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DOW INC. (DOW)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 net sales were $10.41B, down 2% YoY and 4% QoQ; GAAP EPS was $(0.08) with operating EPS $0.00 as higher-than-expected non-cash tax adjustments ($0.27) offset operating performance .
  • Segments: P&SP EBIT fell to $447M on lower polyethylene/functional polymer pricing; II&I EBIT improved to $84M on higher operating rates and supply availability; PM&C EBIT near breakeven at $(9)M with 5% volume growth amid seasonal demand decline .
  • Management announced additional actions: $1B run-rate cost reductions by 2026 (including ~1,500 roles), 2025 CapEx cut by $300–$500M (to ~$3.0–$3.2B), and a minority infrastructure stake sale expected to deliver $2.4–$3.0B cash proceeds in 2025—key near-term cash/earnings catalysts .
  • Q1 2025 outlook: “earnings” ~$1.0B (down ~$200M QoQ) on higher feedstock costs and planned maintenance; P&SP integrated margins lower sequentially; PM&C seasonal tailwind ~$75M; maintenance headwinds ~$50M (P&SP) and ~$25M (monomers) .
  • Dividend maintained at $0.70/share, reinforcing capital allocation priorities despite cyclical trough in cash generation .

What Went Well and What Went Wrong

  • What Went Well

    • II&I operating performance improved: EBIT rose to $84M (vs. $15M LY and $(53)M in Q3), supported by higher operating rates and supply availability (ramp of Louisiana and EO projects; deicing seasonal lift) .
    • PM&C volumes +5% YoY with downstream silicones and architectural coatings strength; EBIT improved $52M YoY despite seasonal QoQ decline .
    • Strategic portfolio/cash levers: definitive Macquarie infrastructure partnership with expected $2.4–$3.0B proceeds by mid-2025; additional $1B cost actions and CapEx recalibration to bolster margins/cash flow in a prolonged downturn .
    • Management quote: “Team Dow delivered our fifth consecutive quarter of year-over-year volume growth… while providing near-term financial flexibility” .

  • What Went Wrong

    • P&SP pricing/margins compressed: EBIT fell to $447M (vs. $664M LY and $618M in Q3) on lower polyethylene and functional polymer prices; segment EBIT margin 8.4% (down 340 bps YoY, 280 bps QoQ) .
    • Non-cash tax items amplified by Argentina inflation drove GAAP EPS to $(0.08) and operating EPS to $0.00; equity losses widened to $(51)M (Thai JV margins; Sadara price declines) .
    • Macro headwinds: global manufacturing PMI in contraction; Europe remains structurally weak; higher feedstocks/energy starting Q1 2025 likely to squeeze integrated margins near-term .
    • Analyst concerns: oversupplied commodity polyethylene and European asset economics; mgmt indicated EU asset idling/strategic review and reliance on cost-advantaged capacity (Alberta “Path to Zero”) .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Net Sales ($USD Billions)$10.915 $10.879 $10.405
GAAP EPS ($)$0.62 $0.30 $(0.08)
Operating EPS ($)$0.68 $0.47 $0.00
Operating EBIT ($USD Millions)$819 $641 $454
Operating EBITDA ($USD Millions)$1,501 $1,382 $1,205
Operating EBIT Margin (%)7.5% 5.9% 4.4%
Cash from Operations ($USD Millions)$832 $800 $811

Segment breakdown (Net Sales and Operating EBIT):

SegmentQ2 2024 Net Sales ($MM)Q2 2024 Op EBIT ($MM)Q3 2024 Net Sales ($MM)Q3 2024 Op EBIT ($MM)Q4 2024 Net Sales ($MM)Q4 2024 Op EBIT ($MM)
Packaging & Specialty Plastics$5,515 $703 $5,516 $618 $5,315 $447
Industrial Intermediates & Infrastructure$2,951 $7 $2,962 $(53) $2,948 $84
Performance Materials & Coatings$2,243 $146 $2,214 $140 $1,965 $(9)

Key KPIs:

KPIQ2 2024Q3 2024Q4 2024
Equity Earnings (Losses) – Total ($MM)$26 $2 $(51)
Free Cash Flow ($MM)$109 $64 $44
Cash Flow Conversion (%)55.4% 57.9% 67.3%

Narrative of the quarter:

  • Q4 YoY: net sales $(216)MM; Op EBIT $(105)MM; Op EBITDA $(11)MM; operating margin down 90 bps .
  • Q4 QoQ: net sales $(474)MM; Op EBIT $(187)MM; Op EBITDA $(177)MM; margin down 150 bps .
  • Volume +1% YoY; local price −3% YoY and QoQ; equity losses $(51)MM (Thai JV margins; Sadara decline) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
“Earnings” (unspecified measure)Q1 2025N/A~$1.0B; down ~$200M QoQNew; down sequentially
P&SP Integrated MarginsQ1 2025N/ALower sequentially on feedstocks outpacing price increasesNew; lower
P&SP Planned MaintenanceQ1 2025N/A~$50M headwind (West Gulf Coast)New
PM&C Seasonal DemandQ1 2025N/A~$75M tailwindNew
Monomers MaintenanceQ1 2025N/A~$25M sequential headwindNew
Operational Tax RateFY 2025N/A25%–29%New range
CapExFY 2025~$3.5B (prior target)~$3.0–$3.2B (reduced by $300–$500M)Lowered
Cost Reduction ProgramRun-rate by 2026N/A$1.0B run-rate savings; ~1,500 role reductions; 75% third-party costsNew
Infrastructure Proceeds2025N/A$2.4B initial; up to $3.0B if option exercisedNew
EU Cracker Turnaround2025PlannedPostponed; asset idled starting Q2 2025Revised; reduces turnaround spend
DividendOngoing$0.70/share$0.70/shareMaintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
Polyethylene pricing/marginsQ3: Higher integrated margins offset Texas cracker outage; P&SP EBIT $618M . Q2: P&SP EBIT $703M; lower pricing; equity gains .P&SP prices fell; market dropped $0.03/lb in Oct; $0.07 Jan and $0.05 Feb increases targeted; margins unsustainably low; feedstocks rising .Near-term squeeze; pushing price realization.
European asset strategyQ3: Announced strategic review of select European assets (polyurethanes) .Idling a European cracker in Q2; strategic review update by mid-2025 .Tightening footprint; cost discipline.
Supply availability/operationsQ2: Louisiana restart; EO ramp; II&I mixed . Q3: Texas cracker outage; ramp back up .Texas ramped; glycol unit back; maintenance impacts in Q1 .Improving supply; maintenance timing.
Silicones/PM&C dynamicsQ2/Q3: Downstream growth; price pressure .China upstream oversupply improving slowly; downstream silicones growing above GDP .Gradual normalization; downstream strength.
Macro/PMI, tariffsQ3: Europe soft; macro recovery slower .PMI contraction; monitoring tariffs (Canada); balanced cross-border flows .Macro mixed; policy risk monitored.
Cost actions & CapExQ3: Counter-cyclical growth investments .$1B cost run-rate by 2026; CapEx cut $300–$500M; maintain dividend .Aggressive cost/capex discipline.
Litigation/NOVAQ3: Legal items noted historically .Progress on NOVA judgment; more to come; net interest ~$600M .Ongoing resolution.
Path to Zero (Alberta)Q2/Q3: Construction initiated; 2030 ~$1B EBITDA .Reaffirmed timeline; differentiation (zero Scope 1&2) .Strategic, long-term earnings lever.

Management Commentary

  • “Despite persistently weak macroeconomic conditions, Team Dow delivered our fifth consecutive quarter of year-over-year volume growth… we signed a definitive agreement for the sale of a minority stake… for expected cash proceeds of up to approximately $3 billion… announcing additional actions to deliver $1 billion of targeted cost reductions.” — Jim Fitterling (CEO) .
  • “We will implement cost reductions of $1 billion… primarily focused on third-party contract labor and purchased services… eliminate approximately 1,500 Dow roles… recalibrate our 2025 CapEx by $300–$500 million.” — Jim Fitterling .
  • “We expect first quarter earnings to be approximately $1 billion, down $200 million quarter-over-quarter… higher feedstock costs due to the severe cold snap… higher planned maintenance activity.” — Jeff Tate (CFO) .
  • “Downstream silicones continue to grow above GDP… upstream oversupply (primarily China) is improving slowly.” — Karen S. Carter (COO) .

Q&A Highlights

  • Polyethylene pricing vs. feedstocks: Management is resolute on contract increases ($0.07 in Jan, $0.05 in Feb) even as ethane/natural gas costs rose; near-term margin compression expected until price realization catches up .
  • European footprint: Idling one cracker in Europe in Q2 to reduce turnaround costs and balance ethylene/propylene chains; broader strategic review by mid-2025 with actions focused on structurally high-cost assets .
  • Cash flow/working capital/dividend: Intentional inventory build ahead of heavy Q1 turnarounds; maintaining industry-leading dividend given shareholder base and absence of substantive maturities until 2027 .
  • Cost savings cadence: ~60% run-rate by Q4’25; full run-rate by mid-2026; emphasis on third-party cost reductions and productivity improvements across regions/functions .
  • Tariffs (Canada): Engagement with U.S. administration; balanced flows across border; aim to avoid unintended consequences for energy/petrochem value chains .

Estimates Context

  • Attempts to retrieve S&P Global consensus for Q4 2024 and Q3 2024 EPS/revenue/EBITDA failed due to a daily request limit exceeded. As a result, Wall Street consensus data (S&P Global) was unavailable for beat/miss comparison at this time [SPGI request error].
  • Values retrieved from S&P Global were unavailable due to system limits; no estimate comparison can be provided at this time.

Key Takeaways for Investors

  • Near-term margin pressure in P&SP as feedstocks outpace price realization; watch execution on announced contract increases and integrated margin trajectory through Q1–Q2 .
  • Structural actions are material: $1B cost run-rate and $300–$500M CapEx cut should underpin 2025 EBITDA despite a sluggish macro, with incremental cash from the Macquarie infrastructure partnership ($2.4–$3.0B) .
  • II&I inflecting: Improving supply availability and seasonal demand support EBIT recovery; monitor EO asset turnarounds and catalyst sales cadence .
  • PM&C downstream demand is solid; upstream siloxanes oversupply easing slowly—mix shift toward downstream specialties remains a lever for margin resilience .
  • European footprint rationalization remains a catalyst; expect mid-2025 update and potential capacity adjustments to improve consolidated returns .
  • Dividend intact at $0.70/share; capital structure/maturity profile supports payout; CapEx recalibration maintains financial flexibility during cyclical trough .
  • Watch Q1 maintenance timing and weather-related feedstock impacts; management guided ~$1.0B “earnings” with specific segment headwinds/tailwinds quantified .

Appendix: Additional Data Points

  • Q4 Selected Financials (YoY/QoQ deltas provided by company): Net Sales $(216)MM YoY, $(474)MM QoQ; Op EBIT $(105)MM YoY, $(187)MM QoQ; Op EBITDA $(11)MM YoY, $(177)MM QoQ; Operating margin −90 bps YoY, −150 bps QoQ .
  • Equity losses drivers: Thai JV margins; Sadara price declines; total equity losses $(51)MM in Q4 .
  • Free Cash Flow reconciliation: Q4 FCF $44MM; FY 2024 FCF $(37)MM; Cash from ops TTM conversion 53% .

Sources: Q4 2024 Form 8-K and Exhibit 99.1 press release ; Q4 press release ; Q3 press release ; Q2 8-K press release ; Q4 earnings call transcript ; Dividend press release .