Dow Chemical 2009 Annual Report Download - page 83

Table of Contents
The Hydrocarbons and Energy business transfers materials to Dow’s derivatives businesses at net cost, which results in EBITDA that is typically at or
near breakeven. EBITDA for 2009 was $391 million, driven by a $457 million gain on the sale of the Company’s interest in TRN and restructuring charges
of $65 million, primarily related to the Company’s decision to shut down the ethylene manufacturing facility in Hahnville, Louisiana. EBITDA for 2008 was
a loss of $70 million due to hurricane-related costs of $52 million and restructuring charges of $18 million.
The Company uses derivatives of crude oil and natural gas as feedstocks in its ethylene facilities, while natural gas is used as fuel. The Company’s cost
of purchased feedstock and energy declined $10.2 billion (40 percent) in 2009. Crude oil prices decreased, and on average, 2009 prices were $36 per barrel
(37 percent) lower than 2008 levels. North American natural gas prices also decreased significantly, and were approximately $5.04 per million Btu lower than
in 2008, a decrease of 56 percent.
2008 Versus 2007
Hydrocarbons and Energy sales were $8,968 million in 2008 compared with $7,105 million in 2007. In 2008, prices were up 21 percent and volume
increased 5 percent from 2007. The increase in selling prices in 2008 was driven by significantly higher overall feedstock, monomer and energy costs. Sales
of monomers increased compared with 2007 due to a styrene supply contract with Americas Styrenics LLC.
EBITDA in 2008 was a loss of $70 million. In 2007, EBITDA was a loss of $45 million, primarily due to restructuring charges of $44 million related to
the shutdown of the Company’s styrene monomer plant in Camaçari, Brazil and the closure of storage wells in Fort Saskatchewan, Canada. See Note C to the
Consolidated Financial Statements for information on restructuring charges.
Hydrocarbons and Energy Outlook for 2010
Crude oil and natural gas prices are expected to remain volatile and sensitive to external factors such as weather, economic activity and geopolitical tensions.
The Company expects crude oil prices, on average, to be higher than 2009. While improving economic conditions are expected to improve ethylene margins
slightly over margins in 2009, the improvement will largely be negated by the startup of significant new industry capacity in the Middle East and Asia Pacific.
Ethylene margins could improve somewhat compared with these expectations if the pace of capacity rationalization elsewhere within the industry accelerates,
and/or demand improves more than current economic projections indicate. The economic outlook continues to be uncertain, as the global markets wait for
signs of demand recovery, while the energy sector remains volatile.
CORPORATE
2009 Versus 2008 (Pro Forma Comparison)
Sales for Corporate, which primarily related to Morton International, Inc. (the Salt business acquired with the Rohm and Haas acquisition) and the
Company’s insurance operations, were $1,095 million in 2009, down from $1,539 million in 2008. Included in the results for Corporate are:
·results of Morton International, Inc. (see Note E to the Consolidated Financial Statements),
·results of insurance company operations,
·gains and losses on sales of financial assets,
·stock-based compensation expense and severance costs,
·changes in the allowance for doubtful receivables,
·expenses related to Ventures,
·asbestos-related defense and resolution costs,
·foreign exchange hedging results, and
·certain overhead and other cost recovery variances not allocated to the operating segments.
EBITDA for 2009 was a loss of $1,092 million, unchanged from 2008. EBITDA for 2009 was reduced by costs related to the April 1, 2009 acquisition
of Rohm and Haas of $362 million, including a $166 million of other transaction and integration costs expensed in accordance with the accounting guidance
for business combinations, $60 million of acquisition-related retention expenses, a $56 million loss on the early extinguishment of debt, and $80 million of
transaction and other acquisition costs incurred by Rohm and Haas prior to the April 1, 2009 acquisition. EBITDA was also impacted by
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