Dow Chemical 2011 Annual Report Download - page 83

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2011 Actual Versus 2010 Actual
Feedstocks and Energy sales were $11,302 million in 2011, up 34 percent from $8,457 million in 2010. Compared with last
year, price was up 27 percent, with increases reported across all geographic areas and businesses, except Energy, which was
flat. Volume improved 7 percent for the segment, as volume growth in the Hydrocarbons and Energy businesses offset declines
in the Chlor-Alkali/Chlor-Vinyl and Ethylene Oxide/Ethylene Glycol (“EO/EG”) businesses. Sales for the Hydrocarbons
business were up 44 percent with prices increasing 31 percent and volume increasing 13 percent. The increase in selling prices
for this business was a result of higher feedstock costs, driven by demand improvement across the industry. Product supply
agreements with Styron led to an increase in sales volume compared with 2010. Sales for the EO/EG business increased
21 percent over 2010, driven by a 22 percent increase in price partially offset by a 1 percent decrease in volume. EO/EG prices
increased in most geographic areas, as a result of higher feedstock costs. EO/EG volume declined due to the business’ strategic
shift to supply purified ethylene oxide to internal derivative businesses. Sales for the Chlor-Alkali/Chlor-Vinyl business
increased 14 percent compared with 2010, driven by a 21 percent increase in price partially offset by a 7 percent decrease in
volume. Within the business, vinyl chloride monomer (“VCM”) price increased in response to higher ethylene costs and strong
U.S. polyvinyl chloride (“PVC”) export demand, and caustic soda volume improved due to increased demand in the alumina
and pulp and paper industries. VCM volume decreased due to a reduction in capacity in North America that more than offset
volume increases in caustic soda. Sales for the Energy business increased 10 percent compared with 2010, with volume up
10 percent and prices remaining flat. Sales for the Energy business are primarily opportunistic merchant sales driven by market
conditions and sales to customers located on Dow manufacturing sites.
The Company uses derivatives of crude oil and natural gas as feedstock in its ethylene facilities. The Company's cost of
purchased feedstock and energy increased $4.3 billion in 2011, a 22 percent increase over last year. Crude oil prices were, on
average, 41 percent higher than 2010 levels. North American natural gas prices decreased in 2011, and were approximately 8
percent lower than in 2010.
The Hydrocarbons business transfers materials to Dow's derivative businesses and the Energy business supplies utilities to
Dow's businesses at net cost, resulting in EBITDA that is at or near break-even for both businesses. For the segment, EBITDA
for 2011 was $940 million, up from $471 million in 2010 due to higher prices, volume growth, and improved equity earnings
from EQUATE, MEGlobal and The Kuwait Olefins Company K.S.C.
2010 Actual Versus 2009 Actual
Feedstocks and Energy sales were $8,457 million in 2010, up 33 percent from $6,346 million in 2009. Compared with 2009,
price was up 28 percent, with increases reported across all businesses and geographic areas. Volume improved 5 percent for the
segment, as volume gains in the Hydrocarbons, Chlor-Alkali/Chlor-Vinyl and Energy businesses more than offset declines in
the EO/EG business. Excluding divestitures, volume improved 23 percent. Sales for the Hydrocarbons business were up 40
percent with prices increasing 35 percent and volume increasing 5 percent. The increase in selling prices for the Hydrocarbons
business was a result of higher feedstock and energy costs, driven by demand improvement across the industry, while product
supply agreements with Styron led to an increase in trade sales volume compared with 2009. Sales for the Chlor-Alkali/Chlor-
Vinyl business increased 28 percent over 2009, driven by a 19 percent increase in price and 9 percent increase in volume.
Within the business, VCM price and volume increased in response to higher ethylene costs and strong U.S. PVC export
demand, and caustic soda volume improved due to increased demand in the alumina and pulp and paper industries. Sales for
the EO/EG business were down compared with 2009, as a 21 percent decrease in volume more than offset a 19 percent increase
in price. EO/EG volume declined, due to the business’ strategic shift to supply purified ethylene oxide to internal derivative
businesses, and the closure of the Company’s Wilton, England facility in January 2010. Sales for the Energy business increased
34 percent compared with 2009, with volume up 31 percent and price up 3 percent. Sales for the Energy business are primarily
opportunistic merchant sales driven by market conditions and sales to customers located on Dow manufacturing sites. Sales
fluctuate as the Company balances energy supply and demand at its manufacturing sites; however, the improving economy
offered more opportunities for merchant sales in 2010.