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Dow to record restructuring charge of up to USD600 million, close manufacturing assets

October 01/2020

MOSCOW (MRC) -- Dow says it will record a charge of between USD500-600 million in the third quarter for costs associated with the companys ongoing restructuring program, and has outlined more details of its previously announced plan to close manufacturing facilities in the US and Europe to enhance its long-term competitiveness as the worldwide economy recovers from the COVID-19 pandemic, said Chemweek.

Dow will rationalize its manufacturing asset footprint in its industrial intermediates and infrastructure business by shutting down certain amines and solvents facilities in the United States and Europe as well as select small-scale downstream polyurethanes manufacturing facilities, it says. In its performance materials and coatings segment it will shut down manufacturing assets, primarily small-scale coatings reactors, and also rationalize its upstream asset footprint in Europe and in the United States and Canada by adjusting the supply of siloxane and silicon metal to balance to regional needs, it says. The specific facilities to be closed have not been detailed at this stage.

The USD310-million sale to Watco Companies (Pittsburg, Kansas) of Dows rail infrastructure assets at six North American sites will also be closed today, three months earlier than planned, it adds. The sale was announced on 6 July. Earlier this month the company announced plans to divest certain marine and terminal operations and assets to Vopak Industrial Infrastructure Americas for cash proceeds of USD620 million, with that transaction expected to close by the end of the year.

Dows restructuring program, first detailed in its second quarter earnings announcement in July, will cut its global workforce costs by approximately 6%. Along with the rationalization of its manufacturing assets, Dow restates that these actions are expected to result in total annualized EBITDA savings of more than USD300 million by the end of 2021. The company said in July it intended to shed uncompetitive assets, lay off about 2,000 employees, and hold off on new capital projects.

The third-quarter charge of USD500-600 million will consist of severance and related benefit costs; costs associated with exit and disposal activities; and asset write-downs and write-offs, according to Dow. The restructuring program is in addition to the previously stated USD500 million of operating expense savings Dow says it will achieve by the end of 2020. The company adds that it remains on target to achieve its reduced capital expenditure target of USD1.25 billion for 2020, down from USD2.0 billion in 2019.

"Given the expected gradual and uneven global economic recovery from COVID-19, we announced in July that we are taking necessary actions to continue to optimize our asset footprint, reduce structural costs and enhance the competitiveness of our business over the long-term, says Jim Fitterling, Dow chairman and CEO. We continue to stay focused on delivering strong cashflow, strengthening our financial profile and maximizing our operational advantages, and we remain well positioned to capture significant growth as market conditions improve."

Dow says it will involve local stakeholders as defined in each country and in compliance with relevant information and consultation processes. Dow president and CFO Howard Ungerleider told CW in July that the layoffs would be spread fairly evenly across businesses and geographies, but that they would be tilted toward assets and sites serving markets most challenged by the COVID-19 shutdowns and the recovery outlook. The manufacturing shutdowns would result in a total charge in the range of USD700 million to USD1.3 billion, most of it paid in 20212022, Ungerleider estimated.

Dow reported a second-quarter net loss of USD217 million in July, down from income of USD90 million in the year-ago period, on sales down 24% year on year to USD8.35 billion.

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.
Author:Anna Larionova
Tags:petroleum products, crude oil, PP, PE, neftegaz, petrochemistry, Dow.
Category:General News
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