Re-Use

Caustic SalesMajor Consuming

BusinessesEnvironmental

Operations

CL/

NaO

H

HCI

Vinyl and EDCSales

Chlorine Production

Basics

Hydrocarbons and EnergyHydrocarbons and Energy



#1 Ethylene

2008 Sales(1): $9.0B


10,000

7,500

5,000

2,500

0Dow Exxon-

MobilLyondellBasellSABIC SinopecShell

Top Global Ethylene Producers (2008)Capacity to produce, thousands of metric tons Source: CMAI

4,000

3,000

2,000

1,000

0Dow

incl. ROHLyondellBasellBASF INEOS Shell

Top Global Propylene Consumers inNon-Polypropylene Applications (2008)

Capacity to produce, thousands of metric tons Source: CMAI

Sinopec

Non-polypropylene applications:- are specialty in nature- are higher value-add- feature higher growth rates

Margin Expansion:The Horsepower of the New Portfolio

Portfolio Earnings Power PotentialHeritage Portfolio(1)

Sales

20% 40% 60% 80% 100%0%

EBIT

DA

as

a %

of S

ales

0%20% 40% 60% 80% 100%

Sales

0%

10%

20%

30%

Performance Plastics

Basic Plastics

Performance Chemicals

Ag Sciences

Average 12%

0%

BasicChem

40%

EBIT

DA

as

a %

of S

ales

10%

20%

40%

30%

Basic Chem

Performance Products Basic Plastics

Performance Systems

Coatings and Infrastructure Health and Ag Sciences

Electronic and Specialty Materials

Average 20%

(1) Represents 2008 data for heritage Dow

Advanced Materials


Sciences


Systems

Basics

The Power of Geographies in Dow Advanced Materials


Sciences


Systems

Basics

North America 38% of sales

Latin America 10% of sales

Europe36% of sales

IMEA3% of sales

Asia Pacific13% of sales

The Power of Geographies in Dow

The Dow Chemical CompanyEmerging Market Sales

4

8

12

16

20

2004* 2008

Sale

s ($

bill

ions

)

11%

CAG

R*

*Heritage Dow

% of 2008 pro forma sales% of 2008 pro forma sales

2008Developed

Emerging(28%)

2012Estimate

Developed

Emerging(35%)

Advanced Materials


Sciences


Systems

Basics

Proportionate EBITDAof Principal Joint Ventures

($ millions)

$0

$300

$600

$900

$1,200

$1,500

$1,800

2003 2004 2005 2006 2007 2008

Equity Earnings EBITDA in excess of equity earnings

Equity Earnings Potential >$1 B Annually

Quarterly AverageEquity Earnings of Nonconsolidated Affiliates

($ millions)

$0

$50

$100

$150

$200

$250

$300

2001 2002 2003 2004 2005 2006 2007 2008 1Q09 2Q09 3Q09

Earnings Power:Equity Earnings

Growth

2-Year Target

$1,300

$750

$450

Cost Control and Acquisition Cost Synergies

Rohm and Haas AcquisitionSynergies

OtherActions

Total Achieved Savings Run Rate 3Q09: $1.4 B

$100$100

$876$876

$ millions

DowRestructuring

Programs$404$404

TOTAL: ~$2.5 B

~$650 million higher net EBITDA impact in 2010 vs. 2009~$650 million higher net EBITDA impact in 2010 vs. 2009

Earnings Power:Restructuring

and Cost Synergies

Acquisition Growth Synergies: Already Moving the Needle

$2 billion revenue run ratetarget by 2012

>$230 million run rate at 3Q09

Earnings Power:Growth Synergies/

Innovation

Captured Growth Synergies(Annualized through 3Q09)

Europe

IMEA

LatinAmerica

NorthAmerica

Asia Pacific

Innovation: Addressing Mega Trends – Growth Opportunities

TRANSPORTATION & INFRASTRUCTURE

Diesel ParticulateFilters

WaterFiltration

Low VOC Architectural

Coatings

ENERGY

Battery Value Chain

Building Wall System

AlternativeEnergy

CONSUMERISM

CMPTechnologies

HomeCare

Electronics

HEALTH & NUTRITION

SmartStax™ / DHT

Ag Chem Pipeline

Traits / Healthier Diets (Omegas)


Innovation

Dow Innovation: Solving World’s Most Pressing Problems

• Dow’s innovation pipeline holds significant market potential

• Innovation pipeline is aligned with global megatrends

• Portfolio management ensures that innovations are supported by solid business cases

Infrastructure & Transportation


Innovation

Consumerism

Energy

Health & Nutrition

Dow’s Pipeline NPV: $28 BDow’s Pipeline NPV: $28 B

The New Dow – Improvement in Normalized Earnings$ /

Sha

re

3Q 2009YTD

Earnings Power

~2012RunRate(1)

(1) Run rate estimate based on third quarter 2009 operating earnings and synergy run rate achieved by end of quarter.

>$10

~$1.25

$0.44

Basics


Performance Products and Performance Systems

Dow Advanced Materials

Growth Synergies/Innovation

Restructuring and Cost Synergies

Equity Earnings Growth

Divestitures

$4.00 - $4.50

The New Dow – Improvement in Normalized Earnings

6

8

10

1992 1994 1996 1998 2000 2002 2004 2006

$ / s

hare

2008 2010 2012 2014

Average: $3.50 - $5.50(2009 - 2015)

EPS (Forecast) Normalized EPSEPS (History)

4Average: $1.86(1993 - 1997)

Average: $2.20(2002 - 2005)

Agenda

• Enhanced Earnings Power


• CEO Priorities

Returning to Lower Debt Levels

Cur

rent

0.0x20%

30%

40%

50%

60%19

96

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

3Q09

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

Net Debt / EBITDANet Debt / Total Capital

Target of $5-6 B in divestitures 2009-2010

2009 YTD = $3.4 B achieved

3 concurrent paths in 2010, with $12 B of options

2010 Divestment Plan: $2 B Target, $12 B of Options



Path 1$3.5 B in Assets:

• Styron Corporation• 10-15 other businesses

• Don't fit long term growth profile

• Will not successfully compete internally for resources

• Timing spread throughout 2010

• Size of each varies between $100 M to $300 M

• Targeted Portfolio Management

• Scope and carve out process already underway

• Non-strategic

• Stand alone







Path 2Kuwait resolution options• Don't fit long term growth profile

• Will not successfully compete internally for resources

• Timing spread throughout 2010• Size of each varies between

$100 M to $300 M



• Non-strategic• Stand alone







Path 2Kuwait resolution options

Path 3New Asset Light Deal(s)

• Don't fit long term growth profile • Will not successfully compete

internally for resources • Timing spread throughout 2010• Size of each varies between

$100 M to $300 M



• Non-strategic• Stand alone

Average Return on Capital

2006-20161995-2005

Average Return on Equity

2006-20161995-2005

Earnings per Share

Average(2002-2005)

Average(2009-2015)

Enhanced Financial Performance

20%20%19%19%

14%14%

12%12%

$2.20$2.20

$4.50$4.50

Sources and Uses of Cash

Beginning Period Cash 1/1/04

Cash From Operations

Asset Sales

Acquisitions Capex Shareholder Remuneration

Change in Debt

Other Ending Period Cash

12/31/08

2004

-200

8

$ billions

Investments (Net)

StockIssuance

$2.4$2.8

$20.5

$3.0

$(9.1)

$(1.7)$(0.9)

$(10.2)$(0.8)

$(2.2)

$1.8

>$20 B in Cash From Operations and Half Returned to Shareholders>$20 B in Cash From Operations and Half Returned to Shareholders

Early Cycle Upside & Balanced Use of Cash

Use of Cash2010 - 2015

$0

$2

$4

$6

$8

$10

$12

1993

1995

2001

2004

2009

2012

EBIT

DA

, $ b

illio

ns

>$35 B in Cash From Operations 2010 - 2015

• Invest for Growth

• Shareholder Remuneration

• Reduction of Financial Obligations

Agenda

• Enhancing Earnings Power


• CEO Priorities

2010 CEO Priorities

• Fixed cost reductions / synergies ($2.5 B run rate)

• Working capital discipline ($500 M reduction)

• Capex ($1.6 B)

OPERATIONAL

• Maintain investment grade rating

• Pay down debt (Debt / Total Capital of 45%)

• Operating cash flow ($1.5 B)• Non-strategic divestments

>$2 B

FINANCIAL

• R&D spend of ~$1.6 B• Growth synergies

(>$500 M run rate)• Portfolio mgmt continued

(asset sales of >$2 B)• The right asset light strategy• Enhanced geographic focus

STRATEGIC

2010 CEO Priorities


of schedule

OPERATIONAL

• Fixed cost reductions / synergies ($2.5 B run rate)

• Working capital discipline ($500 M reduction)

• Capex ($1.6 B)

OPERATIONAL

2010 CEO Priorities


of schedule

OPERATIONAL

• Maintain investment grade rating

• Pay down debt (Debt / Total Capital of 45%)

• Operating cash flow ($1.5 B)

• Non-strategic divestments >$2 B

FINANCIAL

2010 CEO Priorities


of schedule

OPERATIONAL

• R&D spend of ~$1.6 B

• Growth synergies (>$500 M run rate)

• Portfolio mgmt continued (asset sales of >$2 B)

• The right asset light strategy

• Enhanced geographic focus

STRATEGIC

• Early cycle exposure to economic recovery

• Optimized cost structure provides strong leverage

• Polyethylene upside

• Greater share of higher growth, higher margin performance businesses

• Renewed focus on innovation

• Stronger positions in emerging geographies and markets

The Right Elements are in Place to …

Drive GROWTH

Accelerate Enhanced Earnings

RewardShareholders

The Dow Chemical CompanyInvestor Day 2009