Dow Chemical 2013 Annual Report Download - page 68

46
2012 Versus 2011
Performance Plastics sales for 2012 were $14,479 million, down 11 percent from $16,257 million in 2011 with price down 4
percent (with more than half of the decrease due to currency) and volume down 7 percent. Feedstock and energy costs fell
during 2012 resulting in lower selling prices across all geographic areas and businesses. Prices declined in EMEA where
modest local price increases were more than offset by the unfavorable impact of currency. The decline in volume reflects the
divestiture of the Polypropylene business; excluding the impact of this divestiture, volume was up 1 percent. Volume was
higher in all geographic areas except EMEA, where recessionary conditions continued to negatively impact demand. Dow
Elastomers reported double-digit volume growth in all geographic areas, except EMEA, due to strong demand in the
transportation and adhesive industries. Volume in EMEA was lower as weak economic conditions negatively impacted the
transportation and infrastructure industries. Dow Electrical and Telecommunications reported strong volume growth in Asia
Pacific, notably in China, due to continued strong demand for fiber optic cable. This was partially offset by volume declines in
North America, Latin America and EMEA due to lower demand in the power industry. Dow Packaging and Specialty Plastics
reported volume growth due to higher demand in all geographic areas, except EMEA. Volume was higher in North America
despite limited ethylene availability during the first half of the year due to a planned maintenance turnaround at the Company's
St. Charles, Louisiana ethylene facility and limited ethylene supply at the Prentiss, Alberta, Canada manufacturing facility.
EBITDA for 2012 was $3,018 million, down from $3,440 million in 2011. EBITDA declined as lower selling prices, the
absence of earnings from divested businesses, reduced equity earnings from The SCG-Dow Group and equity losses from
Sadara, and the unfavorable impact of the 2012 certain items stated above more than offset the favorable impact of lower
feedstock and energy costs and lower spending on planned maintenance turnarounds. In North America, favorable shale gas
related feedstock dynamics allowed the Company to leverage its competitive position and expand margins. EBITDA in 2011
included an $86 million gain related to cash collected on a previously impaired note receivable related to Equipolymers.
Performance Plastics Outlook for 2014
In 2014, Performance Plastics growth is expected to continue at a modest pace. In North America, the availability of low-cost
U.S. shale gas is expected to continue to provide a competitive advantage for the Performance Plastics businesses. These
favorable dynamics will allow Dow Packaging and Specialty Plastics to improve margins and increase volume through
increased exports into Asia Pacific and Latin America. Margins in EMEA are expected to remain compressed due to the high
cost of naphtha-based feedstocks; however, announced industry production capacity reductions may provide some upside
potential. Dow Packaging and Specialty Plastics will also begin the pre-marketing of products for the Sadara. This activity will
increase as the year progresses, in anticipation of the start-up of the Sadara production facilities in the second half of 2015. In
addition, Dow Packaging and Specialty Plastics will continue to benefit from the restart of an ethylene facility in Louisiana.
Dow Elastomers is expected to see growth as demand increases due to continued improvement in the transportation,
construction and infrastructure industries. Dow Electrical and Telecommunications expects to see improvement in 2014 due to
continued growth in the U.S. housing and construction industries and government spending initiatives in Asia Pacific. Growth
in EMEA will be slower due to weaker economic conditions and the startup of new industry capacity.
Construction continues on phase one of the new biopolymers manufacturing facility in Santa Vitória, Minas Gerais, Brazil. This
project, which is a consolidated joint venture with Mitsui & Co. Ltd., was announced during the fourth quarter of 2011. The
joint venture's ethanol mill is expected to process its first full harvest of sugarcane in 2014. The joint venture's original plans
for expansion into downstream derivative products have been postponed. The joint venture is a variable interest entity and
included in Dow's consolidated financial statements. See Note 19 to the Consolidated Financial Statements for additional
information.
On August 27, 2013, the Company announced the location of four new Performance Plastics production units to be built on the
U.S. Gulf Coast. Leveraging an advantaged feedstock position from U.S. shale gas, these production units will support
expected profitable growth of the Company's high value Performance Plastics franchise. The businesses, production units and
locations impacted are as follows:
• Dow Packaging and Specialty Plastics: An ELITE™ polymer production unit will be built in Freeport, Texas; and a
Low Density Polyethylene (LDPE) production unit will be built in Plaquemine, Louisiana.
• Dow Elastomers: A NORDEL™ metallocene EPDM production unit will be built in Plaquemine, Louisiana; and a
High Melt Index (HMI) AFFINITY™ polymer production unit will be built in Freeport, Texas.