Dow Chemical 2009 Annual Report Download - page 61

Table of Contents
In 2009, the Company sold its products and its services to customers in approximately 160 countries throughout the world. Thirty-five percent of the
Company’s sales were to customers in North America; 34 percent were in Europe; while the remaining 31 percent were to customers in Asia Pacific, Latin
America, and India, Middle East and Africa (“IMEA”). The Company employs approximately 52,000 people and has a broad, global reach with 214
manufacturing sites in 37 countries.
2009 OVERVIEW
Dow and the chemical industry as a whole faced significant economic challenges across much of the world in 2009. While early signs of recovery began to
emerge in the latter half of the year, high unemployment in developed regions, lingering effects of the global financial crisis, and cautious business and
consumer spending all contributed to challenging economic conditions throughout the year. Despite these challenging business conditions, Dow remained
focused on its strategy to transform into an earnings growth company, most notably completing the acquisition of Rohm and Haas Company (“Rohm and
Haas”) on April 1, 2009, combining the two organizations’ best-in-class technologies, broad geographic reach and strong market channels.
Dow’s reported sales declined 22 percent from 2008 to $44.9 billion, as difficult economic conditions persisted for much of the year. Sales were down 30
percent on a pro forma(1) basis, driven by declines of 17 percent in price and 13 percent in volume. While feedstock and energy costs remained volatile in
2009, they were markedly lower than the previous year as a result of weak demand across many end-markets. The Company’s purchased feedstock and
energy costs fell $10.2 billion (40 percent) compared with 2008, although a rising cost trend began to emerge in the latter half of the fourth quarter.
On a pro forma basis, the Performance segments (Electronic and Specialty Materials; Coatings and Infrastructure; Health and Agricultural Sciences;
Performance Systems; and Performance Products) reported smaller declines in price than the Basics segments (Basic Plastics; Basic Chemicals; and
Hydrocarbons and Energy). Double-digit volume declines were reported by all operating segments, except Health and Agricultural Sciences and Basic Plastics,
reflecting the severe downturn in economic conditions. On a geographic basis, volume declined in North America and Europe, while the emerging geographies
of Asia Pacific, Latin America and IMEA performed markedly better. These results reflect the trend of emerging geographies leading the economic recovery
throughout 2009. In addition, in the latter half of the year, Dow’s results from joint ventures began to approach the level of earnings reported prior to the
economic downturn. Dow’s equity in earnings of nonconsolidated affiliates totaled $630 million for the year.
Overall, Dow’s focus on price and volume management, control of discretionary spending and capital expenditures, and active portfolio management were
instrumental to the Company’s ability to respond to the challenging economic environment. The Company continued to invest for growth, reinforcing its
strategic focus on science-based innovation and technology integration, as research and development (“R&D”) expenses reached $1.5 billion, or $1.6 billion
on a pro forma basis. The Company ended the year with $2.8 billion of cash and cash equivalents, and throughout the year the Company had sufficient
liquidity and financial flexibility to meet all of its business obligations.
In the year, Dow remained focused on accelerating its strategic transformation into an earnings growth company and emphasizing the Company’s
commitment to financial discipline. Actions taken during 2009 included:
·Dow completed its acquisition of Rohm and Haas, marking a significant milestone in Dow’s transformation into an earnings growth company. With
this acquisition, Dow became a leading global specialty chemicals and advanced materials company. See Note D to the Consolidated Financial
Statements for additional information.
·The Company’s Board of Directors approved a restructuring plan related to Dow’s acquisition of Rohm and Haas as well as actions to advance the
Company’s strategy and to respond to continued weakness in the global economy. The restructuring plan includes the elimination of approximately
2,500 positions primarily resulting from synergies achieved as a result of the acquisition of Rohm and Haas. In addition, the Company will shut
down a number of manufacturing facilities. These actions are expected to be completed primarily during the next two years. Several ethylene and
ethylene-derivative assets were impacted by the announcement and these shutdowns are expected to reduce Dow’s ethylene demand by approximately
30 percent on the U.S. Gulf Coast. See Note C to the Consolidated Financial Statements for additional information.
(1) The unaudited pro forma historical information reflects the combination of Dow and Rohm and Haas assuming the transaction had been consummated on January 1, 2008.
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