Dow Chemical : Reports Second Quarter Results 2016

• Earnings Per Share Increases to $2.61, or $0.95 on an Operating Basis
• Delivers Record 2Q EBITDA ($4.2B) and Record 2Q Operating EBITDA ($2.5B)
• Highest 2Q EBITDA Margin (35%) and Highest 2Q Operating EBITDA Margin (21%) in a Decade
• Cash Flow from Operations in 2Q Grows to $2.2B - Up 58% Versus Year-Ago Period

Financial Statements

• Dow reported earnings per share of $2.61, or operating earnings per share of $0.95(1). This compares with earnings per share of $0.97 in the year-ago period, or operating earnings per share of $0.91. Certain Items in the quarter primarily reflected a $2.20 per share gain related to the Dow Corning ownership restructure and a $0.27 per share charge for costs associated with the restructuring plan announced in the quarter. The tax rate was impacted by Certain Items. Excluding these, the tax rate was within the Company's modeling guidance.
• Sales were $12.0 billion, down 7 percent versus the year-ago period primarily driven by lower hydrocarbons and raw material prices and the impact from the Dow Chlorine Products divestiture.
• Volume grew 2 percent on a reported basis and 4 percent excluding the impact of divestitures and acquisitions, reflecting broad-based, consumer-driven demand with gains across all geographic areas - Asia Pacific (up 7 percent); Europe, Middle East, Africa and India (EMEAI) (up 4 percent); Latin America (up 4 percent); and North America (up 3 percent). Regional highlights included Greater China (up 7 percent), Europe (up 6 percent) and the United States (up 4 percent).
• Operating EBITDA(2)increased to $2.5 billion, as gains in Infrastructure Solutions, Consumer Solutions and Performance Plastics more than offset lower equity earnings primarily driven by reduced earnings from the Kuwait joint ventures as well as Sadara start-up expenses.
• Operating EBITDA margin(3)improved year-over-year by 160 basis points to 21 percent - reflecting disciplined margin management, portfolio actions that improved mix toward value-add products and targeted growth markets, as well as other self-help measures. Gains were achieved in Infrastructure Solutions (up 710 basis points), Consumer Solutions (up 540 basis points) and Performance Plastics (up 230 basis points). Agricultural Sciences declined 70 basis points. Performance Materials & Chemicals (down 460 basis points) declined due primarily to lower equity earnings and the impact of prior period divestitures.
• Cash flow from operations grew to $2.2 billion in the quarter, up from $1.4 billion in the year-ago period, driven by ongoing disciplined actions to manage working capital as well as higher earnings.
• Dow's focused self-help measures delivered $90 million in productivity savings, bringing the first half contribution to nearly $180 million, tracking well above the 2016 target of $300 million.
• The Company completed the ownership restructure of Dow Corning Corporation's Silicones business on June 1. At full synergy run rate of $500 million - a $100 million increase from the initial target - the transaction is expected to add greater than $1 billion of EBITDA. Dow expects the transaction to be accretive to operating earnings per share, cash flow from operations and free cash flow(4)in the first full year after transaction close.

Andrew N. Liveris, Dow's chairman and chief executive officer, stated:

"Dow's relentless and disciplined execution once again delivered another quarter of operating earnings growth and margin expansion - marking our fifteenth quarter in a row - through a variety of challenging geopolitical and market conditions, and outpacing our peers.

"Our unique combination of world-class innovation, diversified integration and a narrower and deeper market focus enabled operating earnings growth in every business in our Consumer Solutions and Infrastructure Solutions segments, while the strength of our Plastics franchises was again on display. In areas where business conditions have been challenging, we continually implement proactive self-help measures. An example is in our Agricultural Sciences segment, where our actions have generated earnings year-to-date that have outperformed the industry downturn. Another example is our recent restructuring announcement, where we continue to intervene to accelerate earnings growth under these volatile market conditions.

"Equally important, our teams continued to achieve key milestones with both the Dow Corning and DowDuPont transactions. We closed the Dow Corning silicones transaction, increasing our synergy target to $500 million, while bringing in a new element for growth and a powerful technology platform that will further drive Dow's focus in attractive, targeted market sectors, as well as enhance the earnings power of the new Dow - the world's leading material science company.

"And we recently received overwhelming approval for the historic DowDuPont transaction from our shareholders, illustrating the market's recognition of this pivotal opportunity to deliver value to all stakeholders, as we drive the intended separation into three independent, leading science-based companies that will redefine their respective industries."

Agricultural Sciences

Consumer Solutions

Infrastructure Solutions

Performance Materials and Chemicals

Performance Plastics

Outlook

Commenting on the Company's outlook, Liveris said:

"The pace of economic growth remains uneven across the major geographies. Consumption remains a key growth driver, wherever growth exists. We continue to see healthy demand in North America, led by the strength of the consumer. Measured recovery in Europe continues, despite heightened geopolitical uncertainties. Latin America is showing early signs of improvement from a low base. And the rise of increasingly affluent consumers across Asia continues to validate Dow's strategic portfolio shift towards an enhanced focus on consumer-driven products and solutions.

"Despite the varied economic landscape, we continue to see favorable conditions and robust demand in our core consumer-led markets of packaging, automotive and construction throughout the world. We will increasingly capture value from these selected market sectors through our differentiated products underpinned by our geographic breadth, our integrated and diversified portfolio, our global scale and our deep material science technology platforms.

"Ongoing macroeconomic volatility demands a resolute focus. Our resilient business portfolio, strategic investments and self-help productivity actions, including our recently announced restructuring program, position Dow well to continue delivering through a variety of market conditions. Our teams remain squarely focused on our priorities of delivering our near-term financial commitments while also enabling our future with the Dow Corning and DowDuPont transactions. As we have shown these last many years, we will continue to maximize value for our customers and returns for our shareholders in both the short- and long-term."

Dow will host a live webcast of its second quarter earnings conference call with investors to discuss its results, business outlook and other matters today at 9:00 a.m. ET onwww.dow.com.