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Bank of America 38th Annual Investment Conference
 

Bank of America 38th Annual Investment Conference

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    Bank of America 38th Annual Investment Conference Bank of America 38th Annual Investment Conference Presentation Transcript

    • Dow’s Transformation In Action Geoffery E. Merszei Executive Vice President & Chief Financial Officer September 17, 2008 Bank of America 38th Annual Investment Conference
    • Agenda ►Who Is Dow ►Financial Performance ►Transformational Strategy ►Strategy in Action – Formation of K-Dow Petrochemicals – Acquisition of Rohm and Haas ►Summary 2 Bank of America 38th Annual Investment Conference
    • Diversified Portfolio 2007 Sales by Segment 2007 Sales by Geography India, Middle Unallocated & East and Hydrocarbons Other 1% Latin Africa 2% & Energy 13% America Performance 11% Plastics North Basic 28% America Chemicals Asia 38% 11% Pacific 12% $54 B $54 B Basic Plastics Europe Performance 24% 37% Chemicals Agricultural 16% Sciences 7% 3 Bank of America 38th Annual Investment Conference
    • A Strong Basics Franchise ► 2007 Sales* - $29B LyondellBasell ► 8,800 Dow people SABIC Sinopec ► 6,000 global customers Dow Chemical ► 35 Dow sites; 6 JV sites Royal Dutch Shell Exxon Mobil ► Renowned product brands INEOS Group Formosa Plastics Grp ► Operational/safety excellence Total SA ► Technology leadership BASF Reliance Industries Chevron Phillips PetroChina OAO Gazprom Source: Public Company Reports 4 Bank of America 38th Annual Investment Conference *Includes Dow’s proportionate share of joint venture revenues. 4
    • Market-driven Performance Businesses ► 2007 Sales – $27B BASF ► 22,800 employees Dow Chemical ► 12,500 global customers DuPont ► 158 countries Akzo Nobel Hexion (inc. Huntsman) ► 41 R&D sites Evonik Industries AG ► 94 Manufacturing sites Bayer PPG Royal DSM NV Rohm & Haas Eastman Lubrizol Celanese Cytec Source: Public Company Reports 5 Bank of America 38th Annual Investment Conference 5
    • Agenda ►Who Is Dow ►Financial Performance ►Transformational Strategy ►Strategy in Action – Formation of K-Dow Petrochemicals – Acquisition of Rohm and Haas ►Summary 6 Bank of America 38th Annual Investment Conference
    • First Half 2008 Financial Performance 6 months ended 6 months ended Change June 30, 2008 June 30, 2007 Sales $31,204 $25,697 21% Price 18% Volume 3% Purchased feedstock & energy cost 42% Equity earnings $525 $532 (1%) EBIT* $2,535 $2,876 (12%) Earnings per share $1.80 $2.07 (13%) Dollars in millions (except per share amounts) *See www.dow.com for Reconciliation of Non-GAAP Financial Measure 7 Bank of America 38th Annual Investment Conference
    • Financial Goals Financial Metrics Earnings per Share* Return on Capital* Return on Equity* 1997 1998 1999 2000 2002 2003 2004 2005 2006 2007 2001 2007 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007: 14% 2007: $3.76 2007: 19% 10-year average: 12% 10-year average growth: 4% 10-year average: 18% 1995 – 2005 average: 12% 1995 – 2005 growth: 5% 1995 – 2005 average: 19% * Non-GAAP data; excludes certain items; excludes Union Carbide prior to 2001. See www.dow.com for more information. 8 Bank of America 38th Annual Investment Conference
    • Agenda ►Who Is Dow ►Financial Performance ►Transformational Strategy ►Strategy in Action – Formation of K-Dow Petrochemicals – Acquisition of Rohm and Haas ►Summary 9 Bank of America 38th Annual Investment Conference
    • Dow’s Transformational Strategy JOINT JOINT VENTURES VENTURES Products MARKET Solutions BASICS PERFORMANCE FEEDSTOCKS FEEDSTOCKS FACING JOINT Systems JOINT VENTURES VENTURES Innovation, Technology and R&D • Grow Performance and Specialties • Strengthen competitiveness of Basics 10 Bank of America 38th Annual Investment Conference
    • Building the Dow of Tomorrow Themes Transportation & Consumerism Energy Health & Nutrition Infrastructure Alternative Energy Apparel & Agriculture Construction & Feedstocks Furnishings Opportunity Electronics & Energy Production Functional Foods Transportation Areas Communications & Efficiency Home & Personal Healthcare Energy Storage Water Care Optical Materials Insulation Building Materials Biotechnology Applied Energy Printed Circuit Advanced Materials Key Dow Science Efficiency Board Materials Chemistry Capabilities Filter/Membrane Integrated Rapid Formulation Elements Development Photovoltaics Polymer High Throughput Material Science Feedstock & Energy Performance 11 Formulations Management Modeling
    • Shareholder Remuneration $1,600 – 71 Million Shares Repurchased $1,400 Share Repurchase Amount ($Millions) – $3.0 Billion Spent $1,200 – Largest Program $1,000 In A Decade $800 $600 $400 $200 $0 2005 2006 2007 2Q08 YTD 12 Bank of America 38th Annual Investment Conference
    • Consistently Rewarding Shareholders • A 96-Year History of Consistent Dividends – Maintained or Increased Each Year – Increased 25% Since 2006 Quarterly Dividends Paid Per Share* 2008** 1912 1928 1938 1948 1958 1968 1978 1988 1998 *ADJUSTED FOR STOCK SPLITS AND STOCK DIVIDENDS **2008 DIVIDEND ANNUALIZED BASED ON Q2 YTD PAYOUT 13 Bank of America 38th Annual Investment Conference
    • Agenda ►Who Is Dow ►Financial Performance ►Transformational Strategy ►Strategy in Action – Formation of K-Dow Petrochemicals – Acquisition of Rohm and Haas ►Summary 14 Bank of America 38th Annual Investment Conference
    • K-Dow Petrochemicals ► Creates a world-class petrochemicals giant ► Introduces a new global player with enhanced capabilities to grow – especially in China, India and the Middle East ► Opens the door to low-cost feedstocks for future growth ► Preserves vertical integration for Performance businesses ► Estimated pre-tax cash to Dow – $9.5B TRANSACTION VALUE - $19.1 billion (on 100% basis) 15 Bank of America 38th Annual Investment Conference
    • Creating A World-Class Petrochemicals Company ► Polyethylene, Polypropylene, Polycarbonate, Ethyleneamines and Ethanolamines ► All related technologies ► Fully dedicated hydrocarbon assets • Fort Saskatchewan, Canada (cracker) • Bahia Blanca, Argentina (cracker) • Tarragona, Spain (cracker and octene manufacturing facility) ► Ethylene supply agreements from Dow’s other crackers ► Number 1 position in Polyethylene 16 Bank of America 38th Annual Investment Conference
    • Exceptional Returns From JVs Equity Earnings ($ millions) Cash Distributions ($ millions) Return on Investment* $1,122 $964 $959 $837 $923 40% 39% 39% 38% $622 $536 $430 19% $322 $205 2003 2004 2005 2006 2007 2003 2006 2007 2004 2006 2007 2005 2003 2005 2004 *Equity earnings/average investment in nonconsolidated affiliates 17 Bank of America 38th Annual Investment Conference
    • Agenda ►Who Is Dow ►Financial Performance ►Transformational Strategy ►Strategy in Action – Formation of K-Dow Petrochemicals – Acquisition of Rohm and Haas ►Summary 18 Bank of America 38th Annual Investment Conference
    • About Rohm and Haas ► Premier advanced materials and specialty chemicals company ► 2007 sales of $8.9 billion ► Leading positions in electronics and coatings ► Headquartered in Philadelphia, located in 27 countries ► 15,700 employees ► Established in 1909 19 Bank of America 38th Annual Investment Conference
    • Strategic Rationale ► Accelerates growth through strong operational and strategic fit ► Creates new leadership positions in key industry growth segments ► Well-known commitment to R&D ► Fuels Dow’s own innovation engine ► Delivers more stable earnings with higher growth 20 Bank of America 38th Annual Investment Conference
    • A Powerful New Dow 2/3 Specialties Feedstock-Driven Businesses Market-Driven Businesses Asset Light Rohm and Haas Chemicals, Performance Health & Joint Advanced Petrochemicals Products Agriculture Ventures Materials & Feedstocks Electronic Specialty Coatings Materials Materials Adv. Elec. Dow Coating Materials Solutions Designed Specialty Epoxy Polyurethane Polymers Packaging Systems Systems 21 Bank of America 38th Annual Investment Conference
    • Growth Potential ► Accelerates revenue growth and improves margins – Increases percentage of revenues from higher margin, higher growth specialty business – Reduces volatility and increases growth in earnings 2007 – 2012 Industry Growth Rates Dow 4% Rohm and Haas 5 – 9% Dow + Rohm and Haas 5 – 7% SOURCE: SRI Consulting, CMAI, Company filings and presentations 22 Bank of America 38th Annual Investment Conference
    • Significant Cost Synergies ► At least $800 million in annual pre-tax synergies ► Phased in over two years Purchasing, including Raw Materials Shared Services and Governance 35% 35% 35% 35% 10% 10% 20% 20% Corporate Business Manufacturing / Supply Chain Development Overlap Work Process Improvements 23 Bank of America 38th Annual Investment Conference
    • Dow Synergy Track Record Cost synergies as a percent of target revenue Union Carbide 18% delivered Rohm and Haas Ag 16% delivered Angus Chemicals 15% delivered EniChem Polyurethanes 14% delivered Gurit-Essex 16% delivered Rohm and Haas 9% target 24 Bank of America 38th Annual Investment Conference
    • In Summary ► Committed to, and implementing, our strategy ► K-Dow Petrochemicals “Day One” before year-end ► On-track to close Rohm and Haas in early 2009 ► Committed to delivering solid results in 2008 ► Dow will be a transformed company! 25 2008 Credit Suisse Chemical Conference
    • SEC Disclosure Rules ►Some of our comments today may include statements about our expectations for the future. Those expectations involve risks and uncertainties. Dow cannot guarantee the accuracy of any forecasts or estimates, and we do not plan to update any forward-looking statements if our expectations change. If you would like more information on the risks involved in forward-looking statements, please see our annual report and our SEC filings. ►In addition, some of our comments may reference non-GAAP financial measures. Where available, a reconciliation to the most directly comparable GAAP financial measures and other associated disclosures are provided on the internet at www.dow.com in the Financial Reports page of the Investor Relations section. 26 Bank of America 38th Annual Investment Conference
    • Q&A 27 2008 Credit Suisse Chemical Conference