Dow Announces Third Quarter 2021 Financial Results

Financial Summary

• Earnings per share on a GAAP basis were $2.
23; operating earnings per share were $2.
75, compared to $0.
50 a year earlier
.
Operating EPS excludes certain item costs for the quarter of $0.
52 per share, primarily related to the prepayment of debt
.

• Net sales of $14.
8 billion increased 53% year over year and 7% sequentially, with growth in all operating segments and regions
.

• Local prices rose 50% YoY and 5% MoM, with increases across all operating segments, business segments and regions, mainly due to tight supply and demand in key value chains
.

• Sales volume increased by 2% year-on-year, mainly driven by the two operating segments of Packaging and Specialty Plastics, Functional Materials and Coatings
.
Meanwhile, sales volumes rose 2% sequentially, reflecting the ongoing economic recovery and continued strong underlying demand in end markets, but these positives were partially offset by tight supply and global logistics constraints
.

• Equity income was $249 million, up $189 million year-over-year, primarily due to higher margins in Sadara and the Kuwait joint venture
.
Equity earnings decreased by $29 million sequentially as earnings growth in Sadara was more than offset by planned overhaul expenses for the Kuwait joint venture
.

• GAAP net income was $1.
7 billion
.
Operating earnings before interest and taxes (EBIT) were $2.
9 billion, up more than $2.
1 billion year over year
.
Growth in all operating segments and business segments reflected improved margins and equity earnings
.
At the same time, operating EBIT increased by 2% month-on-month, and the growth came from the two operating segments of industrial intermediates and infrastructure, functional materials and coatings
.

• Cash from operating activities (ie, continuing operations) was $2.
7 billion, up $958 million year-over-year and $698 million sequentially
.
Free cash flow was $2.
3 billion
.

• Total debt decreased by more than $1.
1 billion in the quarter
.
The company has taken aggressive debt management initiatives by repurchasing existing bonds, thereby eliminating large long-term debt maturities until 2026, and reducing annual interest expenses by more than $60 million
.

• Total return to shareholders for the quarter was $918 million, including dividend returns of $518 million and share repurchases of $400 million
.

CEO Commentary

Jim Fitterling, chairman and CEO of Dow, had this to say about the quarter's results:

“The Dow team delivered another excellent quarter with sequential and year-over-year sales and profit growth
.
We took a positive storm despite the U.
S.
Gulf Coast hurricane leading to higher energy costs and industry-wide value chain disruptions Precautionary measures have ensured the safety of teams and operations and a rapid recovery
.
In addition, we continue to capitalize on strong demand and price trends in end markets, relying on flexibility in our global presence and raw materials, as well as structural cost advantages
.
, our operating activities generated higher cash flow, with sales growth across all operating segments and regions
.
"

“Additionally, earlier this month, at Dow’s 2021 Investor Day, we announced a strategic plan to make the entire value of the Chain's actual EBITDA increased by more than $3 billion
.
Our strategy enables us to capture the growing demand for circular economy products, low to zero carbon emissions products; advance our productivity actions; and continue to meet our financial priorities
.
"

Outlook

Fitterling said: “We see end-market demand continuing to be strong and expected to extend into 2022, while near-term logistics constraints remain and inventory levels remain low across the value chain
.
Looking ahead, as we continue to reduce carbon footprint, and achieve our 2030 and 2050 carbon reduction goals, Dow is well positioned to increase earnings, improve cash flow, and improve returns
.
We will continue to strengthen our competitive advantage with high-margin, sustainable downstream Solutions drive growth and increase value-added investments, replacing end-of-life assets with production layouts that are carbon efficient and have a higher return on investment
.
As we continue to adopt a balanced approach to capital allocation to increase earnings while maintaining a high degree of operational and financial rigor, Dow expects to create significant long-term value for shareholders
.
"