DOW INC. (DOW)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 print was defensive: revenue held flat sequentially with a modest beat vs consensus, while margins compressed on higher energy/feedstocks; GAAP EPS was a loss from significant items, but operating EPS was slightly positive .
• Management launched an expanded action plan: delay Path2Zero construction, broaden European asset review, and quantify ~$6B near-term cash support (Macquarie infrastructure proceeds, NOVA litigation, cost actions, CapEx cuts), a key stock narrative catalyst .
• Guidance signals near-term choppiness but stabilization: Q2 EBITDA expected roughly in line with Q1, with P&SP down ~$50M, II&I flat, PMC up ~$75M; cost actions add ~$50M sequential benefit .
• Dividend reaffirmed (70¢/share in Feb) and supported by $2.4B proceeds closing from Diamond Infrastructure Solutions; Macquarie option could take total to ~$3B in 2025 .
• Key downside drivers: European demand/margins, tariff uncertainty impacting global trade flows; upside drivers: downstream silicones growth, Industrial Solutions start-ups, advantaged North American feedstocks and USMCA compliance .

What Went Well and What Went Wrong

• What Went Well

  • “Sixth consecutive quarter of year-over-year volume growth”; Q1 volumes +2% YoY despite macro softness .
  • Downstream silicones delivered another quarter of growth; PMC operating EBIT improved sequentially on seasonal demand and lower fixed costs .
  • Strategic cash levers executed or imminent: $2.4B Diamond Infrastructure Solutions stake sale closed May 1; NOVA judgment >$1B expected; CapEx cut by $1B to $2.5B for 2025 .

• What Went Wrong

  • Margin compression from higher energy/feedstocks and lower prices; Op EBIT fell $444MM YoY, and Operating EBITDA declined $450MM YoY .
  • II&I equity losses widened (Sadara, Kuwait JV turnaround) and segment swung to Op EBIT loss (-$128MM) .
  • GAAP EPS -$0.44 driven by significant items ($0.46/share), including restructuring and indemnification/transaction costs; cash from ops dropped to $104MM with seasonal working capital build .

Financial Results

Segment breakdown (Q1 2025):

KPIs (Q1 2025):

Versus estimates (S&P Global):

Values with asterisks retrieved from S&P Global. Note: Consensus “Primary EPS” and “EBITDA” definitions may differ from Dow’s Operating EPS/Operating EBITDA.

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We remain focused on disciplined execution and increased actions to improve profitability and support cash flow… Today’s announcements build on Dow’s cost actions… strengthen our financial flexibility and support a balanced capital allocation approach.” — Jim Fitterling, CEO .
• “We now expect our 2025 capital expenditures to be $2.5 billion compared to the original plan of $3.5 billion.” — Jim Fitterling on Path2Zero delay .
• “Greater than 95% of our North American volume is USMCA compliant, which is an advantage for Dow.” — Karen Carter, COO .
• “We expect second quarter EBITDA to be roughly in line with first quarter levels… maintenance/start-up costs offset by seasonal volume and margin improvements.” — Jeff Tate, CFO .

Q&A Highlights

• Alberta Path2Zero delay: decision reflects lower-for-longer outlook and tariff uncertainty; revisiting timing by year-end; KPIs include tightening S&D and clarity on supply chains .
• Tariffs impact: reconfiguring supply chain to export more via Canada and leveraging integrated PE on four continents; concern about indirect demand impacts .
• II&I outlook: polyurethanes remain challenged (durables/auto/EU), but MDI margins may benefit from local production; Industrial Solutions sees stable energy/pharma; ~50% of new alkoxylation capacity already contracted .
• Dividend security: $6B near-term cash support (majority in 2025) helps support dividend; monitoring macro/tariff clarity .
• Europe capacity rationalization: industry heading toward teens-to-20% ethylene capacity destruction; Dow balancing idle vs shutdown decisions to preserve optionality .

Estimates Context

• Q1 revenue modestly beat consensus (actual $10.431B vs $10.261B*), driven by volume gains across segments and licensing/merchant hydrocarbon sales despite price pressure .
• Operating EPS of $0.02 beat consensus “Primary EPS” (-$0.01*); GAAP EPS was -$0.44 due to $0.46/share significant items (restructuring, indemnification, debt extinguishment) .
• Consensus EBITDA definitions may differ; Dow’s Operating EBITDA was $0.944B vs consensus $0.911B* .
  Values with asterisks retrieved from S&P Global.

Key Takeaways for Investors

• Cost/cash playbook is the near-term thesis: $6B of cash support (Macquarie $2.4B closed, NOVA >$1B, CapEx -$1B, cost savings $1B by 2026) underpins dividend and balance-sheet flexibility; pivotal in an extended downcycle .
• Expect Q2 grind: EBITDA roughly flat vs Q1 with P&SP maintenance/integrated margin pressure offset by PMC seasonality and II&I stability; ~$50MM sequential cost-savings benefit .
• Watch Europe actions and tariff outcomes: expanded asset review and potential idles/shutdowns are key to improving consolidated margins; tariff clarity is a stock catalyst for export flows and pricing .
• Downstream silicones and Industrial Solutions are bright spots: ongoing volume growth and Q2 start-ups (alkoxylation) support H2 earnings traction .
• P&SP sensitivity: feedstock/electricity cost spikes compress margins; management “resolute” on price increases to restore integrated margins; near-term volatility likely until costs normalize .
• Non-GAAP adjustments matter: significant items of $0.46/share materially impacted GAAP EPS; operate off Operating EPS/EBITDA for run-rate performance and trend .
• Tactical trades: position for cash events (NOVA proceeds timing), watch maintenance cadence, and tariff headlines; medium term, the reset in CapEx and portfolio actions should improve free cash flow conversion .