dow investor day 2009
DESCRIPTION
Dow Chemical Investor Day Presentation by CEO Andrew LiverisTRANSCRIPT
The Earnings Power of The New DowInvestor Day 2009
Andrew N. LiverisChairman & Chief Executive OfficerNovember 2009
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.
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
2009 Accomplishments
Structural and cost synergies are ahead
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
2009 Accomplishments
Structural and cost synergies are ahead
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
2009 Accomplishments
Structural and cost synergies are ahead
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
2009 Accomplishments
• 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
Dow Advanced Materials Portfolio
(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
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
Dow Advanced Materials Portfolio
Coatings and InfrastructureCoatings and Infrastructure
(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.
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
Earnings Power:Advanced Materials
Dow Advanced Materials Portfolio
(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.
Key Drivers of Profitability
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
Earnings Power:Advanced Materials
Health and Agricultural Sciences
Health and Agricultural SciencesHealth and Agricultural Sciences
(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.
EBITDA MARGIN(2): 18% NORMALIZED EBITDA MARGIN: 25%
Leading Industry Positions
#1 Green Chemistry/Insecticides
• Sentricon
• Spinosad
• Spinetoram
#1 Silage Corn and Omega-9 naturally stable oils
2008 Sales(1): $4.6B | Growth: GDP x 1.5
Earnings Power:Health and Agricultural
Sciences
(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.
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) 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.
EBITDA MARGIN(2): 11% NORMALIZED EBITDA MARGIN: ~15-18%
Leading Industry Positions
#1 Automotive glass bonding
#1 Specialty high performance sealants
#1 Wire & Cable compounds
#2 Polyurethane systems
2008 Sales(1): $8.2B | Growth: GDP x 1.3
Earnings Power:Performance
Systems
(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.
Key Drivers of Profitability
• 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
Earnings Power:Performance
Systems
Diesel Particulate Filter Demand Growth
Performance Systems
Performance Products
Performance ProductsPerformance Products
(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.
EBITDA MARGIN(2): 12% NORMALIZED EBITDA MARGIN: ~15%
Leading Industry Positions
#1 Polyols
#1 LER and Epichlorohydrin
#1 E- and P-Series Glycol Ethers
#1 Ethylene Amines and Ethylene Oxide Amines
#2 Performance Fluids
2008 Sales(1): $13.1B | Growth: GDP x 1.1
Earnings Power:Performance
Products
(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.
Key Drivers of Profitability
Earnings Power:Performance
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
Performance Products
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%
Health and Agricultural Sciences
Performance Products
Performance Systems
Coatings and Infrastructure
Electronic and Specialty Materials
Advanced Materials
Health and Agricultural
Sciences
Performance Products and Performance
Systems
Basics
Basic PlasticsBasic Plastics
(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.
EBITDA MARGIN(2): 14-20% NORMALIZED EBITDA MARGIN: ~15%
Leading Industry Positions
#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
2008 Sales(1): $14.2B | Growth: GDP x 1.3
Earnings Power:Basics
Basics
(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.
Key Drivers of Profitability
Earnings Power: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
Earnings Power:Basics
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) 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.
EBITDA MARGIN(2): 10% NORMALIZED EBITDA MARGIN: ~12-15%
Leading Industry Positions
#1 Chlor-Alkali
World leader in purified EO
Successful asset light partnership (MEGlobal)
2008 Sales(1): $4.3B | Growth: GDP
Earnings Power:Basics
Basics
(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.
Key Drivers of Profitability
Earnings Power: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) 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.
Leading Industry Positions
#1 Ethylene
2008 Sales(1): $9.0B
Earnings Power:Basics
10,000
7,500
5,000
2,500
0Dow Exxon-
MobilLyondellBasellSABIC SinopecShell
Top Global Ethylene Producers (2008)Capacity to produce, thousands of metric tons Source: CMAI
4,000
3,000
2,000
1,000
0Dow
incl. ROHLyondellBasellBASF INEOS Shell
Top Global Propylene Consumers inNon-Polypropylene Applications (2008)
Capacity to produce, thousands of metric tons Source: CMAI
Sinopec
Non-polypropylene applications:- are specialty in nature- are higher value-add- feature higher growth rates
Margin Expansion:The Horsepower of the New Portfolio
Portfolio Earnings Power PotentialHeritage Portfolio(1)
Sales
20% 40% 60% 80% 100%0%
EBIT
DA
as
a %
of S
ales
0%20% 40% 60% 80% 100%
Sales
0%
10%
20%
30%
Performance Plastics
Basic Plastics
Performance Chemicals
Ag Sciences
Average 12%
0%
BasicChem
40%
EBIT
DA
as
a %
of S
ales
10%
20%
40%
30%
Basic Chem
Performance Products Basic Plastics
Performance Systems
Coatings and Infrastructure Health and Ag Sciences
Electronic and Specialty Materials
Average 20%
(1) Represents 2008 data for heritage Dow
Advanced Materials
Health and Agricultural
Sciences
Performance Products and Performance
Systems
Basics
The Power of Geographies in Dow Advanced Materials
Health and Agricultural
Sciences
Performance Products and Performance
Systems
Basics
North America 38% of sales
Latin America 10% of sales
Europe36% of sales
IMEA3% of sales
Asia Pacific13% of sales
The Power of Geographies in Dow
The Dow Chemical CompanyEmerging Market Sales
4
8
12
16
20
2004* 2008
Sale
s ($
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
Health and Agricultural
Sciences
Performance Products and Performance
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)
Earnings Power:Growth Synergies/
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
Earnings Power:Growth Synergies/
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
Health and Agricultural Sciences
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
• Strengthened Financial Profile
• 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
2009 YTD = $3.4 B achieved
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
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
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
• Targeted Portfolio Management
• Scope and carve out process already underway
• Non-strategic• Stand alone
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
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
• Targeted Portfolio Management
• Scope and carve out process already underway
• 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
• Strengthened Financial Profile
• 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
Structural and cost synergies are ahead
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
Structural and cost synergies are ahead
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
Structural and cost synergies are ahead
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