Dow Chemical 2009 Annual Report Download - page 71

Table of Contents
ELECTRONIC AND SPECIALTY MATERIALS
2009 Versus 2008 (Pro Forma Comparison)
Electronic and Specialty Materials sales were $4,614 million for 2009, down 19 percent from $5,729 million in 2008, as volume dropped 15 percent and
prices declined 4 percent. The decrease in volume was broad-based with declines in all geographic areas, except IMEA, and in both businesses due to the
global downturn in the electronics and construction industries. EBITDA for 2009 was $1,060 million compared with $1,565 million for 2008. Despite the
impact of lower SG&A expenses and lower raw material costs during 2009, EBITDA declined as a result of lower volume, a decrease in equity earnings from
Dow Corning, which included the Company’s $29 million share of a restructuring charge, restructuring charges of $68 million (see Note C to the
Consolidated Financial Statements), and an increase in cost of sales of $75 million related to the fair valuation of Rohm and Haas inventories. EBITDA for
2008 included the gain on the sale of Rohm and Haas’ investment in UP Chemical Company of $87 million, restructuring charges of $22 million and
hurricane-related costs of $3 million.
Electronic Materials sales for 2009 were down 23 percent versus 2008, driven by a 22 percent decrease in volume and a 1 percent decline in prices.
Volume declined in all geographic areas reflecting the global economic downturn. Asia Pacific, however, reported signs of recovery in the second half of 2009
due to a rebound in electronics demand and re-stocking within the value chain. Despite lower SG&A expenses driven by the Company’s cost control
programs, EBITDA decreased significantly due to lower volume. EBITDA for 2009 was reduced by $12 million of restructuring charges and a $28 million
increase in cost of sales related to the fair valuation of Rohm and Haas inventories. EBITDA for 2008 included a gain of $87 million resulting from the sale of
Rohm and Haas’ investment in UP Chemical Company, restructuring charges of $12 million and hurricane-related costs of $1 million.
Specialty Materials sales for 2009 were down 18 percent versus 2008 with volume down 12 percent and prices down 6 percent. Volume declined across
all major businesses and geographic areas. Volume declines in ion exchange resins and reverse osmosis membranes, particularly for large industrial water
projects, were principally due to lower infrastructure spending and cautious capital spending by customers. Volume declines in cellulosics were driven by
weaker construction industry conditions. Prices declined in all geographic areas, especially in North America and Europe. EBITDA for 2009 decreased due to
lower selling prices and volume which more than offset lower raw material costs and SG&A expenses. EBITDA for 2009 was reduced by $56 million of
restructuring charges and by a $47 million increase in cost of sales related to the fair valuation of Rohm and Haas inventories. EBITDA for 2008 included
restructuring charges of $10 million and hurricane-related costs of $2 million.
2008 Versus 2007 (Actual Comparison)
Electronic and Specialty Materials sales increased 27 percent to $2,620 million in 2008, compared with $2,071 million in 2007. Volume increased 19 percent
and prices increased 8 percent including a 3 percent favorable currency impact. The improvement in volume was driven by the full-year impact of the 2007
acquisition of Wolff Walsrode. The increase in prices in 2008 was driven by higher raw material costs. EBITDA for 2008 was $835 million compared with
$737 million in 2007. EBITDA increased in 2008 due to higher sales volume and increased equity earnings from Dow Corning. EBITDA for 2008 was
reduced by restructuring charges totaling $10 million related to the closure of two manufacturing assets and $2 million of hurricane-related costs. EBITDA in
2007 was reduced by restructuring charges totaling $27 million and a $7 million charge for IPR&D related to the acquisition of Wolff Walsrode. (See Notes C
and D to the Consolidated Financial Statements for additional information on restructuring charges and IPR&D.)
41