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transcript
Sanford Bernstein Strategic Decisions
Conference
Andrew LiverisChairman and CEO
May 30, 2008
Agenda
Who We Are
Dow’s Unmatched Strengths
Dow of Tomorrow
Financial Outlook
Sanford Bernstein Strategic Decisions ConferenceANL 05/30/08 2
A Global Science and Technology Company
Focused on Growth ♦ Emerging Markets♦ Global Megatrends
♦ Financial Discipline/Low Cost to Serve
♦ Asset Management
Operationally Excellent
♦ Plastics♦ Chemicals♦ AgroSciences♦ Material Sciences
Integrated in Chemistry
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Strong Financial Results
2007 Sales by Segment
Performance Plastics
Performance Chemicals
Agricultural Sciences
Basic Plastics
Basic Chemicals
Hydrocarbons &
Energy
$54 B
2007 Sales by Geography
India, Middle East and Africa
North America
Europe
Asia Pacific
Latin America
$54 B
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1Q07Sales (billions) $12.4Equity Earnings (millions) $274Earnings Per Share $1.00
1Q08$14.8$274
$0.99
Strong Financial Results
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Strong Financial Results
2003 2004 2005 2006 2007
Debt/Capital55%
48%39%
34% 32%
Joint Venture Earnings Growth
0
200
400
600
800
1,000
1,200
2003 2004 2005 2006 2007
$Millions
Dow EBIT History*
012345678
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07
Performance Basics
*Non-GAAP data, excludes certain items and unallocated. Excludes Union Carbide prior to 2001.
$Billions
0
10
20
30
40
50
60
2003 2004 2005 2006 2007
$Billions Revenues
6
OAO Gazprom
PetroChina
Chevron Phillips
Reliance Industries
BASF
Total SA
Formosa Plastics Grp
INEOS Group
Exxon Mobil
Royal Dutch Shell
Dow Chemical
Sinopec
SABIC
LyondellBasell
Strong Basics Franchise
2007 Sales* - $29B8,800 Dow people6,000 global customers35 Dow sites; 6 JV sitesRenowned product brandsOperational/safety excellenceTechnology leadership
*Includes Dow’s proportionate share of joint venture revenues. 7Source: Public Company Reports Sanford Bernstein Strategic Decisions ConferenceANL 05/30/08
Cytec
Celanese
Lubrizol
Eastman
Rohm & Haas
Royal DSM NV
PPG
Bayer
Evonik Industries AG
Hexion (inc. Huntsman)
Akzo Nobel
DuPont
Dow Chemical
BASF
Market-Driven Performance Businesses
2007 Sales – $23.5B
17,800 employees
12,500 global customers
158 countries
41 R&D sites
68 Manufacturing sites
8Source: Public Company Reports Sanford Bernstein Strategic Decisions ConferenceANL 05/30/08
2nd Largest Chemical Company
2nd Largest Chemical Company
0%
5%
10%
15%
20%
SyngentaTotal
MonsantoTotal
BASF AgProducts
DAS Total BayerCropScience
DuPont Ag &Nutrition
YE 2006 YE 2007
Dow AgroSciences
2007 Sales – $3.8B
5,000 Employees
Customers in 131 countries
>1,000 R&D employees
R&D sites in 15 countries
26 Manufacturing locations worldwide
*Monsanto’s Fiscal Year = September 1 to August 31; includes Animal Ag; Non-GAAP data, excludes certain items.Source: Public Company Reports
9
EBIT as % of Sales*
Sanford Bernstein Strategic Decisions ConferenceANL 05/30/08
Dow Corning
0
100
200
300
400
500
600
700
2003 2004 2005 2006 2007
0
1
2
3
4
5
2003 2004 2005 2006 2007
$Billions
$Millions Net Income
Sales 2007 Sales – $4.9B10,000 Employees∼25,000 Customers7,500 Products and servicesR&D investment –5% of salesR&D labs in more than 10 countries∼25 Manufacturing sites>4,000 Active patents
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Who We Are
Dow’s Unmatched Strengths
Dow of Tomorrow
Financial Outlook
Agenda
Integration
Operational Excellence
Feedstock Flexibility
Global Reach
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Strength: Vertical Integration Across Diverse Portfolio
Performance• Designed Polymers
Dow AgroSciences• Dow Automotive• Dow Building Solutions• Dow Epoxy• Dow Latex• Polyurethanes and PU
Systems• Specialty Chemicals• Specialty Plastics &
Elastomers• Technology Licensing
& Catalyst
Basics• Butanol• Caustic Soda• Ethylene Glycol • Polyethylene• Polypropylene• Polystyrene• Vinyl Acetate• Vinyl Chloride
Building Blocks• Benzene• Butadiene• Cell Effluent• Chlorine• Ethylene• Ethylene Dichloride• Ethylene Oxide• Propylene• Propylene Oxide• Styrene
12Sanford Bernstein Strategic Decisions ConferenceANL 05/30/08
Strength: Operational Excellence through Scale and Integration
Market Leadership Position
Man
ufac
turin
g Po
sitio
n
High High
High
High
Chlorine Epoxy Resin
Source: CMAI
Ethylene LLDPE
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Strength: Feedstock Flexibility
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Feedstock Flexibility (Global)Naphtha/condensate 25 - 60%Ethane 30 - 50%Disconnected ethane ~ 10%Propane 5 - 40%
India, Middle East, Africa3% ($1.5 billion) of Dow’s global sales8% ($0.5 billion) of Dow’s share of JV sales
Strength: Global Reach
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Europe37% ($19.6 billion) of Dow’s global sales19% ($1.3 billion) of Dow’s share of JV sales
Emerging region sites with 25-100 employeesManufacturingR&D (may include manufacturing)Business / sales centers
All Dow sites with more than 100 employeesManufacturingR&D (may include manufacturing)Business / sales centers
Asia Pacific11% ($6.2 billion) of Dow’s global sales39% ($2.6 billion) of Dow’s share of JV sales
Latin America11% ($5.7 billion) of Dow’s global sales8% ($0.5 billion) of Dow’s share of JV sales
North America38% ($20.5 billion) of Dow’s global sales26% ($1.7 billion) of Dow’s share of JV sales
Sanford Bernstein Strategic Decisions ConferenceANL 05/30/08
Who We Are
Dow’s Unmatched Strengths
Dow of Tomorrow
Financial Outlook
Agenda
Asset-Light
Performance / Market Focused Business Model
R&D / Innovation
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Building the Dow of TomorrowFE
EDST
OCK
S
Products
Solutions
Systems
PERFORMANCEBASICS
JOINT VENTURES
MARKET FACING
JOINT VENTURES
Technology and R&DTechnology and R&DStrengthening Competitiveness of BasicsGrow Performance and Market Facing BusinessesR&D Pipeline
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2007 Revenue (Dow share) - $2.6B2007 Equity Earnings (Dow share) - $0.7B
Asset-LightPetrochemical
ProjectsSiam Cement Group (Thailand)
Saudi Aramco (Saudi Arabia)
Shenhua Group (China)
National Oil Company (Libya)
Crystalsev (Brazil)
Gazprom / SIBUR (Russia)
Existing Joint Ventures*Compañía MEGAEQUATEEquipolymersMEGlobalThe OPTIMAL GroupThe SCG-Dow Group
New Asset-Light JVsCPChem (Americas)PIC (Kuwait)*Principal joint ventures
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#1 industry leader
Advantaged feedstocks for growth
Global franchise
Unparalleled technology, R&D
TRANSACTION VALUE - $19.1B (on 100% basis)
History of operational excellence
Strong financial position
Desire – and capability – to grow
>$11 billion in 2007 revenue
A New Polyolefins Powerhouse
[A subsidiary of Kuwait Petroleum Company]
®
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Performance and Market Facing Businesses
Traditional PerformanceDesigned PolymersDow EpoxyDow LatexPolyurethanes and Polyurethane SystemsSpecialty ChemicalsSpecialty Plastics & ElastomersTechnology Licensing & Catalyst
Market FacingDow AgroSciencesDow AutomotiveDow Building SolutionsDow Coating SolutionsDow Fabric & Surface CareDow Fiber SolutionsDow Footwear SolutionsDow Oil & Gas SolutionsDow Water SolutionsDow Wire & Cable
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Investing in Performance Businesses
POLY-CARB Inc.
Duo Maize
Wuhan Essex
Agromen Tecnologia -Corn seed business
Exelixis Plant Sciences assets
UPPC AG
GNS Technologies
Edulan A/S
Pacific Plastics (Thailand) Limited
Celanese Acrylates Business
Engage®, Nordel® and Tyrin® businesses -DuPont Dow Elastomers
DE-NOCIL Crop Protection Private Limited
Pacific Epoxy Co.
AgroPartners
Zhejiang Omex Environmental Engineering
Wolff Walsrode AG
Hyperlast Limited
Maize Technologies International (Austrian affiliate)
Triumph Seed Company, Inc.
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Energy
Alternative Energy& Feedstocks
Energy Production& Efficiency
Energy Storage
Building IntegratedPhotovoltaics
Insulation
Applied EnergyEfficiency
Feedstock & Energy Mgmt
Infrastructure &Transportation
Construction
Transportation
Water
Building Materials
Advanced MaterialsScience
Filter/MembraneElements
High ThroughputFormulations Capability
Consumerism
Apparel & Furnishings
Electronics & Communications
Home & Personal Care
Printed Circuit Board Materials
Optical Materials
Rapid Formulation Development
Polymer Performance Modeling
HealthThemes
OpportunityAreas
Key DowCapabilities
Agriculture
Functional Foods
Healthcare
Material Science
Biotechnology
Chemistry
Market Megatrends
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™ SmartStax is a trademark of the Monsanto Company
New Surfactant Platform
FORTIFIBERTM
Cellulosics for Controlled
ReleaseOmega-9 Oils
Breakthrough FR for
STYROFOAMTM
Epoxy for Wind Energy
RENUVATM
Renewable Resource
Technology
Multi-Layer Reverse Osmosis
Chemistry
PU Automotive & Composites
Diesel Emission Platform
Dow ARYXXTM
Fibers
Building Blocks for Electrical Laminates
Manufacturing Pre‐Commercial
Trials
Dow R&D Pipeline
23
Surfactant Alcohol Process
Quat New Applications for Textiles
Solar –Thin Film
Photovoltaics
Insect Resistant
Stack
Herbicide Tolerant
CropsZinc-Finger
Protein Technology
SulfoximineSap-Feeding Insecticide
Dow Wolff Cellulosics
Food Additive Growth Macromolecular
Self-Assembled Materials
Breakthrough R Value
InsulationNext Generation Natural Oil
Polyols
Catalyzed Diesel Filters
High Efficiency
Anti-Fouling CoatingsNext
Generation Auto Impact
ModifierAdvanced
Micro-Porous Membranes
Epoxy Systems
Composites
Fast Curing Highly
Durable Auto Refinish
Polymer Matrix
Composites
Next Generation Epoxy Resin Processes
Cold Water Cleaning
Renewable Monoglyceride &
DiglycerideEthoxylates
Enhanced Oil Recovery
The Methane Challenge
Process Intensification
UnderDevelopment
Infrastructure & Transportation
Health
Energy
ConsumerismHigh
Throughput Formulations
Capability Polyolefin Dispersions
PU Footwear
Dow Wolff Cellulosics
Film Forming Portfolio
Nutritionally Enhanced
Corn
Low Energy CO2 Capture Sugarcane-to-
PolyethyleneBuilding
IntegratedPhotovoltaics
Next Generation Structural Adhesives
Biocides: Aquatic
Biosecurity
Next Generation
Ultra-Filtration
SmartStax™Eight-Way
Gene Platform
AdvancedDevelopment
Sanford Bernstein Strategic Decisions ConferenceANL 05/30/08
Dow AgroSciences: Technology Leader
Animal Health
Ag Chem
Biotech
Advanced in 2007
* Novel Delivery System®™ Trademarks of Dow AgroSciences LLC
™ SmartStax is a trademark of the Monsanto Company 24
Healthier Oil
Trait 3
Healthier Oil
Trait 2
InsectTrait 2
NutritionTrait 2
New Venture
Healthier Oil
Trait 1
New Venture
DHTTrait 1
StressTrait 2
NutritionTrait 1
InsectTrait 1
StressTrait 1
Healthier Oil
Trait 5
DHTTrait 2
Oilseed Breeding
Enhancement
ChewingInsecticide
HerbicideHerbicideNDS*4
FungicideNDS*3
Animal Health
Vaccine 3
Animal Health
Vaccine 2
Animal Health
Vaccine 1
Discovery
NDS*1 NDS*2
Sap Feeding
Insecticide
SmartStax™
Development
ECOZOME™
Launch
Sanford Bernstein Strategic Decisions ConferenceANL 05/30/08
2007 R&D Magazine Recognition
What Companies Have the Most Improved R&D in the Past 5 Years?
Which Company’s R&D is the Most Proactive in High-Tech Challenges?
Dow Ranked in Top 10
of the World
1 IBM2 General Electric3 DuPont4 3M5 Toyota6 Google7 Apple8 Microsoft9 Genentech10 Dow Chemical
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New Product Sales %R&D as % Sales
BenchmarkTop 20% >7Next 20% 5-7Bottom 60% <5
McKinsey&Company Innovate at ScaleHeadroom, Engines, and Orthodoxies
Strong Dow R&D Metrics
Traditional Metrics* New Product Sales: Dow = 34%Patent Applications: Dow = 450+New Disclosures: Dow = 1000+
*2007 data
Dow Ratio: 14
26
34%
2.4%
Sanford Bernstein Strategic Decisions ConferenceANL 05/30/08
Who We Are
Dow’s Unmatched Strengths
Dow of Tomorrow
Financial Outlook
Agenda
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Conservative: 3%
The New Dow
Target:EP Breakeven
(2010/2011)
2002 Next Industry Trough
Volume Growth
Cost Control
Margin Improvement
Equity Earnings
Portfolio ManagementInnovation
$3.50
$0.34
♦ Olefins II♦ MEGlobal♦ Dow Corning♦ OPTIMAL
♦ 20 Acquisitions♦ 38 Divestitures♦ 92 Plant Shutdowns
$2B EBIT by 2011
Announced $340MM cost reductions in
2006/2007
28
Higher QualityPerformanceBusinesses
Sanford Bernstein Strategic Decisions ConferenceANL 05/30/08
Asset-Light Proceeds
AdditionalBorrowingCapacity
Cash Flow from
Operations
Sources of Cash: 2008-2015
$57B
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Dividends
Capital SpendingAcquisitions
& Share
Repurchase
Uses of Cash: 2008-2015
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$57B
Acquisitions&
Share Repurchase
FromFrom ToTo
Uses of Cash
Strong pre-disposition to deploy cash to change portfolio and earnings profile
31Sanford Bernstein Strategic Decisions ConferenceANL 05/30/08
Dow of Tomorrow –Earnings Potential
Target: EP
Breakeven
0
4
$/Sh
are 8
12
2002 (Trough) 2005 (Peak) Next IndustryTrough
(2010/2011)
Next Industry Peak (2015)
>$10
$3.50
32
10% EPS G
rowth
Sanford Bernstein Strategic Decisions ConferenceANL 05/30/08
Two Mutually Inclusive Options
CriteriaReturn more long-term value than share buybackStrategic fitAccretive by end of second year $0
$400
$800
$1,200
$1,600
2006 2007 1Q08
$721
$1,416
$410
$MM
Share BuybackMergers & Acquisitions
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Target: EP
Breakeven
0
4
$/Sh
are 8
12
2002 (Trough) 2005 (Peak) Next IndustryTrough
(2010/2011)
Next Industry Peak (2015)
>$10
$3.50
Dow of Tomorrow –Earnings Potential
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Dynamic.Strong.
®
Innovative. Rewarding.
Acquisitions&
Share Repurchase
SEC Disclosure Rules
36Sanford Bernstein Strategic Decisions ConferenceANL 05/30/08
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.
®