Dow Chemical 2013 Annual Report Download - page 69

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FEEDSTOCKS AND ENERGY
The Feedstocks and Energy segment includes the following businesses: Chlor-Alkali/Chlor-Vinyl; Energy; Ethylene Oxide/
Ethylene Glycol ("EO/EG"); and Hydrocarbons. Also included in the Feedstocks and Energy segment are the results of
MEGlobal and a portion of the results of EQUATE Petrochemical Company K.S.C., The Kuwait Olefins Company K.S.C., and
The SCG-Dow Group, all joint ventures of the Company.
Feedstocks and Energy
In millions 2013 2012 2011
Sales $ 9,854 $ 10,695 $ 11,302
Price change from comparative period (3)% (2)% 27%
Volume change from comparative period (5)% (3)% 7%
Equity earnings $ 539 $ 452 $ 561
EBITDA $ 858 $ 718 $ 940
Certain items impacting EBITDA $ 21 $ (7) $ —
2013 Versus 2012
Feedstocks and Energy sales were $9,854 million in 2013, down 8 percent from $10,695 million in 2012, driven by a 5 percent
decrease in volume and a 3 percent decrease in price.
Sales for the Hydrocarbons business were down 12 percent compared with 2012, due to a 7 percent decrease in volume and 5
percent decrease in price. Volume declined primarily from the expiration of propylene supply contracts related to the divestiture
of Dow’s Polypropylene business as well as lower co-product sales resulting from lower production and the use of lighter
feedslates in Europe. Price declined primarily due to lower butadiene prices in the United States and Europe as well as lower
prices for other co-products in Europe.
Sales for the Energy business are primarily opportunistic merchant sales driven by market conditions and sales to customers
located on Dow manufacturing sites. In 2013, Energy business sales increased 28 percent compared with 2012. Price increased
20 percent due to higher natural gas prices in North America while volume increased 8 percent.
The Company uses derivatives of crude oil and natural gas as feedstock in its ethylene facilities. In addition, the Company
purchases electric power, ethylene and propylene to supplement internal production, as well as other raw materials. The
Company's cost of purchased feedstock and energy increased $319 million in 2013, a 2 percent increase from 2012, primarily
due to increased propylene and natural gas costs.
Chlor-Alkali/Chlor-Vinyl sales decreased 3 percent compared with 2012, as volume declined 4 percent and price increased 1
percent. Volume decreased primarily due to lower sales of vinyl chloride monomer ("VCM"). In addition, caustic soda volume
decreased due to a planned maintenance turnaround and lower demand in the chlorine chain. Price increases were driven by
ethylene dichloride (“EDC”) in Asia Pacific, which was partially offset by lower caustic soda prices in North America and
Latin America due to improved chlorine demand and new capacity nearing startup.
EO/EG sales increased 13 percent compared with 2012, as volume increased 10 percent while price increased 3 percent.
Volume was higher due to increased catalysts sales. Ethylene oxide volumes were higher due to increased demand in North
America and EMEA. Price increases were driven by monoethylene glycol (“MEG”), which increased year-over-year due to
continued demand growth and limited industry capacity additions.
The Hydrocarbons business transfers materials to Dow's derivative businesses and the Energy business supplies utilities to
Dow's businesses at net cost, resulting in EBITDA that is at or near break-even for both businesses. For the segment, EBITDA
for 2013 was $858 million, up from $718 million in 2012. EBITDA for 2013 benefited from higher equity earnings from
EQUATE and MEGlobal and an $87 million gain on the sale of a 7.5 percent ownership interest in Freeport LNG
Development, L.P. EBITDA for 2013 was negatively impacted by $66 million of asset impairments, including the shutdown of
manufacturing facilities in the Chlor-Alkali/Chlor-Vinyl business. EBITDA in 2012 was negatively impacted by a $7 million
restructuring charge for the write-off of certain capital projects as part of the 4Q12 Restructuring plan. See Notes 3 and 11 to
the Consolidated Financial Statements for additional information on these charges.
2012 Versus 2011
Feedstocks and Energy sales were $10,695 million in 2012, down 5 percent from $11,302 million in 2011, driven by a 3
percent decrease in volume and a 2 percent decrease in price.