Dow Chemical 2012 Annual Report Download - page 65

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Functional Materials sales in 2012 were down 2 percent from 2011, entirely related to the unfavorable impact of currency
on price. Price decreased in most geographic areas, especially in EMEA. Volume was flat as higher industrial demand for
specialty amines and polymers was offset by lower demand for home and personal care products and lower demand for
cellulosics used in food and pharmaceutical applications.
On July 20, 2012, the Chinese Ministry of Commerce ("MOFCOM") initiated antidumping and countervailing duty
investigations of imports of solar-grade polycrystalline silicon products from the United States and Korea based on a petition
filed by Chinese solar-grade polycrystalline silicon producers. The petition alleges that producers within these countries
exported solar-grade polycrystalline silicon to China at less than fair value, and that production of solar-grade polycrystalline
silicon in the United States has been subsidized by the U.S. government. If the Chinese authorities find dumping or
subsidization, they may impose additional duties on future imports of solar-grade polycrystalline silicon to China from the
United States. Dow Corning, as a provider of solar-grade polycrystalline silicon product, is cooperating with MOFCOM in the
investigation and is vigorously contesting the allegations. The outcome of this matter is uncertain. However, it is reasonably
possible that the estimate of undiscounted cash flows used to test the recoverability of the polycrystalline silicon asset group
could change in the near term, resulting in a write-down of assets to fair value. If an asset impairment is recorded at Dow
Corning related to the polycrystalline silicon asset group, the potential after tax impact to Dow is estimated to be approximately
$700 million.
2011 Versus 2010
Electronic and Functional Materials sales were $4,599 million for 2011, up from $4,203 million in 2010. Sales increased
9 percent, with price up 6 percent (with approximately one-third of the increase due to currency) and volume up 3 percent.
Price increased in all geographic areas and most major business units in response to increasing raw material costs. Volume
increased across all geographic areas, except EMEA, driven by higher demand for consumer electronics, specialty polymers
and specialty cellulosics used in food and pharmaceutical applications that more than offset lower demand for home and
personal care products. EBITDA for 2011 was $1,084 million, up from $1,052 million in 2010. EBITDA improved from 2010
as price increases and volume growth more than offset higher raw material costs, higher SG&A expenses, increased investment
in growth initiatives and slightly lower equity earnings from Dow Corning. EBITDA in 2010 was negatively impacted by an $8
million adjustment to the 2009 restructuring charge related to the closure of a small manufacturing facility.
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.
Electronic and Functional Materials Outlook for 2013
Electronic and Functional Materials sales are expected to increase in 2013 due to gradual global economic recovery and
continued demand growth in the electronics and home and personal care applications, especially in emerging geographies.
Equity earnings from Dow Corning are expected to be lower in 2013, as challenges in the polysilicon industry continue to
compress margins.
Dow Electronic Materials sales volume is expected to increase, driven by higher demand in mobile electronics, especially
tablets and smartphones, and by new product launches including advanced photoresists and advanced chip packaging used in
personal computer memory applications and circuit boards.
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.