Dow Chemical 2011 Annual Report Download - page 134

40
Dow Electronic Materials sales in 2011 were up 9 percent from 2010, driven by higher volume, especially in Asia Pacific
and EMEA, primarily due to higher demand for materials used in the production of organic light emitting diodes and other
materials used in flat panel and mobile displays. While semiconductor foundry utilization rates across the industry decreased in
2011, reducing the demand for chemical mechanical planarization pads ("CMP"), demand for metal organic products and
polishing CMP slurries increased. Demand for advanced photoresists and advanced chip packaging used in personal computer
memory applications and circuit boards also increased.
Functional Materials sales in 2011 were up 10 percent from 2010, as price increases more than offset a slight decline in
volume. Price increased in all geographic areas and all major businesses driven by higher raw material costs. Volume was down
slightly as a result of lower demand for home and personal care products (primarily in EMEA), more than offsetting increased
global demand for specialty polymers and cellulosics used in food and pharmaceutical applications.
2010 Actual Versus 2009 Pro Forma
Electronic and Functional Materials sales were $4,203 million for 2010, up 20 percent from $3,509 million in 2009, entirely
due to volume. Volume was strong across all geographic areas and all businesses, reflecting improved economic conditions in
the food and nutrition, personal care and electronics industries. Prices were flat for the segment, as competitive pricing pressure
on more mature products was countered by the introduction of new products with higher margins and targeted price increases in
response to escalating raw materials costs. EBITDA for 2010 was $1,052 million, a significant increase from $656 million in
2009, primarily due to higher volume and higher equity earnings from Dow Corning. Results for 2010 were negatively
impacted by an $8 million adjustment to the 2009 restructuring charge related to the closure of a small manufacturing facility.
EBITDA for 2009 was negatively impacted by an increase in cost of sales of $75 million related to the fair valuation of Rohm
and Haas inventories, restructuring charges of $48 million (see Note C to the Consolidated Financial Statements) and
$8 million of the Company's share of a restructuring charge recognized by Dow Corning.
Dow Electronic Materials sales in 2010 were up 29 percent from 2009, driven by higher volume, especially in Asia Pacific,
primarily due to strong underlying demand in the electronics industry and new product introductions. Semiconductor foundry
utilization rates across the industry improved significantly compared with 2009 and were running in excess of 90 percent
throughout most of 2010, supporting higher demand for CMP and materials used in printed circuit boards. Demand for liquid
crystal display chemicals and film materials that replace glass used in plasma display panels also increased. New product
launches and strategic customer wins helped drive a 39 percent volume growth for Dow Electronic Materials in Asia Pacific.
Functional Materials sales in 2010 were up 13 percent from 2009, entirely related to volume. Volume increased in all
geographic areas and all major businesses due to higher demand for specialty biocides and cellulosics used in food, nutrition
and personal care products.
Electronic and Functional Materials Outlook for 2012
Electronic and Functional Materials sales are expected to increase in 2012, driven by continued demand growth in the
electronics and health care industries, especially in emerging geographies. Equity earnings from Dow Corning are expected to
be lower in 2012, as challenges in the polysilicon industry are expected to compress margins.
Dow Electronic Materials sales volume is expected to increase, driven by higher demand in electronics end-markets,
especially tablets and smartphones, and by new product launches and strategic customer wins. The pace of growth is expected
to be modest in the first half and more robust in the latter part of the year.
Functional Materials sales are expected to increase, especially in emerging geographies, due to higher demand for specialty
biocides used in personal care, cosmetics applications and cellulosics used in food and pharmaceutical applications.
COATINGS AND INFRASTRUCTURE SOLUTIONS
The Coatings and Infrastructure Solutions segment consists of the following businesses: Dow Building and Construction, Dow
Coating Materials, Dow Water and Process Solutions, and Performance Monomers; and includes a portion of the Company's
share of the results of Dow Corning Corporation, a joint venture of the Company. These businesses produce a wide variety of
products with a broad range of applications – adhesives and sealants, construction materials (insulation, weatherization and
vinyl applications), cellulosic-based construction additives, raw materials for architectural paints and industrial coatings, and
technologies used for water purification.