Dow’s Transformation In Action
Geoffery E. Merszei
Executive Vice President &
Chief Financial Officer

December 2, 2008

1...
Agenda

►Strengthening Basics
►Preferentially Investing in Performance Businesses
►Business Portfolio Management
►Financia...
Delivering On Our Commitments –
 K-Dow Joint Venture Formation Agreement


►A Binding, Definitive Agreement


►Expected To...
A New, World Class Petrochemicals Company

► Polyethylene, Polypropylene, Polycarbonate,
  Ethyleneamines and Ethanolamine...
K-Dow Transaction Proceeds


► Total Enterprise Value                         $17.4 B

► EBITDA Multiple on 2006 Basis    ...
K-Dow Petrochemicals – Sound Partners

Dow                                                 KPC / PIC
                     ...
KPC – A Strong Partner & Resource Owner
                 350
                                                             ...
K-Dow Petrochemicals – Key Statistics
                           • A 50:50 joint venture between Dow and Petrochemicals
 T...
K-Dow Petrochemicals – Key Statistics
        K-Dow Sales by Product*
                          Ethylene Glycol 20%
      ...
K-Dow & EQUATE: Opportunities for Growth




                                                    Kuwait
                  ...
Preserving The Value of Dow’s Integration
       K-Dow                              Building Blocks               Dow
    ...
Agenda

►Strengthening Basics
►Preferentially Investing in Performance Businesses
►Business Portfolio Management
►Financia...
Delivering On Our Commitments –
   A Transformative Move

► Accelerates growth through strong
  operational and strategic ...
Rohm and Haas Integration Update


►Program Management Office
 – 21 Functional Implementation Teams
 – 6 Business Implemen...
Rohm and Haas Cost Synergy Update
                                                                            Run Rate Est...
Synergy Opportunities


             Function                                      Project Description
Purchasing         ...
Rohm and Haas Advanced Materials Division
                                                                                ...
The New Dow – A Significant Portfolio Shift!
                                                                             ...
Agenda

►Strengthening Basics
►Preferentially Investing in Performance Businesses
►Business Portfolio Management
►Financia...
Delivering On Our Commitments –
Business Portfolio Management
►Divest or shut down non-competitive, unproductive or
 non-s...
Agenda

►Strengthening Basics
►Preferentially Investing in Performance Businesses
►Business Portfolio Management
►Financia...
Delivering On Our Commitments –
Sound Financial Discipline
                                          Debt Reduction
      ...
Managing Today’s Challenging Environment

Financial Flexibility
►Sufficient liquidity
 – Credit lines of approximately $5 ...
Agenda

►Strengthening Basics
►Preferentially Investing in Performance Businesses
►Business Portfolio Management
►Financia...
Delivering On Our Commitments –
                                          Remunerating Our Shareholders
                  ...
Delivering On Our Commitments –
              Our Consistent & Reliable Dividend

     • A 96-Year History of Consistent D...
Key Messages

►Strengthen Franchise Basics Business via K-Dow
►Preferentially Invest in Performance Businesses
 via Rohm a...
SEC Disclosure Rules
►Some of our comments today may include statements about our
 expectations for the future. Those expe...
Q&A



                                         29
19th Annual Citi Chemicals Conference
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Citi Chemicals Conference

  1. 1. Dow’s Transformation In Action Geoffery E. Merszei Executive Vice President & Chief Financial Officer December 2, 2008 19th Annual Citi Chemicals Conference
  2. 2. Agenda ►Strengthening Basics ►Preferentially Investing in Performance Businesses ►Business Portfolio Management ►Financial Discipline ►Remunerating Our Shareholders 2 19th Annual Citi Chemicals Conference
  3. 3. Delivering On Our Commitments – K-Dow Joint Venture Formation Agreement ►A Binding, Definitive Agreement ►Expected To Begin Operations By January 1, 2009 3 19th Annual Citi Chemicals Conference
  4. 4. A New, World Class Petrochemicals Company ► Polyethylene, Polypropylene, Polycarbonate, Ethyleneamines and Ethanolamines, Ethylene Glycol and PET ► All related technologies ► Fully dedicated hydrocarbon assets • Fort Saskatchewan, Canada (cracker) • Bahía Blanca, Argentina (cracker) • Tarragona, Spain (cracker and octene manufacturing facility) ► Ethylene supply agreements from Dow’s other crackers ► Number 1 position in Polyethylene 4 19th Annual Citi Chemicals Conference
  5. 5. K-Dow Transaction Proceeds ► Total Enterprise Value $17.4 B ► EBITDA Multiple on 2006 Basis 7.1x ► Special Cash Distribution by K-Dow $1.5 B ► Gross Proceeds $9.0 B 5 19th Annual Citi Chemicals Conference
  6. 6. K-Dow Petrochemicals – Sound Partners Dow KPC / PIC + Feedstock integration More than 100 years of experience and leadership Expertise in oil and gas A recognized global brand and franchise Technology and market leadership Regional leadership and global relationships Global reach Resources and desire to grow downstream #1 position in PE and amines, leader in PP, PC, and technology/catalyst licensing Strong financial position and track record Innovation, application and operational Successful JV experiences expertise … all coming together in a focused, dedicated, agile company with the staying power to grow with our customers in all regions of the world. 6 19th Annual Citi Chemicals Conference
  7. 7. KPC – A Strong Partner & Resource Owner 350 National oil company (NOC) 300 Publicly traded company 250 Billion 200 barrels of oil equivalent 150 100 50 0 NOC NOC C m OC NOC eum eria) mco C ips bil BP hell ron Eni a NO i NO roleu n Mo Phill ria N Chev ch S i Ara etrol (Alg Iran Iraq zuela Dhab Liby r Pet Exxo Nige l Dut oco ait P Saud trach Vene Abu Qata Con Roya Kuw Sona 7 19th Annual Citi Chemicals Conference Source: CMAI, 2005 data
  8. 8. K-Dow Petrochemicals – Key Statistics • A 50:50 joint venture between Dow and Petrochemicals The Company Industry Company of Kuwait • The world’s largest polyolefins producer and marketer • The world’s largest amines producer and marketer • Sales of approximately $15 billion worldwide Headquarters Southeast Michigan, USA Employees ~ 5,000 people worldwide Products Polyethylene, Polypropylene, Polycarbonates and blends, Ethanolamines, Ethyleneamines, Ethylene Glycols, PET, Technology Licensing and Catalyst Manufacturing 16 plant sites in 9 countries Locations 8 19th Annual Citi Chemicals Conference
  9. 9. K-Dow Petrochemicals – Key Statistics K-Dow Sales by Product* Ethylene Glycol 20% Polyethylene 58% PET 3% Amines 4% Licensing 1% Polycarbonate 3% Polypropylene 11% K-Dow Sales by Geography* IMEA 4% Asia Pacific 13% North America 35% Latin America 14% * Estimate based on 2007 sales Europe 34% 9 19th Annual Citi Chemicals Conference
  10. 10. K-Dow & EQUATE: Opportunities for Growth Kuwait China North Africa Thailand Brazil Current Production Assets Planned Assets 10 19th Annual Citi Chemicals Conference
  11. 11. Preserving The Value of Dow’s Integration K-Dow Building Blocks Dow • Designed Polymers • Benzene • Dow AgroSciences • Polyethylene • Butadiene • Dow Automotive • Ethylene Glycol • Chlorine • Dow Building Solutions (MEG & DEG) • Cumene • Dow Epoxy • Polypropylene • Ethylene • Dow Latex • Polycarbonate • Ethylene • Polyurethanes and PU • Ethyleneamines Dichloride Systems • Ethanolamines • Ethylene Oxide • Specialty Chemicals • Propylene • Specialty Plastics & • PET • Propylene Oxide Elastomers • Styrene • Technology Licensing & Catalyst ►More Than 60 Service and Supply Agreements ►Reliable and Secure long-term supply ►Enabling Both Dow and K-Dow to Grow 11 19th Annual Citi Chemicals Conference
  12. 12. Agenda ►Strengthening Basics ►Preferentially Investing in Performance Businesses ►Business Portfolio Management ►Financial Discipline ►Remunerating Our Shareholders 12 19th Annual Citi Chemicals Conference
  13. 13. Delivering On Our Commitments – A Transformative Move ► 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 13 19th Annual Citi Chemicals Conference
  14. 14. Rohm and Haas Integration Update ►Program Management Office – 21 Functional Implementation Teams – 6 Business Implementation Teams – 7 Clean Teams 14 19th Annual Citi Chemicals Conference
  15. 15. Rohm and Haas Cost Synergy Update Run Rate Estimates End Year 1 End Year 2 Shared Services & $280 $170 Governance Purchasing Synergies, $180 $280 Including Raw Materials Manufacturing / Supply $160 $70 Chain Business Development $65 $80 Overlap 0 50 100 150 200 250 300 July 10 Commitment ($800 Million) Will be at $100 Million Run Rate on Day 1 Rohm & Haas’ $110 Million Savings is Additive 15 19th Annual Citi Chemicals Conference
  16. 16. Synergy Opportunities Function Project Description Purchasing Raw Materials Information Technology IT Infrastructure Consolidation Corp Business Dev Overlap Business Overlap Synergies Supply Chain Logistics and Packaging Information Technology I/S Organizational Consolidation Manufacturing & Engineering Specific Mfg Footprint Optimization Marketing & Sales Marketing and Sales Synergy Project Manufacturing & Engineering MRO/Maintenance Equipment Shared Services Corporate Services 16 19th Annual Citi Chemicals Conference
  17. 17. Rohm and Haas Advanced Materials Division Dow Chairman and CEO Andrew Liveris Rohm and Haas Advanced Materials Division CEO Pierre Brondeau Marketing Human Resources Coatings Specialty Packaging & Films Ruby Chandy* Ruby Chandy Rich Lovely Luis Fernandez Patrice Barthelmes Vice-President Vice President Vice President Vice President Vice President Communications R&D Designed Polymers & Brian McPeak Building & Construction A. N. Sreeram Separation Technologies Vice President Torsten Kraef Vice President Peter Davies Vice President Vice President Shared Services Legal Paper & Textiles Jim Varilek Electronic Materials Ken Fitzpatrick Philippe Raynaud de Fitte Vice President Yi Hyon Paik Vice President Vice President Vice President Asia Finance Manufacturing and EH&S Mark Douglas Alfonso Escudero Don Taylor Vice President Vice President Vice President This organization alignment is pending all regulatory approvals and closing of the transaction. 17 Until that time, Rohm and Haas and Dow will remain separate entities and will operate independently.
  18. 18. The New Dow – A Significant Portfolio Shift! Pro Forma Dow Pro Forma Dow Dow (pre K-Dow) (post K-Dow) + ROH (post K-Dow) 2007 Revenue1 51% 49% 63% 37% 69% 31% 2007 EBITDA1,2 52% 48% 59% 41% 67% 33% Performance (Includes Ag) 1 Dataexcludes Unallocated and Other. 2 Non-GAAP financial measure. Excludes certain items. See www.dow.com for additional information. Basic 18 19th Annual Citi Chemicals Conference
  19. 19. Agenda ►Strengthening Basics ►Preferentially Investing in Performance Businesses ►Business Portfolio Management ►Financial Discipline ►Remunerating Our Shareholders 19 19th Annual Citi Chemicals Conference
  20. 20. Delivering On Our Commitments – Business Portfolio Management ►Divest or shut down non-competitive, unproductive or non-strategic assets (2003 – 2007) − 92 plant shutdowns − 42 site exits − 38 business divestitures ►Strategic Acquisitions − 26 since 2003 − In the last two years …. − Wolff Walsrode − Dow AgroSciences – 7 acquisitions − Epoxy Systems – 3 acquisitions − Polyurethanes – 3 acquisitions − Dow Building Solutions – Stevens Roofing Systems 20 19th Annual Citi Chemicals Conference
  21. 21. Agenda ►Strengthening Basics ►Preferentially Investing in Performance Businesses ►Business Portfolio Management ►Financial Discipline ►Remunerating Our Shareholders 21 19th Annual Citi Chemicals Conference
  22. 22. Delivering On Our Commitments – Sound Financial Discipline Debt Reduction 59% 55% Debt/Capital 48% 39% 34% 32% 2002 2003 2004 2005 2006 2007 Capex 3.0 2.0 $ Billions Depreciation 1.0 Capex 0.0 2002 2003 2004 2005 2006 2007 22 19th Annual Citi Chemicals Conference
  23. 23. Managing Today’s Challenging Environment Financial Flexibility ►Sufficient liquidity – Credit lines of approximately $5 billion – Retail and Institutional bond access – Diversified funding sources throughout the world Financial Discipline / Interventions ►Targeted reductions by end of year – Discretionary spending reduction of $100 - $150 million – Capital spending reductions of $100 million – Working capital reductions 23 19th Annual Citi Chemicals Conference
  24. 24. Agenda ►Strengthening Basics ►Preferentially Investing in Performance Businesses ►Business Portfolio Management ►Financial Discipline ►Remunerating Our Shareholders 24 19th Annual Citi Chemicals Conference
  25. 25. Delivering On Our Commitments – Remunerating Our Shareholders $1,600 – 73 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 3Q08 YTD 25 19th Annual Citi Chemicals Conference
  26. 26. Delivering On Our Commitments – Our Consistent & Reliable Dividend • 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 Q3 YTD PAYOUT 26 19th Annual Citi Chemicals Conference
  27. 27. Key Messages ►Strengthen Franchise Basics Business via K-Dow ►Preferentially Invest in Performance Businesses via Rohm and Haas ►Portfolio Management Continues ►Preserving Financial Flexibility ►Uninterrupted Dividend for 96 Years! 27 19th Annual Citi Chemicals Conference
  28. 28. 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. 28 19th Annual Citi Chemicals Conference
  29. 29. Q&A 29 19th Annual Citi Chemicals Conference

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