Dow Chemical 2011 Annual Report Download - page 139

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Polyurethanes experienced modest volume growth as strong demand in the appliance industry more than offset a slow recovery
in the building and construction sector.
EBITDA for 2011 was $1,748 million, compared with $1,714 million in 2010. EBITDA increased in 2011 as higher prices,
improved margins, and lower R&D spending more than offset the decline in volume, increased feedstock and other raw
material costs, the negative impact of currency on costs, the absence of earnings from divested businesses and lower equity
earnings. Equity earnings in 2011 declined from 2010 principally due to lower earnings at Map Ta Phut Olefins Company
Limited. EBITDA in 2011 included $77 million of asset impairment charges and related costs in the Polyurethanes business and
a $42 million loss on the sale of a contract manufacturing business. EBITDA in 2010 was negatively impacted by $48 million
of asset impairment charges and related costs in the Polyurethanes business, a $34 million charge for the write-off of capital
project spending and related costs in the Epoxy business, and a $9 million write-off of capital spending in Dow Automotive
Systems. EBITDA in 2010 was favorably impacted by a $20 million net gain on the sale of Styron.
2010 Actual Versus 2009 Pro Forma
Performance Materials sales for 2010 were $13,957 million, up 17 percent from $11,900 million in 2009. Price increased
12 percent and volume increased 5 percent, with price and volume improvements reported in all geographic areas and most
businesses. Chlorinated Organics experienced a double-digit price increase due to improved pricing in refrigerants,
fluoropolymers and solvent applications. Epoxy, Dow Plastic Additives, Oxygenated Solvents and Polyurethanes also
experienced double-digit price increases driven primarily by increased feedstock and energy and other raw material costs.
Compared with 2009, volume was negatively impacted by the sale of Emulsion Polymers, Synthetic Rubber and certain Dow
Automotive Systems assets as part of the Styron divestiture completed on June 17, 2010. Excluding the impact of this
divestiture, volume was up 15 percent with double-digit increases in all geographies. Particularly strong growth was reported
by the Epoxy business, up 30 percent driven by improved demand for resins used in the automotive and electronic industries
and new product supply agreements with Styron. Dow Automotive Systems reported significant volume growth of 24 percent
due to strong demand in the automotive industry. Demand for formulations related to alternative energy and energy efficiency
rebounded from the global economic slowdown, contributing to a 21 percent volume gain in Dow Formulated Systems.
Oxygenated Solvents also reported a 21 percent volume increase driven by the economic recovery, especially in North America
and Asia Pacific.
EBITDA for 2010 was $1,714 million, compared with $1,567 million in 2009. Compared with 2009, EBITDA improved as
higher prices and volume, and the benefits of improved operating rates and lower R&D expenses more than offset higher raw
material costs, higher manufacturing and supply chain costs and lower equity earnings related to costs associated with the start-
up of a new joint venture. EBITDA in 2010 was negatively impacted by $48 million of asset impairment charges and related
costs in the Polyurethanes business, a $34 million charge for the write-off of capital project spending and related costs in the
Epoxy business, and a $9 million write-off of capital spending in Dow Automotive Systems. EBITDA in 2010 was favorably
impacted by a $20 million net gain on the sale of Styron. EBITDA in 2009 was positively impacted by a $146 million gain on
the sale of the Company's ownership interest in OPTIMAL, partially reduced by a $7 million charge related to the impairment
of goodwill associated with the Dow Haltermann reporting unit (see Note I to the Consolidated Financial Statements) and $2
million of restructuring charges. See Note C to the Consolidated Financial Statements for information on restructuring charges.
Performance Materials Outlook for 2012
Demand is expected to increase modestly across most businesses in Performance Materials, as the transportation, building and
construction, and infrastructure-related sectors begin to recover, especially in the second half of the year. Modest recovery is
also expected in the wind energy industry. Dow Automotive Systems is expected to benefit from ongoing recovery in the
transportation industry in North America and Asia Pacific; however, this is expected to be offset by continued economic
uncertainty in Western Europe. Soft demand, driven primarily by industry overcapacity, is expected in the Epoxy business.
Formulated Systems expects increased volume growth as a combination of government regulations and high energy costs are
expected to drive demand for energy efficiency applications. The launch of new products in 2012 is expected to drive volume
growth for Dow Plastic Additives. Oxygenated Solvents expects volume growth as demand increases for end-use applications.
Higher feedstock and energy and other raw material costs are expected in 2012 as the economy strengthens, driving price
increases across most businesses. A marginal improvement in equity earnings is also expected in 2012.