Dow Chemical 2009 Annual Report Download - page 79

Table of Contents
BASIC PLASTICS
2009 Versus 2008
For the Basic Plastics segment, there was no difference between actual and pro forma sales and EBITDA for 2009 and 2008.
Basic Plastics sales for 2009 were $9,925 million, down 30 percent from $14,240 million in 2008. Double-digit price declines were reported in all
geographic areas during 2009. The decline in feedstock costs and the weak pricing environment that developed in late 2008 carried forward into 2009,
resulting in prices that were 27 percent lower than those of 2008. After reaching a low point during the first quarter of 2009, prices improved during the
remainder of the year. Volume was negatively impacted by weak global economic conditions, declining 3 percent for the year. Volume improved, however, in
Asia Pacific, Latin America and IMEA as the economic recovery began to gather momentum and demand increased. Lower natural gas and other feedstock
prices in North America, as well as delays in the startup of new Middle East industry production capacity, resulted in economic conditions that favored the
export of North American production into these geographic areas. Volume in North America and Europe was lower as weak economic conditions persisted
throughout the year. The volume decline in North America also reflected the May 2008 formation of Americas Styrenics LLC.
EBITDA for 2009 was $1,665 million, down from $1,746 million in 2008. While Basic Plastics benefited from a significant decline in feedstock
costs, lower raw material and freight costs and lower SG&A expenses, these favorable impacts were more than offset by the decline in prices. Equity earnings
were down slightly from 2008 as improved earnings from Americas Styrenics LLC, The Kuwait Olefins Company K.S.C., LG DOW Polycarbonate Limited
and Siam Polyethylene were more than offset by lower earnings from EQUATE. EBITDA in 2009 was impacted by $65 million of impairment charges
related to the Company’s investment in Equipolymers, a nonconsolidated affiliate, and $1 million of restructuring charges. EBITDA in 2008 was reduced by
restructuring charges totaling $148 million. The 2008 restructuring charges reflect the write-down of the Company’s investment in a project to form a joint
venture in Oman with the Oman Petrochemicals Industries Company LLC; costs related to the shutdown of production facilities (Terneuzen, The
Netherlands; Freeport, Texas; and Riverside, Missouri); as well as costs associated with the permanent shutdown of the operations of the Pétromont and
Company, Limited Partnership (“Pétromont”) joint venture in Varennes, Canada. (See Note C to the Consolidated Financial Statements for information on
restructuring charges.) EBITDA in 2008 also included a goodwill impairment loss of $30 million associated with the polypropylene reporting unit (see Note I
to the Consolidated Financial Statements), as well as costs of $16 million related to the U.S. Gulf Coast hurricanes.
Polyethylene sales were down 28 percent compared with 2008 as prices decreased 29 percent and volume improved 1 percent. Double-digit price declines
were reported in all geographic areas, reflecting significantly lower feedstock costs. While prices improved in all geographic areas since the first quarter of the
year, they remained significantly lower than in 2008. Volume was up slightly, with improvement in Asia Pacific, Latin America, and IMEA. Significant
volume improvement was realized in Asia Pacific as government economic stimulus programs in China created increased demand. This increased demand,
along with delays in new Middle East industry capacity and lower natural gas prices in North America, created economic conditions that promoted the export
of North American production into Asia Pacific. Volume was lower in North America and Europe as weak economic conditions continued to dampen demand.
EBITDA declined in 2009 as the favorable impact of lower feedstock and raw material costs and lower SG&A expenses were more than offset by the decline
in prices and lower equity earnings from EQUATE. EBITDA in 2008 reflected restructuring charges of $142 million related to the write-down of costs
associated with the Oman Petrochemicals Industries Company LLC joint venture; and costs associated with the permanent closure of the Pétromont joint
venture. EBITDA for 2008 also reflected costs of $12 million related to the U.S. Gulf Coast hurricanes.
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