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Dow’s Transformation In ActionGeoffery E. MerszeiExecutive Vice President & Chief Financial Officer
September 17, 2008
Bank of America 38th Annual Investment Conference
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Agenda
►Who Is Dow
►Financial Performance
►Transformational Strategy
►Strategy in Action
– Formation of K-Dow Petrochemicals– Acquisition of Rohm and Haas
►Summary
Bank of America 38th Annual Investment Conference
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2007 Sales by Segment
Performance Plastics
Performance Chemicals
Agricultural Sciences 7%
Basic Plastics
Basic Chemicals
Hydrocarbons & Energy 13%
$54 B
2007 Sales by Geography
India, Middle East and Africa 2%
North America
Europe
Asia Pacific
Latin America
$54 B
Diversified Portfolio
Bank of America 38th Annual Investment Conference
28%
16%24%
11% 38%
12%
11%
37%
Unallocated & Other 1%
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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►2007 Sales* - $29B
►8,800 Dow people
►6,000 global customers
►35 Dow sites; 6 JV sites
►Renowned product brands
►Operational/safety excellence
►Technology leadership
*Includes Dow’s proportionate share of joint venture revenues. 4
Source: Public Company Reports
A Strong Basics Franchise
Bank of America 38th Annual Investment Conference
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Cytec
Celanese
Lubrizol
Eastman
Rohm & Haas
Royal DSM NV
PPG
Bayer
Evonik Industries AG
Hexion (inc. Huntsman)
Akzo Nobel
DuPont
Dow Chemical
BASF
►2007 Sales – $27B►22,800 employees►12,500 global customers►158 countries►41 R&D sites►94 Manufacturing sites
5
Source: Public Company Reports
Market-driven Performance Businesses
Bank of America 38th Annual Investment Conference
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Agenda
►Who Is Dow
►Financial Performance
►Transformational Strategy
►Strategy in Action
– Formation of K-Dow Petrochemicals– Acquisition of Rohm and Haas
►Summary
Bank of America 38th Annual Investment Conference
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First Half 2008 Financial Performance6 months ended 6 months ended
June 30, 2008 June 30, 2007 ChangeSales $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
Bank of America 38th Annual Investment Conference
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Financial Goals
* Non-GAAP data; excludes certain items; excludes Union Carbide prior to 2001. See www.dow.com for more information.
Financial Metrics
2007: $3.76
10-year average growth: 4%1995 – 2005 growth: 5%
2004
2003
Earnings per Share*
1997
1999
2000
2001
2002
2005
2006
2007
1998
2007: 14%10-year average: 12%1995 – 2005 average: 12%
Return on Capital*
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Bank of America 38th Annual Investment Conference
2007: 19%
10-year average: 18%1995 – 2005 average: 19%
1998
1999
2000
2001
2002
2003
2004
2005
2006
Return on Equity*
2007
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Agenda
►Who Is Dow
►Financial Performance
►Transformational Strategy
►Strategy in Action
– Formation of K-Dow Petrochemicals– Acquisition of Rohm and Haas
►Summary
Bank of America 38th Annual Investment Conference
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Innovation, Technology and R&DInnovation, Technology and R&D
Dow’s Transformational Strategy
• Grow Performance and Specialties
• Strengthen competitiveness of Basics
ProductsProducts
SolutionsSolutions
SystemsSystemsBASICSBASICSFEEDSTOCKSFEEDSTOCKS PERFORMANCEPERFORMANCE MARKET
FACINGMARKET FACING
JOINTVENTURES
JOINTVENTURES
JOINTVENTURES
JOINTVENTURES
Bank of America 38th Annual Investment Conference
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Building the Dow of Tomorrow
OpportunityAreas
AgricultureAgriculture Alternative Energy& Feedstocks
Alternative Energy& Feedstocks ConstructionConstruction Apparel &
FurnishingsApparel &
Furnishings
Energy Production& Efficiency
Energy Production& Efficiency TransportationTransportation Electronics &
CommunicationsElectronics &
Communications
Energy StorageEnergy Storage WaterWater Home & Personal Care
Home & Personal Care
Functional FoodsFunctional Foods
HealthcareHealthcare
Key DowCapabilities
Building MaterialsBuilding Materials
IntegratedPhotovoltaics
IntegratedPhotovoltaics
Feedstock & Energy Management
Feedstock & Energy Management
InsulationInsulation
Applied EnergyEfficiency
Applied EnergyEfficiency
Advanced MaterialsScience
Advanced MaterialsScience
Filter/MembraneElements
Filter/MembraneElements
High ThroughputFormulations
High ThroughputFormulations
Rapid Formulation Development
Rapid Formulation Development
Printed Circuit Board MaterialsPrinted Circuit
Board Materials
Optical MaterialsOptical Materials
Polymer Performance
Modeling
Polymer Performance
Modeling
BiotechnologyBiotechnology
ChemistryChemistry
Material ScienceMaterial Science
Themes
Health & Nutrition Energy Transportation & Infrastructure
Consumerism
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Shareholder Remuneration
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
2005 2006 2007 2Q08 YTD
Sha
re R
epur
chas
e A
mou
nt ($
Mill
ions
)
– 71 Million Shares Repurchased
– $3.0 Billion Spent– Largest Program
In A Decade
Bank of America 38th Annual Investment Conference
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1928 1938 1948 1958 1968 1978 1988 1998
Consistently Rewarding Shareholders
1912 2008**
• A 96-Year History of Consistent Dividends– Maintained or Increased Each Year
– Increased 25% Since 2006
Quarterly Dividends Paid Per Share*
*ADJUSTED FOR STOCK SPLITS AND STOCK DIVIDENDS**2008 DIVIDEND ANNUALIZED BASED ON Q2 YTD PAYOUT
Bank of America 38th Annual Investment Conference
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Agenda
►Who Is Dow
►Financial Performance
►Transformational Strategy
►Strategy in Action
– Formation of K-Dow Petrochemicals– Acquisition of Rohm and Haas
►Summary
Bank of America 38th Annual Investment Conference
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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)
Bank of America 38th Annual Investment Conference
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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
Bank of America 38th Annual Investment Conference
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Exceptional Returns From JVs
$322
$923$964 $959
$1,122
$205
$430
$536$622
$837
19%
40% 39% 38% 39%
Equity Earnings ($ millions)
2003
2004
2005
2006
2007
Cash Distributions ($ millions) Return on Investment*
2003
2004
2005
2006
2007
2003
2004
2005
2006
2007
*Equity earnings/average investmentin nonconsolidated affiliates
Bank of America 38th Annual Investment Conference
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Agenda
►Who Is Dow
►Financial Performance
►Transformational Strategy
►Strategy in Action
– Formation of K-Dow Petrochemicals– Acquisition of Rohm and Haas
►Summary
Bank of America 38th Annual Investment Conference
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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 1909Bank of America 38th Annual Investment Conference
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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
Bank of America 38th Annual Investment Conference
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A Powerful New Dow
Asset LightAsset LightJointJoint
VenturesVentures
Chemicals,Chemicals,PetrochemicalsPetrochemicals& Feedstocks& Feedstocks
PerformancePerformanceProductsProducts
Health &Health &AgricultureAgriculture
Rohm and HaasRohm and HaasAdvancedAdvancedMaterialsMaterials
ElectronicElectronicMaterialsMaterials
SpecialtySpecialtyMaterialsMaterials CoatingsCoatings
Dow Coating Solutions
Adv. Elec. Materials
DesignedPolymers
Specialty Packaging
EpoxySystems
PolyurethaneSystems
Feedstock-Driven Businesses Market-Driven Businesses
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2/3 Specialties
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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 – 2012Industry Growth Rates
SOURCE: SRI Consulting, CMAI, Company filings and presentations
Dow 4%
Rohm and Haas 5 – 9%
Dow + Rohm and Haas 5 – 7%
Bank of America 38th Annual Investment Conference
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Significant Cost Synergies
►At least $800 million in annual pre-tax synergies
►Phased in over two years
Shared Servicesand Governance
Purchasing, including Raw Materials
Manufacturing / Supply Chain Work Process Improvements
Corporate Business Development Overlap
35%35% 35%35%
10%10% 20%20%
Bank of America 38th Annual Investment Conference
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Dow Synergy Track RecordCost 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
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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!
2008 Credit Suisse Chemical Conference
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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.
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Q&A
2008 Credit Suisse Chemical Conference