10-QPeriod: Q2 FY2019

DOW INC. Quarterly Report for Q2 Ended Jun 30, 2019

Filed July 25, 2019For Securities:DOW

Summary

Dow Inc. reported a significant decline in net sales for the second quarter of 2019 compared to the prior year, with a 14% decrease to $11.0 billion. This was primarily driven by lower prices across all segments and regions, alongside a 4% volume decline. The company's financial results were heavily influenced by its separation from DowDuPont on April 1, 2019, which resulted in the presentation of its agricultural and specialty products businesses as discontinued operations. Integration and separation costs increased year-over-year, impacting profitability. Despite the top-line decline, Dow Inc. maintained a strong liquidity position with significant cash and available credit facilities. The company also continued its share repurchase program, demonstrating a commitment to returning capital to shareholders. Management anticipates a continued slowdown in global growth but plans to focus on cost discipline, operational efficiency, and high-return growth projects to drive future earnings.

Financial Highlights

51 data points
Beta

Revenue

$11.01B

14.5% Gross Margin

Net Income

$75.00M

0.7% Net Margin

EPS (Diluted)

$0.10

Total Assets

$64.89B

Cash & Equivalents

$2.48B

Free Cash Flow

$875.00M

Financial Statements
Beta
Revenue$11.01B
Cost of Revenue$9.42B
Gross Profit$1.59B
SG&A Expenses$422.00M
Operating Income$90.00M
Interest Expense$237.00M
Net Income$75.00M
EPS (Basic)$0.10
EPS (Diluted)$0.10
Shares Outstanding (Basic)742.80M
Shares Outstanding (Diluted)747.90M

Key Highlights

  • 1Net sales decreased by 14% to $11.0 billion in Q2 2019 compared to Q2 2018, driven by lower prices and volumes across all segments and geographies.
  • 2The company completed its separation from DowDuPont on April 1, 2019, with the results of its agricultural and specialty products businesses presented as discontinued operations.
  • 3Integration and separation costs increased to $348 million (Dow Inc.) / $324 million (TDCC) in Q2 2019 from $262 million in Q2 2018.
  • 4Net income available for common stockholders declined significantly to $75 million for Dow Inc. (or $0.10 per share) in Q2 2019, compared to $1,333 million (or $1.78 per share) in Q2 2018.
  • 5Dow Inc. announced a dividend of $0.70 per share, paid in June 2019, and continued its share repurchase program, repurchasing $305 million in Q2 2019.
  • 6The company revised its full-year capital expenditure forecast downward to $2.0 billion, reflecting a focus on capital discipline amidst slower global growth.
  • 7Equity in earnings of nonconsolidated affiliates turned into a loss of $15 million in Q2 2019 from earnings of $193 million in Q2 2018, largely due to increased losses from Sadara.

Frequently Asked Questions

The primary driver for the 14% decrease in net sales to $11.0 billion was a combination of lower prices across all segments and geographies, coupled with a 4% decline in sales volume. This reflects a softening demand environment and a decrease in feedstock and raw material costs that passed through to pricing.

The separation, completed on April 1, 2019, has led to Dow Inc. becoming an independent, publicly traded company. The financial statements reflect this by presenting the agricultural and specialty products businesses as discontinued operations. Additionally, integration and separation costs related to the separation have increased.

Dow Inc. anticipates a continued slowdown in global growth, with cautious buying patterns due to trade and geopolitical uncertainties. In response, the company plans to maintain cost and operating discipline, reduce planned capital expenditures for the year, and focus on disciplined margin management. Long-term growth is expected to be driven by its portfolio, leading business positions, and high-return growth investments.

Dow Inc. has a share repurchase program authorizing up to $3.0 billion, of which $305 million was repurchased in Q2 2019, with a full-year target of approximately $500 million. The company also declared a dividend of $0.70 per share, paid in June 2019. Despite reduced capital expenditure plans, high-return growth projects remain a priority.