the dow chemical company - valueplays
TRANSCRIPT
July 25, 2011
The Dow Chemical Company
Dow & Saudi Aramco Embark on World’s Largest Chemicals Project
to Drive Downstream Growth
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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 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/financial.
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Agenda
Forging a Premier Partnership for Growth
Strategic Intent & Project Overview
Project Economics & Milestones
Driving Growth on Multiple Fronts
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Premier partnership focused on long-term growth
World-scale operations supported by strong back-integration to advantaged feedstocks
Tailored product mix designed to target high-growth, high-margin end-markets
Uniquely located in the middle of the fastest growing regions
Strong economics and financingmodel
Historic Partnership Drives Next Generation of Growth
Commencing a New Era of Growth
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Introducing Sadara
Progressive leadership, enhanced performance, and a
status derived from quantifiable talent and proven mastery.
Sadara
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Sadara Delivers Value on Every Front
State-of-the-art, world-scale chemicals complex and value park– Construction to begin immediately; production to ramp up beginning in 2015– Reaching $10 B in annual revenue– More than 3 MM metric tons of capacity
Positioned to capture growth opportunities aligned with Dow’s strategy– Performance product slate designed to serve fast-growing regions and value chains– Drives higher, more sustainable margins– Dow to market product on behalf of JV outside of Middle East
Sadara will be highly competitive and profitable– Average EBITDA margins of ~40 percent– Average equity earnings of ~$500 MM/yr to each partner over first 10 years after start-up
Well-conceived financing plan de-risks project– Strong project economics, utilizing equity-light model– Limited future cash contributions from Dow going forward
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Sadara Creates Value on Every Front
Builds new industries and creates jobs for Saudi Arabia
Adds capacity needed to supply emerging regions, particularly in Asia Pacific
Delivers value-add tofast-growing value chains that hold tremendous market opportunities
Brings state-of-the-art technology and competitive cost position to bear in operations and products
JV
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Uniquely Positioned to Capture Emerging Region Growth
Advantaged feedstocks enable growth capture in attractive value chains
Expected RegionalVolume Split
Asia Pacific: ~45%
Middle East: ~25%
Europe: ~20%
Other: ~10%
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Positioned to Address High-Growth Sectors in Asia Pacific
Sadara uniquely positioned to capture significant growth in Asia Pacific
Asia Pacific’s global demand share in key end-markets has grown from <30% to ~40% since 2005
Automotive Home &Personal Care Electronics Water Packaging
12-15% 7-9% 12-15% 12-15% 10-15%
Source: Dow
Ch
ina’
s 2
00
5-2
02
0
CA
GR
%
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Target End-Markets Drive Performance-Focused Design
High-GrowthEnd-Markets
& Value Chains
Hygiene and Medical
Food Packaging
Specialty Packaging
Adhesives
Electronics
Coatings
Automotive
Oil & Gas
Consumer Durables
Construction
Infrastructure
Water
Feedstocks
Ethane
Liquid Feeds
Refinery
Integration
Sadara
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Packaging Growth Centered on Emerging Regions
LLPDE Growth Rates 2011-2015 2016-2025
U.S. & Canada 4% 3%
China 12% 8%
Western Europe 4% 2%
Asia Pacific ex-China 10% 7%
Middle East & Africa 8% 6%
Latin America 8% 6%
Eastern Europe 8% 8%
Global 8% 6%
40
30
20
10
0
0 1 2 3 4 5 6 7
Population (billions)
Po
lye
thyle
ne D
em
an
d p
er
Cap
ita (
kg
pe
r p
ers
on
)
Africa
Rest of Asia Pacific
La
tin
Am
eri
ca
China
Easte
rn E
uro
pe
Mid
dle
East
Jap
an
Weste
rn E
uro
pe
No
rth
Am
eri
ca
Global average: ~10 kg per person
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Polyurethanes Share Growth Enabled By Investments
Dow participates in key fast-growing applications
– Automotive– Appliances – Construction– Furniture and bedding– Wind energy
JV investment enables share growth, supported by competitive supply position
Investment fortifies Dow’s commitment to key global customers
Maintains flexibility to add differentiation via further downstream investments
(1) Source: Dow
42%
28%
15%
8%
7%
Estimated % of Polyurethanes
Industry 2010 Sales(1)
Middle East & Africa Asia Pacific
Middle East, Africa Asia Pacific North America
Latin America Europe
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Agenda
Forging a Premier Partnership for Growth
Strategic Intent & Project Overview
Project Economics & Milestones
Driving Growth on Multiple Fronts
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Performance-Focused Product Slate
Solution PE
LDPE
Amines
Glycol Ethers
Propylene Glycol
Polyether Polyols
Isocyanates
Elastomers
Water
Others…
Feedstocks
Ethane
Liquid Feeds
Refinery
Integration
Sadara
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Highly Competitive and Profitable Investment
Dow expects to reach cash flow break-even within 5 years of start-up
Sadara revenues projected to reach ~$10 B annually within 10 years of full operations, with top
quartile EBITDA margins
Average equity earnings of ~$500 MM/yr to each partner over first 10 years of full operations
– Additional value to Dow from marketing fees, royalties, and licensing fees
~40% margin
on average
30%
40%
50%
$0
$2
$4
$6
$8
$10
2015 2020 2025
Pro
jecte
d J
V E
BIT
DA
Ma
rgin
An
nu
al JV
Re
ve
nu
e (
$ B
)
Revenue
EBITDA Margin Range
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Equity-Light Financing Plan Reduces Project Risk
Target Equity Funding: 35% Target Debt Funding: 65%
Sadara
Total Project
Investment~$20 B
DebtAramco
IPO
Dow
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Key Milestones Going Forward
2H 2011 2012 2013 2014 2015 2016 2017
Financial close
Remaining plants ramp to full production
Final investment decision
Sadara formation & construction begins
IPOFirst plants come online (cracker and PE)
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Agenda
Forging A Premier Partnership for Growth
Strategic Intent & Project Overview
Project Economics & Milestones
Driving Growth on Multiple Fronts
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Water
Thermoplastic Polyolefins (TPE) Compounding
Wire & Cable Compounding
Specialty Packaging
Photovoltaic Encapsulant Films
Gas Treatment Formulations
Composite Carbon Fiber
Thermosets Systems House
Automotive Parts
Household Products
Future Value Park Accelerates Growth in Key Value Chains
An
no
un
ce
dTo
day
Un
de
r C
on
sid
era
tio
n
SadaraValuePark
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Advancing Our Strategy On All Fronts
Integrated Portfolio
Geographic Position
70% of Dow’s ethylene production located in cost-advantaged regions
Announced USGC investments to deliver profitable growth in Americas- $750MM to $1B of annual
EBITDA by 2016
Formed JV with Mitsui, delivering back-integration into renewable sugar cane
R&D playbook contains >500 projects, with risk adjusted NPV of $12B
Monetizing pipeline today and in near-term
- SmartStax®
- POWERHOUSE™
- EVOQUE™
Continuing to capture growth synergies; run-rate now at $1.2B
Innovation Pipeline
By 2012, 35% of revenue to come from emerging geographies
Record sales in emerging geographies ($16B) in 2010
Expanding footprint in Asia Pacific with significant investments
Proposed Saudi JV: final investment decision
® SmartStax multi-event technology developed by Dow AgroSciences and Monsanto.
SmartStax is a trademark of Monsanto Technology, LLC.
™Trademark of The Dow Chemical Company or an affiliated company of Dow.
Delivers Diversification While
Driving Shareholder Value and Earnings Growth
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