MOSCOW (MRC) -- Dow reports a second-quarter net loss of USD217 million, down from income of USD90 million in the year-ago period, reported Chemweek.
Sales totaled USD8.354 billion, down 24% year-over-year (YOY) from USD11.014 billion. COVID-19 lockdowns cut into demand and low energy values weighed on prices, says the company. Citing the prospect of a gradual and irregular recovery, Dow says it will soon begin a restructuring program aimed at USD300 million in annualized EBITDA benefit by the end of 2021. Measures include a 6% reduction in the company’s global workforce and plans to exit uncompetitive assets.
An adjusted loss of 26 cents/share beat the average analyst estimate of a 30 cent/share loss as compiled by Refinitiv (New York, New York).
“We captured solid demand growth in packaging, health and hygiene, home care and pharma end-markets, which partially offset weakness in consumer durable goods,” says CEO Jim Fitterling. “Extended economic lockdowns shifted the inflection point for demand recovery in key markets and geographies into June, where we began to see gradual improvements across most industries. The growing recovery in China and early signs of improvement in Western Europe are positive indicators for the United States and Latin America.”
Fitterling says the company prioritized cash and maintaining financial strength. “We electively lowered our operating rates to meet demand, reduced inventory, and focused on cash to deliver on our priority. Importantly, we generated USD1.6 billion in cash flow from operations, up more than USD600 million year over year, and free cash flow of USD1.3 billion, up more than $800 million year over year.”
Dow has improved cash flow conversion every quarter since the spin out from DowDuPont, delivering 110% conversion on a trailing 12-month basis, notes CFO Howard Ungerleider. “Cash flow conversion was about 45% one year ago, and when we spun out, we talked about getting the best in class, which was 90%,” he says.
Dow continues to expect a “gradual and uneven recovery,” says Fitterling. “For that reason, we will upsize our 2020 operating expense reduction target from USD350 million to USD500 million through additional structural cost interventions. We will also initiate a restructuring program during the quarter, targeting more than USD300 million in annualized EBITDA benefit by the end of 2021. This program includes a 6% reduction in Dow’s global workforce as well as actions to exit uncompetitive assets. While these are difficult decisions, they are necessary to maintain competitiveness while the economic recovery gains traction.”
The packaging & specialty plastics segment recorded net sales of USD4 billion, down 23% YOY. Overall volume was flat. Strong gains in flexible food and specialty packaging, industrial and consumer packaging, and health and hygiene applications were offset by declines in durables, particularly automotive, infrastructure, and construction. Demand for cracker by-products also declined. Regionally, gains in Asia-Pacific and the Europe/Middle East/Africa/India were offset by declines in the US and Canada. Latin America was flat. Local price declined 22% owing to lower global energy prices, and currency decreased net sales by 1%. Operating EBIT was USD318 million, down YOY from USD768 million as targeted expense reductions, increased volume, and improved incremental integrated margin in packaging were more than offset by lower demand and integrated margins in durables.
The industrial intermediates & infrastructure segment recorded net sales of USD2.4 billion, down 28% YOY. Volume declined 18% on reduced demand into durables, primarily in polyurethanes & construction chemicals. Local price decreased 9%, and currency decreased net sales by 1%. Volume growth in Asia Pacific was more than offset by declines in other regions. Operating EBIT was a USD220 million loss, down from earnings of USD154 million in the year-ago period owing to much weaker demand, margin compression, and increased equity losses.
Performance materials & coatings net sales totaled USD1.9 billion, down 21% YOY. Volume declined 14% as growth in home care products and DIY architectural coatings in the US and Canada was more than offset by a decline in siloxanes reflecting weakness in automotive, construction, and personal care end-markets. Local price decreased 6%, and currency decreased net sales by 1%. Operating EBIT was USD27 million, down from USD214 million in the year-ago period, mainly on margin compression in siloxanes and lower demand. Acrylic monomers pricing remained under pressure globally on weaker supply/demand fundamentals.
As MRC informed before, as part of the company’s current slate of low capital intensity, high-return incremental growth investments, Dow announced in August 2019 that it will retrofit proprietary fluidized catalytic dehydrogenation (FCDh) technology into one of its mixed-feed crackers in Plaquemine, Louisiana, to produce on-purpose propylene.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
The Dow Chemical Company is an American multinational chemical corporation. Dow is a large producer of plastics, including polystyrene, polyurethane, polyethylene, polypropylene, and synthetic rubber.
MRC