Dow Chemical 2009 Annual Report Download - page 75

Table of Contents
2009 Versus 2008 (Pro Forma Comparison)
Performance Systems sales were $5,854 million in 2009, down from $8,228 million in 2008. Sales declined 29 percent with volume declining 18 percent
and prices declining 11 percent. The decrease in volume was broad-based across all geographic areas and most businesses, with declines driven by the global
economic slowdown in the automotive, construction and utility industries. The drop in prices was also broad-based, with decreases reported in all geographic
areas driven by lower feedstock and other raw material costs.
EBITDA for 2009 was $675 million, compared with $274 million in 2008. EBITDA increased from 2008 as a decrease in raw material and feedstock
costs, lower freight costs, and lower R&D and SG&A expenses offset lower selling prices and lower volume. EBITDA for 2009 was reduced by an increase
in cost of sales related to the fair valuation of Rohm and Haas inventories ($30 million) and favorably impacted by $1 million from the sale of the Company’s
ownership interest in OPTIMAL. EBITDA for 2008 was negatively impacted by a goodwill impairment loss of $209 million associated with the Automotive
System reporting unit (See Note I to the Consolidated Financial Statements), costs of $6 million related to the U.S. Gulf Coast hurricanes, and restructuring
charges of $72 million related to the closure or impairment of several manufacturing facilities. See Note C to the Consolidated Financial Statements for
information on restructuring charges.
Automotive Systems sales decreased 36 percent versus 2008, with a 29 percent decrease in volume and a 7 percent decrease in prices. Compared with
2008, volume declined in most geographic areas due to the downturn in the global economy as original equipment manufacturers served by the business in
North America, Europe, and Latin America had decreased production. Volume in Asia Pacific started to recover in the second half of the year due to
government stimulus programs in China. Prices were down across all geographic areas due to lower feedstock costs and weak demand. EBITDA for 2009
increased compared with 2008 in part due to lower feedstock costs and lower SG&A expenses. EBITDA in 2008 was reduced by the goodwill impairment of
$209 million and restructuring charges of $27 million related to the closure or impairment of several manufacturing facilities.
Dow Elastomers sales decreased 30 percent versus 2008, with an 18 percent decrease in volume and a 12 percent decrease in prices. Double-digit volume
declines were reported in all geographic areas as the business continued to be impacted by weakness in the global automotive and construction industries.
EBITDA for 2009 increased compared with 2008 as lower feedstock and other raw material costs and lower SG&A and R&D expenses more than offset the
decline in volume and selling prices. EBITDA for 2009 was reduced by an increase in cost of sales related to the fair valuation of Rohm and Haas inventories
($30 million). EBITDA in 2008 was impacted by $44 million of restructuring charges, primarily related to the shutdown of facilities that manufactured
NORDEL™ hydrocarbon rubber in Seadrift, Texas and TYRIN™ chlorinated polyethylene in Plaquemine, Louisiana and $5 million of costs related to the
U.S. Gulf Coast hurricanes.
Formulated Systems sales decreased 23 percent versus 2008, with a 14 percent decrease in prices and a 9 percent decrease in volume. Prices were down in
all geographic areas driven by lower feedstock costs. Volume was down in all geographic areas except Asia Pacific where volume increased significantly,
primarily due to increased demand in China, particularly for epoxy systems used in wind energy applications. EBITDA for 2009 increased compared with
2008, primarily due to lower raw material costs and cost savings initiatives.
Dow Wire and Cable sales decreased 30 percent versus 2008, with a 17 percent decrease in volume and a 13 percent decrease in prices. Volume was down
in all geographic areas due to the continued weakness in the construction industry. Prices were also down in all geographic areas driven by lower raw material
costs. Despite the decrease in sales, EBITDA for 2009 was flat with 2008 as cost savings initiatives offset the decrease in selling prices and volume.
2008 Versus 2007 (Actual Comparison)
Performance Systems sales were $7,540 million in 2008, up from $6,597 million in 2007. Compared with 2007, sales increased 14 percent as prices rose
12 percent, including a 4 percent favorable impact of currency, and volume increased 2 percent. The improvement in prices was broad-based with increases in
all geographic areas.
EBITDA for 2008 was $235 million, compared with $624 million in 2007. Results for 2008 were negatively impacted by a goodwill impairment loss of
$209 million, costs of $6 million related to the U.S. Gulf Coast hurricanes, and restructuring charges of $70 million related to the closure or impairment of
several manufacturing facilities announced in the fourth quarter. Despite the improvement in prices, EBITDA for 2008 declined from 2007 due to reduced
operating rates across the Company’s manufacturing facilities, significant increases in feedstock and other raw material costs, and the unfavorable
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