Midland, Michigan and Wilmington, Delaware, USA
February 1, 2018

• 4Q GAAP Loss Per Share from Continuing Operations of $0.52; Adj. EPS Up 41% to $0.83
• 4Q GAAP Net Loss from Continuing Operations of $1.2B; Op. EBITDA Up 24% to $3.9B
• 4Q Net Sales Rise 13% to $20.1B, with Gains in all Operating Segments and Geographies
• 2017 GAAP EPS from Continuing Operations of $0.95; Pro Forma Adj. EPS Up 22% to $3.40
• 2017 GAAP Net Income from Continuing Operations of $1.7B; Pro Forma Op. EBITDA Up 15% to $16.2B
• 2017 GAAP Net Sales of $62.5B; Pro Forma Net Sales Grow 12% to $79.5B, with Gains in all Operating Segments and Geographies

Fourth Quarter 2017 Highlights

• DowDuPont reported a GAAP loss per share from continuing operations of $0.52. Adjusted earnings1 per share increased 41 percent to $0.83, compared with pro forma adjusted earnings per share in the year-ago period of $0.59. Adjusted earnings per share excludes significant items in the quarter totaling net charges of $1.26 per share, as well as a $0.09 per share charge for DuPont amortization of intangible assets.
• Net sales increased 13 percent to $20.1 billion, with gains in all operating segments and geographies, from pro forma net sales of $17.7 billion in the year-ago period. The primary sales growth drivers by division were: Materials Science – Industrial Intermediates & Infrastructure (27 percent) and Packaging & Specialty Plastics (17 percent); Specialty Products – Transportation & Advanced Polymers and Nutrition & Biosciences (10 percent each); and Agriculture (5 percent). Regional sales increases were led by Europe, Middle East and Africa (EMEA) (25 percent) and North America (10 percent), with gains in all divisions, led by the Materials Science operating segments.
• Volume grew 6 percent on a pro forma basis, with increases in all operating segments and geographies on broad-based, consumer-led and investment-driven demand. Volume gains were led by Industrial Intermediates & Infrastructure (13 percent), Packaging & Specialty Plastics (8 percent), Electronics & Imaging (6 percent) and Transportation & Advanced Polymers (5 percent). Regional volume growth was led by EMEA (10 percent) and Asia Pacific (6 percent).
• Local price rose 5 percent on a pro forma basis, led by increases in all geographies and double-digit gains in Industrial Intermediates & Infrastructure (12 percent) and Performance Materials & Coatings (10 percent).
• Operating EBITDA1 increased 24 percent on a pro forma basis to $3.9 billion, driven by volume and price gains, including new capacity additions in the U.S. Gulf Coast and Saudi Arabia; cost synergies; lower pension/OPEB costs2; and higher equity earnings. These gains more than offset higher feedstock costs and startup expenses related to new assets on the U.S. Gulf Coast.
• The Company achieved an annual cost synergy run-rate of more than $800 million and more than $200 million of realized savings in the fourth quarter. DowDuPont is announcing today that it is increasing its cost synergy commitment from $3 billion to $3.3 billion.
• Cash flow from operations in the quarter was $4.2 billion, driven by increased cash earnings and Agriculture’s seasonal cash inflow, partly offset by contributions to pension plans.
• The Company returned nearly $2 billion to shareholders in the quarter through dividends ($0.9 billion) and share repurchases ($1 billion).
• Fourth quarter GAAP results include net tax benefits of $1.1 billion (a significant item of $0.46 per share) related to remeasurements and charges as a result of new U.S. tax legislation. The Company expects this new legislation to translate into a 1-2 percentage point reduction in its 2018 tax rate versus previous expectations.
• The Company is announcing today that it has updated the timing and sequence of the intended separation of the companies: Materials Science is expected to separate by the end of the first quarter of 2019, and Agriculture and Specialty Products are expected to separate by June 1, 2019.

CEO Quote

“Our fourth quarter operating results continued the strong performance that we delivered throughout 2017, as we grew our top and bottom lines by double digits in the quarter and the full year,” said Ed Breen, chief executive officer of DowDuPont. “Our 2017 results reflect robust underlying demand for many of our products, the power of our innovation engine and our leading positions in growing markets. We delivered these results while completing our merger, realigning the business around key end-markets, and achieving more than $800 million in run-rate savings from our cost synergy programs. Based on the progress we’ve made, we are raising our commitment for cost synergies from $3 billion to $3.3 billion, an increase of 10 percent. We also are making significant progress standing up the intended public companies, which we now expect to spin about 14 to 16 months from today.”

2017 Full-Year Highlights

• GAAP earnings per share from continuing operations was $0.95. Pro forma adjusted earnings per share increased 22 percent to $3.40 versus the year-ago period. Pro forma adjusted earnings per share excludes significant items totaling net charges of $1.90 per share, as well as a $0.33 per share charge for DuPont amortization of intangible assets.
• GAAP net sales increased 30 percent. Pro forma net sales increased to $79.5 billion, up 12 percent versus the year-ago period, with gains in all operating segments and all geographies. Primary sales growth drivers were: Materials Science – Performance Materials & Coatings (37 percent), Industrial Intermediates & Infrastructure (17 percent) and Packaging & Specialty Plastics (13 percent); Specialty Products – Transportation & Advanced Polymers (14 percent) and Electronics & Imaging (12 percent); and Agriculture (2 percent). Sales rose double-digits in EMEA (17 percent), Asia Pacific (15 percent) and North America (10 percent). Sales in Latin America grew 5 percent.
• Pro forma operating EBITDA increased 15 percent to $16.2 billion, driven by volume and price gains, including new capacity additions; cost synergies and productivity actions; higher equity earnings; lower pension/OPEB costs; and the full-year contribution of silicones. These gains more than offset higher feedstock costs, startup expenses on the U.S. Gulf Coast and the unfavorable impact of hurricanes. Increases were achieved in most operating segments, led by double-digit growth in Performance Materials & Coatings; Industrial Intermediates & Infrastructure; Electronics & Imaging; Transportation & Advanced Polymers; and Agriculture.
• Less than two weeks following merger close, DowDuPont announced certain targeted portfolio adjustments to the Materials Science and Specialty Products divisions to better align with end-markets and further enhance the competitive advantages of the intended companies.
• DowDuPont satisfied key regulatory remedies required of the merger transaction, including: divesting DuPont’s cereal broadleaf herbicides and chewing insecticides portfolios, as well as certain parts of its crop protection R&D pipeline and organization to FMC; divesting Dow’s PRIMACOR™ ethylene acrylic acid copolymers and ionomers business; and divesting a select portion of Dow AgroSciences' corn seed business in Brazil. The Company also closed its acquisition of FMC's Health and Nutrition business.

Fourth Quarter Segment Information

Agriculture

Sales of $2.8 billion were up 5 percent from pro forma net sales of $2.7 billion in the year-ago period. Volume and currency improvements of 2 percent and 1 percent, respectively, were partially offset by local price declines. Portfolio-related actions increased sales by 3 percent.

Organic revenue growth was realized in both seed and crop protection. Seed volume and price rose slightly as earlier Brazil safrinha deliveries, doubling of corn sales in Argentina, driven by penetration of Leptra® corn hybrids, and growth in the European sunflower and corn seed business were partially offset by the reduction in Brazil summer corn area. Crop protection volume improvement was driven by the continued penetration of new products such as Vessarya™ fungicide and increased demand for Optinyte™ nitrogen stabilizers and novel seed treatment solutions. Crop protection pricing declined, driven by generic pricing pressure, specifically in Latin America and Asia Pacific.

Operating EBITDA for the segment more than doubled to $224 million, versus pro forma operating EBITDA of $100 million in the year-ago period. The improvement resulted primarily from synergies and other cost reductions, lower pension/OPEB costs, volume increases, and a net portfolio gain. This improvement was partially offset by lower local price due to generic crop protection pricing pressure and higher soybean royalties.

Full-year pro forma net sales of $14.3 billion rose 2 percent from pro forma net sales of $14.1 billion reported in the year-ago period driven by higher volumes and a portfolio gain. Full-year seed sales increased 5 percent due to both volume and price improvement. Full-year crop protection sales were down 1 percent as growth from new products was more than offset by pricing pressures in Latin America and high inventory levels in China.

Full-year pro-forma operating EBITDA for the segment improved 12 percent to $2.6 billion versus pro forma operating EBITDA of $2.3 billion in the year-ago period. The improvement resulted primarily from higher volumes, synergies, lower pension/OPEB costs and currency. Pro forma operating EBITDA growth was partially offset by lower local price due to generic crop protection pricing pressure and higher soybean royalties.

Materials Science

Performance Materials & Coatings

Performance Materials & Coatings reported net sales of $2.2 billion, up 15 percent versus pro forma net sales of $1.9 billion in the year-ago period. The year-over-year gain was primarily driven by double-digit growth in both businesses, as well as double-digit increases across all geographic regions. Local price increased 10 percent, with gains in all geographic regions and both businesses. Volume grew 4 percent, driven by gains in North America, Asia Pacific and Latin America.

Consumer Solutions delivered double-digit sales growth in all geographic regions, driven by strong gains in local price in Asia Pacific and EMEA; disciplined price/volume management in upstream silicone intermediate products; and broad-based demand for downstream applications including pressure sensitive adhesives and high performance building solutions. Coatings & Performance Monomers achieved double-digit growth in sales, on strong local price increases in all geographic regions and higher demand in North America.

Operating EBITDA increased to $613 million, up 56 percent from pro forma operating EBITDA of $392 million in the year-ago period, primarily due to increased pricing, higher equity earnings, strong end-market demand and cost synergies.

Equity earnings for the segment totaled $223 million, compared with pro forma equity earnings of $176 million in the year-ago period, driven by two factors at the HSC Group – higher demand from the photovoltaics end-market and DowDuPont’s share of a settlement of a long-term polysilicon sales agreement.

Industrial Intermediates & Infrastructure

Industrial Intermediates & Infrastructure reported net sales of $3.6 billion, up 27 percent versus pro forma net sales of $2.8 billion in the year-ago period. Double-digit sales gains were reported in all geographic regions. Volume grew 13 percent while local price rose 12 percent.

Polyurethanes & Chlor-Alkali and Vinyl (CAV) delivered robust sales growth in all geographic regions, driven by double-digit price and volume gains. The business also reported strong price and demand increases in downstream, higher-margin systems applications, as well as higher merchant sales of methylene diphenyl diisocyanate (MDI) and caustic where industry supply/demand fundamentals remained tight. Industrial Solutions grew sales double digits, led by surfactants, glycol ethers and ethylene glycols in consumer-driven applications, including electronics processing, crop defense and food and pharmaceuticals. The business delivered volume and price gains in all geographic regions. Construction Chemicals delivered sales growth driven by demand for methyl cellulosics in EMEA. Energy Solutions reported lower sales due to reduced project activity in energy market sectors.

Operating EBITDA was $677 million, up 38 percent from pro forma operating EBITDA of $489 million in the year-ago period. Pricing momentum, improved equity earnings and demand growth in most businesses more than offset the impact of higher raw material costs.

Equity earnings for the segment totaled $71 million, compared with pro forma equity earnings of $31 million in the year-ago period. The year-over-year growth was driven by improvement in Sadara equity losses due to further progression of facility startups and contributions from the EQUATE joint venture as a result of higher monoethylene glycol pricing.

Packaging & Specialty Plastics

The Packaging & Specialty Plastics segment reported net sales of $6.1 billion, up 17 percent from pro forma net sales of $5.2 billion in the year-ago period. Sales growth was driven by volume gains of 8 percent, local price increases of 7 percent and a 2 percent tailwind from currency, primarily in Europe. Volume highlights included double-digit percent growth in North America and EMEA on higher hydrocarbons sales, new capacity additions on the U.S. Gulf Coast and ramp-up in Sadara production. Local price gains were recorded in all geographic regions.

The Packaging and Specialty Plastics business grew volume on continued consumer-led demand across key end-markets. Notable highlights included double-digit sales growth in food and specialty packaging as well as in industrial and consumer packaging end-markets in EMEA, enabled by the contributions of volumes from the Sadara joint venture. Volume growth in North America was driven by robust demand in food and specialty packaging as well as in health and hygiene applications, supported by start-up of the ELITE™ polyethylene unit. Gradual recovery from hurricane-related supply limitations continued to impact polyethylene sales volumes, particularly exports to Latin America, as well as global sales of ethylene copolymers and products for wire and cable applications. The business also delivered volume gains in elastomers applications, including: footwear and photovoltaics applications in Asia Pacific; hot melt adhesives in EMEA; and infrastructure applications in North America.

Operating EBITDA for the segment totaled $1.3 billion, flat with pro forma operating EBITDA in the year-ago period. Price and volume gains, including the benefit of new capacity additions, were offset by increased feedstock costs; cost and production impacts from hurricane-related disruptions and maintenance activities; as well as commissioning and startup costs for the U.S. Gulf Coast growth projects.

Equity earnings for the segment were $59 million, down from pro forma equity earnings of $64 million in the year-ago period. Improvement in Sadara equity losses, driven by higher sales of polyethylene, were more than offset by reduced earnings at the Thai joint ventures, due to rising raw material costs, and at the Kuwait joint ventures, driven by planned maintenance activities.

Specialty Products

Electronics & Imaging

Electronics & Imaging delivered net sales of $1.2 billion, an increase of 1 percent versus pro forma net sales in the year-ago period. Net sales growth was led by volume gains of 6 percent, which more than offset a 5 percent negative impact from portfolio-related actions (sales of the Display Films and Authentication businesses).

Volume growth in the segment was driven by double-digit gains in consumer electronics, industrial and semiconductor end-markets, primarily in Asia Pacific. Continued demand for mobile phones and other consumer electronics, as well as industrial applications drove volume gains. Increased semiconductor content in end-use applications drove strong demand in both memory and logic market segments. Partially offsetting this growth was a decline in photovoltaics as demand for Tedlar® film was more than offset by continued declines in Solamet® paste due to competitive pressure.

Operating EBITDA for the segment was $367 million, up 11 percent from pro forma operating EBITDA of $331 million in the year-ago period. Volume growth, lower pension/OPEB costs, and cost synergies more than offset hurricane-related costs, a negative impact from portfolio and higher raw material costs.

Nutrition & Biosciences

Nutrition & Biosciences reported net sales of $1.6 billion, up from pro forma net sales of $1.4 billion in the year-ago period. Net sales growth of 10 percent was due to a 6 percent net benefit from portfolio, a 2 percent benefit from volume and a 2 percent benefit from currency. The positive impact from portfolio-related actions was due to the acquisition of FMC’s Health & Nutrition business.

Volume growth in the segment was led by increased demand for bioactives, continued growth in probiotics, demand for microbial control solutions in energy markets in North America, and growth in pharmaceuticals, including excipients and vegetal-based encapsulations. Growth in bioactives reflected strength in home and personal care and animal nutrition markets due to new product introductions. Continued growth in probiotics was driven by demand in Asia Pacific and Europe. Partially offsetting this growth were declines in systems and texturants due to continued weakness in packaged food markets, primarily in North America, and specific actions taken to exit low-margin market segments.

Operating EBITDA for the segment was $352 million, up 14 percent from pro forma operating EBITDA of $309 million in the year-ago period driven by a portfolio benefit, lower pension/OPEB costs, cost synergies, and volume growth. Partially offsetting these gains was the absence of a $27 million gain from a prior-year asset sale.

Transportation & Advanced Polymers

Transportation & Advanced Polymers reported net sales of $1.3 billion, up from pro forma net sales of $1.2 billion in the year-ago period. Net sales growth of 10 percent included volume gains of 5 percent, local price benefits of 4 percent and 1 percent from currency. The growth, which was achieved in most geographies, was led by strong demand from the automotive market and broad-based demand from electronics and industrial markets. Focused application development and continued trends in light weighting of vehicles and higher temperature environments fueled stronger demand for adhesives and engineered polymers. The segment continued to outpace global industry auto builds, which according to IHS rose 1 percent in the quarter versus last year.

Volume gains were also achieved by Kalrez® and Vespel® high-performance parts as demand from the electronics and aerospace markets remained robust while demand for specialty silicones in medical devices remained solid. Volume growth was led by Asia Pacific, followed by the Americas and Europe.

Operating EBITDA for the segment was $365 million, up 32 percent from pro forma operating EBITDA of $276 million in the year-ago period. Benefits from lower pension/OPEB costs, volume gains, improved local price and cost synergies more than offset higher raw material costs.

Safety & Construction

Safety and Construction delivered net sales of $1.3 billion, compared with pro forma net sales of $1.2 billion for the year-ago period. Net sales growth of 4 percent was driven by volume gains of 4 percent and currency of 1 percent, partly offset by a decrease in local price of 1 percent. Volume growth reflected continued solid demand across industrial markets, construction and medical packaging. Local price declines reflected pressure in isolated areas of aramids as well as product mix, partly offset by gains in building solutions.

The volume gain was led by Tyvek® protective materials, which achieved double-digit percent volume growth due to increased demand from industrial and construction markets as well as medical packaging. Contributing to the volume gain was a high-single-digit percent increase in Kevlar® high-strength materials, reflecting higher demand from industrial markets. A low-single-digit percent volume gain from water filtration reflected strength in ion exchange resins and ultra-filtration in industrial applications. Building Solutions volumes also rose by the low-single-digits percent with gains in foam board amid stronger construction demand. Nomex® thermal-resistant garment volumes were even with strong sales in the prior year’s quarter while Corian® design volume was constrained by raw material availability. Regionally, volume growth was driven by Europe, followed by Asia Pacific and Latin America. Drivers included Tyvek® for graphics and house wrap in EMEA, and gains from Kevlar® in Asia Pacific.

Operating EBITDA for the segment was $285 million, up 26 percent from pro forma operating EBITDA of $227 million in the year-ago period as lower pension/OPEB costs and broad-based volume growth was partly offset by the impact of lower local price and higher raw material costs.

Outlook

“The trajectory of global economic expansion has gained momentum – driven by robust fundamentals in consumer and business confidence, employment and wage growth and manufacturing and infrastructure investment activity,” said Andrew Liveris, executive chairman of DowDuPont. “In developed economies in particular, such as the United States, Germany, France, Canada and the U.K., we continue to see strong leading indicators of broad-based growth. Furthermore, early signs from the business community point to U.S. tax reform as a catalyst for further domestic capital investments, which will take advantage of enhanced competitiveness and pro-business incentives. Adding to this, the emerging middle class in developing economies, most notably in India and China, but also in Africa and the Middle East, continues to support sustainable growth.

“All of this bodes well for the products and technologies within DowDuPont’s portfolio, which are well positioned to meet growing needs in the Materials Science, Agriculture and Specialty Product sectors. Looking ahead, our levers of value creation are clear: continuing to further unlock the cost and growth synergies of this merger transaction, capitalizing on our early success and achieving the enhanced cost synergy commitment we are announcing today; delivering new products from our in-flight growth investments and powerful innovation pipeline; and quickly standing and separating into three industry-leading companies on the new accelerated timeline we announced today.” 

Website: http://www.dow-dupont.com

Published: February 1, 2018