FINANCIAL HIGHLIGHTS

• GAAP earnings per share was $0.62; operating earnings per share (EPS) 1 was $0.68, compared to $0.75 in the year-ago period and $0.56 in the prior quarter. Operating EPS excludes significant items in the quarter related to restructuring and efficiency costs totaling $0.06 per share.

• Net sales were $10.9 billion, down 4% versus the year-ago period. Sales were up 1% sequentially, driven by gains in Performance Materials & Coatings and Packaging & Specialty Plastics.

• Volume increased 1% versus the year-ago period, with gains led by the U.S. & Canada. Sequentially, volume increased 1%, with gains in all regions except Asia Pacific, which was flat. Excluding Hydrocarbons & Energy, volume increased 4% year-over-year and 2% sequentially.

• Local price decreased 4% year-over-year. Sequentially, local price increased 1%, led by gains in Europe, the Middle East, Africa and India (EMEAI).

• Currency decreased net sales by 1% both year-over-year and sequentially.

• Equity earnings were $26 million, an $83 million improvement compared to the year-ago period, driven by gains at the Kuwait and Sadara joint ventures. Sequentially, equity earnings were up $9 million.

• GAAP net income was $458 million. Operating EBIT1 was $819 million, down $66 million year-over-year, primarily driven by lower integrated margins and higher planned maintenance activity, which were partly offset by improved equity earnings. Sequentially, Op. EBIT was up $145 million, reflecting gains in Performance Materials & Coatings and Packaging & Specialty Plastics.

• Cash provided by operating activities – continuing operations was $832 million, down $515 million year-overyear and up $372 million compared to the prior quarter due to stronger cash flow conversion1 and a release of working capital.

• Returns to shareholders totaled $691 million in the quarter, including $491 million in dividends and $200 million in share repurchases.

CEO QUOTE

Jim Fitterling, chair and chief executive officer, commented on the quarter:

“In the second quarter, Team Dow delivered sequential earnings improvement and our third consecutive quarter of year-over-year volume growth,” said Fitterling. “The pace of the global macroeconomic recovery has been slower than expected. We remain focused on working capital, reducing costs, and matching our operating rates to current demand. We’re innovating with our customers, which was evident in the quarter as we captured growing demand in packaging, electronics, and home & personal care. With a continued focus on cash generation, we delivered cash flow from operations of $832 million and free cash flow of $109 million. This enabled us to return $691 million to shareholders while progressing our higher-return growth investments.”

SEGMENT HIGHLIGHTS - Industrial Intermediates & Infrastructure

Industrial Intermediates & Infrastructure segment net sales were $3 billion, down 7% versus the year-ago period. Local price declined 7% year-over-year. Currency decreased net sales by 1%. Volume was up 1% year-over-year, driven by gains in Polyurethanes & Construction Chemicals. On a sequential basis, net sales decreased 2% as volume gains in Industrial Solutions were more than offset by lower volumes in Polyurethanes & Construction Chemicals, primarily in the U.S. & Canada, including the impact of a third-party supplier outage.

Equity losses for the segment were $31 million, an improvement of $52 million versus the year-ago period, driven by improved MEG margins at the Kuwait joint ventures. Equity losses in the prior quarter were $15 million. Sequentially, the earnings decline was primarily driven by lower prices and volumes at Sadara.

Operating EBIT was $7 million, an improvement of $42 million versus the year-ago period, driven by improved equity earnings, partly offset by lower integrated margins. On a sequential basis, operating EBIT decreased $80 million, driven by higher planned maintenance activity and equity losses, as well as lower volumes.

Polyurethanes & Construction Chemicals business reported a net sales decrease compared to the year-ago period, driven by local price declines, which were partly offset by volume gains in EMEAI, led by building & construction. Sequentially, net sales decreased as price gains in all geographic regions except Latin America were more than offset by lower volumes in the U.S. & Canada, including the impact of a third-party supplier outage.

Industrial Solutions business reported a decrease in net sales compared to the year-ago period, driven by local price declines and the impact of an outage at Louisiana Operations, which successfully restarted at the end of June. Sequentially, net sales increased, led by volume gains in Asia Pacific and local price gains in EMEAI and Latin America

Source: DOW