Dow Chemical 2012 Annual Report Download - page 71

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related to Equipolymers. See Note 3 to the Consolidated Financial Statements for additional information on these restructuring
charges.
2011 Versus 2010
Performance Plastics sales for 2011 were $16,257 million, up 7 percent from $15,260 million in 2010. Compared with 2010,
price was up 12 percent, while volume declined 5 percent. Double-digit price increases were reported in all geographic areas,
except Latin America (up 9 percent), and most businesses, largely due to a significant increase in feedstock costs. The price
improvement was especially evident in Dow Elastomers, Dow Performance Packaging, Polypropylene and Dow Electrical and
Telecommunications. The decline in volume for the segment reflected the September 30, 2011 divestiture of the Polypropylene
business to Braskem S.A. and the divestiture of the Styrenics and Polycarbonate and Compounds and Blends businesses as part
of the June 17, 2010 divestiture of Styron. Excluding the impact of these divestitures, volume improved 4 percent with gains in
all geographic areas, particularly in Asia Pacific and Latin America. Volume was higher for all businesses, except Dow
Electrical and Telecommunications, which experienced significant volume decline in Asia Pacific as the expiration of
government stimulus spending, increased interest rates and more restrictive lending resulted in slower growth in the
construction, manufacturing and public infrastructure sectors. Dow Performance Packaging reported solid volume growth with
a strong, double-digit increase in Asia Pacific. Volume was also significantly higher in Latin America, despite limited ethylene
supply during the second quarter due to a planned maintenance turnaround at the Company's ethylene facility in Bahia Blanca,
Argentina. In North America, Dow Performance Packaging volume was essentially flat, reflecting the slow pace of the
economic recovery in the United States, planned maintenance turnarounds and unplanned outages at the Company's U.S. Gulf
Coast manufacturing facilities, and limited ethane and ethylene supply at the Prentiss, Alberta, Canada manufacturing facility.
Dow Performance Packaging volume was flat in EMEA as Middle East producers aggressively sold excess material into the
region. Dow Elastomers reported double-digit volume growth with especially strong demand in Asia Pacific as a result of the
continuing recovery from the March 2011 earthquakes and tsunami in Japan. Dow Performance Packaging volume was up
slightly, as growth was impacted by limited product availability due to a major capital project at the manufacturing facility to
produce SARANTM resins in Midland, Michigan.
EBITDA for 2011 was $3,440 million, down from $3,565 million in 2010. EBITDA declined as higher selling prices,
improved margins and a small gain on the sale of the Polypropylene business in the third quarter of 2011 were more than offset
by the unfavorable impact of higher feedstock and other raw material costs, higher freight costs, and increased costs related to
turnarounds. Equity earnings were $303 million in 2011, up from $254 million in 2010 primarily due to an $86 million gain
related to cash collected on a previously impaired note receivable associated with Equipolymers. Improved earnings from The
Kuwait Olefins Company K.S.C., The Kuwait Styrene Company K.S.C., and Univation Technologies, LLC were partially
offset by lower earnings at EQUATE and the SCG-Dow Group. EBITDA for 2010 included a $7 million net gain related to the
divestiture of Styron. See Note 5 to the Consolidated Financial Statements for additional information on this divestiture.
Performance Plastics Outlook for 2013
In North America, the increasing supply of U.S. shale gas and the restart of the St. Charles, Louisiana ethylene cracker in
December 2012 will increase ethylene supplies from internal production and is expected to provide a long-term competitive
advantage for the Performance Plastics' businesses. These favorable dynamics will allow Dow Performance Packaging and
Dow Hygiene and Medical to improve margins and increase volume through increased exports into Asia Pacific and Latin
America. Margins in EMEA are expected to remain compressed due to the high cost of feedstocks and energy, and volume will
decline due to the closure of the Company's Tessenderlo, Belgium high density polyethylene manufacturing facility. Dow
Elastomers is expected to see more moderate growth rates as markets are impacted by new global industry capacity which came
on-line during 2012 or is expected to come on-line in early 2013. Dow Electrical and Telecommunications expects to see
significant improvement in 2013 as the U.S. housing market continues to improve and the business targets more profitable
market segments. Growth is also expected in Latin America as preparation for the 2014 World Cup and other infrastructure
projects get underway. Economic growth in EMEA is expected to remain weak as recessionary conditions in Europe
overshadow growth in Middle East and Africa.
Construction continues on phase one of the new biopolymers manufacturing facility in Santa Vitória, Minas Gerais, Brazil.
This project, which is a consolidated joint venture with Mitsui & Co. Ltd., was announced during the fourth quarter of 2011.
The joint venture's ethanol mill is expected to process its first full harvest of sugarcane in 2014. The joint venture's original
plans for expansion into downstream derivative products have been postponed. The joint venture is a variable interest entity
and included in Dow's consolidated financial statements. See Note 19 to the Consolidated Financial Statements for additional
information.