Citi Chemicals Conference

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  • 1.Dows Transformation In Action Geoffery E. Merszei Executive Vice President & Chief Financial OfficerDecember 2, 200819th Annual Citi Chemicals Conference

2. AgendaStrengthening Basics Preferentially Investing in Performance Businesses Business Portfolio Management Financial Discipline Remunerating Our Shareholders 219th Annual Citi Chemicals Conference 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. 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) Baha Blanca, Argentina (cracker) Tarragona, Spain (cracker and octene manufacturing facility) Ethylene supply agreements from Dows other crackers Number 1 position in Polyethylene419th Annual Citi Chemicals Conference 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 B519th Annual Citi Chemicals Conference 6. K-Dow Petrochemicals Sound PartnersDow 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 leadershipRegional 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. KPC A Strong Partner & Resource Owner350National oil company (NOC)300Publicly traded company250Billion 200 barrels of oilequivalent150100 500NOCNOCC m OCNOCeumeria)mcoCips bilBP hell ronEnia NOi NO roleu n MoPhillria N Chevch Si Araetrol (AlgIranIraq zuelaDhabLiby r PetExxoNige l Dutocoait P Saud trachVeneAbu QataConRoyaKuw Sona719th Annual Citi Chemicals Conference Source: CMAI, 2005 data 8. K-Dow Petrochemicals Key Statistics A 50:50 joint venture between Dow and PetrochemicalsThe CompanyIndustry Company of Kuwait The worlds largest polyolefins producer and marketer The worlds largest amines producer and marketer Sales of approximately $15 billion worldwide HeadquartersSoutheast Michigan, USAEmployees ~ 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. 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 salesEurope 34%919th Annual Citi Chemicals Conference 10. K-Dow & EQUATE: Opportunities for Growth Kuwait ChinaNorthAfricaThailandBrazilCurrent Production AssetsPlanned Assets 1019th Annual Citi Chemicals Conference 11. Preserving The Value of Dows IntegrationK-DowBuilding 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 EthyleneaminesDichlorideSystems Ethanolamines Ethylene Oxide Specialty Chemicals Propylene Specialty Plastics & PET Propylene Oxide Elastomers Styrene Technology Licensing & CatalystMore Than 60 Service and Supply Agreements Reliable and Secure long-term supply Enabling Both Dow and K-Dow to Grow11 19th Annual Citi Chemicals Conference 12. AgendaStrengthening Basics Preferentially Investing in Performance Businesses Business Portfolio Management Financial Discipline Remunerating Our Shareholders 1219th Annual Citi Chemicals Conference 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 Dows own innovation engine Delivers more stable earnings with higher growth13 19th Annual Citi Chemicals Conference 14. Rohm and Haas Integration Update Program Management Office 21 Functional Implementation Teams 6 Business Implementation Teams 7 Clean Teams1419th Annual Citi Chemicals Conference 15. Rohm and Haas Cost Synergy Update Run Rate EstimatesEnd Year 1 End Year 2Shared Services & $280$170 Governance Purchasing Synergies,$180 $280 Including Raw Materials Manufacturing / Supply $160$70Chain Business Development$65$80 Overlap 050100 150 200 250 300July 10 Commitment ($800 Million) Will be at $100 Million Run Rate on Day 1Rohm & Haas $110 Million Savings is Additive 1519th Annual Citi Chemicals Conference 16. Synergy OpportunitiesFunctionProject Description Purchasing Raw Materials Information TechnologyIT Infrastructure Consolidation Corp Business Dev OverlapBusiness Overlap Synergies Supply Chain Logistics and Packaging Information TechnologyI/S Organizational Consolidation Manufacturing & Engineering Specific Mfg Footprint Optimization Marketing & SalesMarketing and Sales Synergy Project Manufacturing & Engineering MRO/Maintenance Equipment Shared ServicesCorporate Services16 19th Annual Citi Chemicals Conference 17. Rohm and Haas Advanced Materials Division Dow Chairman and CEO Andrew Liveris Rohm and Haas Advanced Materials Division CEOPierre BrondeauMarketingHuman ResourcesCoatings Specialty Packaging & Films Ruby Chandy* Ruby Chandy Rich Lovely Luis FernandezPatrice BarthelmesVice-President Vice President Vice PresidentVice PresidentVice PresidentCommunicationsR&D Designed Polymers & Brian McPeak Building & Construction A. N. SreeramSeparation TechnologiesVice PresidentTorsten KraefVice President Peter DaviesVice President Vice PresidentShared ServicesLegal Paper & Textiles Jim VarilekElectronic Materials Ken FitzpatrickPhilippe Raynaud de FitteVice President Yi Hyon Paik Vice PresidentVice President Vice PresidentAsiaFinanceManufacturing and EH&SMark DouglasAlfonso EscuderoDon TaylorVice PresidentVice PresidentVice 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. The New Dow A Significant Portfolio Shift! Pro Forma DowPro Forma DowDow (pre K-Dow) (post K-Dow) + ROH (post K-Dow)2007 Revenue151% 49% 63% 37%69% 31% 2007 EBITDA1,252% 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 1819th Annual Citi Chemicals Conference 19. AgendaStrengthening Basics Preferentially Investing in Performance Businesses Business Portfolio Management Financial Discipline Remunerating Our Shareholders 1919th Annual Citi Chemicals Conference 20. Delivering On Our Commitments Business Portfolio Management Divest or shut down non-competitive, unproductive ornon-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 2019th Annual Citi Chemicals Conference 21. AgendaStrengthening Basics Preferentially Investing in Performance Businesses Business Portfolio Management Financial Discipline Remunerating Our Shareholders 2119th Annual Citi Chemicals Conference 22. Delivering On Our Commitments Sound Financial Discipline Debt Reduction59% 55% Debt/Capital48%39%34% 32%20022003 20042005 2006 2007Capex 3.0 2.0 $ BillionsDepreciation 1.0Capex 0.0 2002 2003 20042005 2006 20072219th Annual Citi Chemicals Conference 23. Managing Todays Challenging EnvironmentFinancial 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. AgendaStrengthening Basics Preferentially Investing in Performance Businesses Business Portfolio Management Financial Discipline Remunerating Our Shareholders 2419th Annual Citi Chemicals Conference 25. Delivering On Our Commitments Remunerating Our Shareholders $1,600 73 Million SharesRepurchased $1,400 Share Repurchase Amount ($Millions) $3.0 Billion Spent $1,200 Largest Program $1,000In A Decade$800 $600 $400 $200 $020052006 20073Q08 YTD 2519th Annual Citi Chemicals Conference 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 19281938 1948 1958 1968 1978 19881998*ADJUSTED FOR STOCK SPLITS AND STOCK DIVIDENDS**2008 DIVIDEND ANNUALIZED BASED ON Q3 YTD PAYOUT 2619th Annual Citi Chemicals Conference 27. Key MessagesStrengthen Franchise Basics Business via K-Dow Preferentially Invest in Performance Businessesvia Rohm and Haas Portfolio Management Continues Preserving Financial Flexibility Uninterrupted Dividend for 96 Years!2719th Annual Citi Chemicals