Dow Chemical 2009 Annual Report Download - page 82

Table of Contents
2008 Versus 2007
Sales for Basic Chemicals were $4,265 million in 2008, compared with $4,434 million in 2007. Overall, sales decreased 4 percent as volume decreased
17 percent and prices rose 13 percent. Volume decreased across all businesses and geographic areas, except IMEA, with the largest decline in EO/EG, mainly
driven by weak economic conditions, poor industry fundamentals and planned and unplanned outages. Price increases were realized in all geographic areas
except Asia Pacific, with particular strength in Latin America and North America, driven by significant increases in feedstock and energy costs through the
third quarter of 2008 and tight industry supply/demand balances in the caustic soda market that drove prices higher.
EBITDA for Basic Chemicals was $278 million in 2008, compared with $952 million in 2007. Results for the segment in 2008 were reduced by
hurricane-related costs and restructuring charges. EBITDA in 2008 declined sharply from 2007 due to higher feedstock and energy costs which compressed
margins, and lower equity earnings from EQUATE and MEGlobal. In 2007, results were reduced by restructuring charges of $7 million related to the write-
off of capital project spending.
Basic Chemicals Outlook for 2010
Caustic soda sales are expected to decrease in 2010 due to continued weak demand in the chemical processing and pulp and paper industries. However, both
prices and volume are expected to continue to improve over the trough conditions that existed in the third quarter of 2009, as downstream industries continue to
recover.
VCM sales are expected to increase in 2010 through increased demand from existing contractual customers and expected price increases resulting from
cost pressure related to higher feedstock and energy prices.
EG sales are expected to decrease in 2010 as volume is negatively impacted by increased industry run rates and the full-year impact of new industry
production capacity in the Middle East and Asia Pacific that started up in 2009, as well as the anticipated startup of new industry production capacity in Asia
Pacific during 2010. In the first quarter of 2010, the Company shut down the EO/EG plant in Wilton, England.
Equity earnings are expected to remain relatively flat compared with 2009 as increased earnings from EQUATE and The Kuwait Olefins Company
K.S.C. are expected to be offset by lower earnings from MEGlobal, in line with the Company’s expectations for the EO/EG business.
HYDROCARBONS AND ENERGY
2009 Versus 2008
For the Hydrocarbons and Energy segment, there was no difference between actual and pro forma sales and EBITDA for 2009 and 2008.
Hydrocarbons and Energy sales were $4,241 million in 2009, down significantly from $8,968 million in 2008. Sales declined 53 percent with prices
declining 28 percent and volume declining 25 percent . The decrease in selling prices in 2009 was driven by the impact of the global economic recession and
the unprecedented decline of crude oil and other commodity prices that began in the fourth quarter of 2008 and continued into 2009. Volume declined sharply
in 2009 due to lower ethylene cracker operating rates and lower refinery sales as a result of a planned maintenance turnaround at TRN and the September 1,
2009 sale of the Company’s ownership interest in TRN.
52