Dow Chemical Co Earnings Call Nuggets: Potential Downtime and Performance Materials Business

Dow Chemical Co (NYSE:DOW) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Potential Downtime

John McNulty – Credit Suisse: Just first one with regard to the plastics business, you had some downtime last year you have like Charles up now. How should we be thinking about potential downtime for this year and what all of this kind of added in means for volume growth in terms of what you are expecting this quarter, or excuse me this year?

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Andrew N. Liveris – Chairman, President and CEO: This is Andrew. It is very hard to forecast unplanned and we just had an unplanned in Texas our team did a great job of bringing that back up very quickly. But in terms of planned, Bill will give you a specific sense of it, but look, nothing like last year to answer your question and that was an unfortunately timed downtime as you know, so we lost a lot of the run-up in the low-cost feedstock side out of Canada in particular. But we believe our Performance Plastics business is on its march up. We believe that the margin expansions based on our steady-state model here shows operating rates going up. We believe that we are advantaged specially in the growth regions with our Kuwait venture as well as our Argentina business and of course the U.S. and Canada. So, I actually think that the business is doing incredibly well. They’ve got price increases out there. They’ve got good operating rates and with exception of unplanned, I think you can expect year-on-year growth.

William H. (Bill) Weideman – EVP and CFO: We’re assuming just a typical turnaround season this year and so even in our turnaround spending actually for 2013 will be very much in line with 2012.

John McNulty – Credit Suisse: Then just one follow-up question. In Electronics, we’ve seen the pricing continue to kind of drag down over the last few quarters and I guess if you can give us some colors to what’s really driving that and if there’s competitive issues or its commoditization type issues or if it’s just weak demand? Maybe you can shed a little light on that.

Andrew N. Liveris – Chairman, President and CEO: Definitely weak demand, John, nothing embedded in the business. In fact the business has got increasing investments and positive exposure to the growth side of the business which are; tablets, smartphones OLED, solid-state drives, but the slowdown in PC instead of phones and end of year all the people you’ve seen out there, whether it be Apple or anyone else, Samsung there’s been some slowness in the consumer this last quarter and they are expected to continue into Q1, but no, nothing about the portfolio. The portfolio has positioned itself for positive growth and positive margin expansion.

Performance Materials Business

Robert Koort – Goldman Sachs & Co.: Andrew, I was wondering if I could ask maybe a broader question around your Performance Materials business and propylene derivatives businesses, it seems like it’s been quite some time since they performed up to PAR and I’m wondering if you can assess is this a Dow Specific issue, or is there something structurally about those end markets and businesses that just make it a tough slog or how do you compare when you benchmark? And if it weren’t for just getting some low cost propylene production, is there a path to enrichment in other ways here?

Andrew N. Liveris – Chairman, President and CEO: Well the fix, you know Dow specific, I don’t believe so. If you look at the two key parts of performance material that are underperforming and have for some time to respond to you point, epoxy and then the whole polyurethane chain including isocyanides. The fixes are in place with the propylene back integration and the isocyanides investments in Saudi Arabia. So, low cost competitive building blocks, propylene oxide, MDI, TDI, epichlorohydrin all those are in place for the two-year route point. In the short term what’s been going on in the last couple of years in particular Bob is the propene volatility without half of our exposure being on the purchase side of this thing. The propylene volatility mimics the old price naphtha volatility and frankly the disconnect between the arbitrage of Asia where the markets are growing and North American where the market hadn’t been growing the way our assets are has particularly hurt polyurethanes. On epoxy, the Chinese just over built that plus the Taiwanese and the Koreans and its’ over supplied and frankly we took down the asset in Japan just recently. You was us take down the TDI asset down in South America. Slide 25 really speaks to the fact the in the very near term in Performance Materials in particular we have to intervene on high cost assets in low growth jurisdictions. Now one in Japan is clear one, the one in South America less clear, because Latin America is growing. So how do we actually bridge over to the low cost jurisdictions in developed markets and developing markets as the investment in Saudi Arabia and the investment in the U.S. Gulf Coast that actually bridges this over. In the meantime you can expect price action and price action will result in lost volume and lost volume may result in some more assets coming down. We are going to put a laser like focus because we are unsatisfied, dissatisfied with the last two years of performance and it is creating headwinds that speak against the positive side of the Dow portfolio. That’s the ROC focus, we are determined to fix those two businesses and do it in the short order.

Robert Koort – Goldman Sachs & Co.: Can you help us just size the reduced propylene sales to Braskem, is this meaningful for you from an earnings standpoint?

Andrew N. Liveris – Chairman, President and CEO: Not at all, it was not a great contract, and we are okay to see it go.