Dow Chemical 2013 Annual Report Download - page 66

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propylene glycol capacity in Thailand was brought online in late 2012. Dow Oil, Gas & Mining volume was higher in all
geographic areas due to strong demand fundamentals in the exploration and production and refining and processing industries.
Volume increased modestly in Polyurethanes in all geographic areas except EMEA, driven primarily by increased demand for
energy efficient applications.
EBITDA for 2013 was $1,436 million, compared with $1,036 million in 2012. EBITDA in 2013 included $38 million of asset
impairment charges and costs related primarily to the shutdown of certain assets in the Dow Plastics Additives and Epoxy
businesses and a $15 million gain for the adjustment of contract cancellation fees related to the 1Q12 restructuring program.
EBITDA in 2012 was negatively impacted by a goodwill impairment loss of $220 million in Dow Formulated Systems; $186
million of 1Q12 Restructuring charges related to the cancellation of a project and the shutdown/consolidation of assets in the
Polyurethanes and Epoxy businesses in Brazil, Texas and Germany; and $192 million of 4Q12 Restructuring charges related
primarily to the shutdown/consolidation of certain assets in the Dow Automotive Systems and Oxygenated Solvents businesses
in Michigan and Texas. EBITDA in 2012 was also impacted by an $8 million gain related to post-closing adjustments on the
sale of a contract manufacturing business. See Notes 3, 5, 9 and 11 to the Consolidated Financial Statements for additional
information on these charges. Excluding these certain items, EBITDA decreased in 2013 as higher propylene and energy costs,
decreased sales volume and increased SG&A costs more than offset lower equity losses from Map Ta Phut Olefins Company
Limited, decreased spending on planned maintenance turnarounds and improved operating rates.
On March 14, 2013, the Company announced the Dow Plastics Additives business was being marketed for divestment, as part
of the Company's ongoing commitment to portfolio management. During the third quarter of 2013, the Company determined
this valuable business was being undervalued by potential buyers in the market. As a result, the Dow Plastics Additives
business is no longer being marketed for divestment and will continue to be operated by the Company to obtain maximum
value.
2012 Versus 2011
Performance Materials sales were $13,608 million in 2012, down 7 percent from $14,647 million in 2011. Compared with
2011, price declined 6 percent with approximately 40 percent of the decline due to the unfavorable impact of currency. Lower
feedstock and energy and other raw material costs drove price decreases across all geographic areas and most businesses.
Amines, Epoxy and PO/PG experienced double-digit price decreases due to lower feedstock and energy and other raw material
costs as well as excess industry inventories. Polyglycols, Surfactants & Fluids reported slight price increases led by favorable
pricing in North America. Volume for 2012 was down 1 percent compared with 2011, reflecting the sale of Dow Haltermann in
2011. Excluding the impact of this divestiture, volume was flat as a decline in Latin America, due to the shutdown of the
toluene diisocyanate manufacturing facility in Brazil, offset modest volume increases in other geographic areas. Amines
reported volume growth of 8 percent due to increased sales of herbicides in the agricultural industry, as well as increased
industry demand in laundry detergents, fabric softeners and industrial applications for the oil and gas industry. Strong volume
growth was reported by PO/PG, driven primarily by the addition of new propylene oxide capacity in Asia Pacific in 2011. Dow
Oil, Gas & Mining volume was higher in all geographic areas, except Asia Pacific, due to strong demand fundamentals in the
exploration and production and refining and processing industries. These volume gains were offset by volume declines in Dow
Automotive Systems, where demand softened in Latin America and Europe, as well as Polyurethanes where volume was down
across all geographic areas except North America. Epoxy also reported lower volume across all geographic areas, except Latin
America, due to soft demand and extended planned maintenance turnarounds in 2012.
EBITDA for 2012 was $1,036 million, compared with $1,748 million in 2011. EBITDA decreased in 2012 as lower selling
prices, increased spending for planned maintenance turnarounds, lower equity earnings from Map Ta Phut Olefins Company
Limited and equity losses from Sadara more than offset lower feedstock and energy and other raw material costs, improved
operating rates, the positive impact of currency on costs and lower R&D and SG&A costs. EBITDA in 2012 was negatively
impacted by $590 million of certain items, as previously discussed. 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.
See Notes 5 and 11 to the Consolidated Financial Statements for additional information on these charges.
Performance Materials Outlook for 2014
Performance Materials volume is expected to grow modestly, at or slightly above GDP for most businesses. Volume is expected
to improve in Polyurethanes as the economic recovery continues in North America and is expected across all other geographic
areas. Continued sales growth is expected for Dow Oil, Gas & Mining driven by market fundamentals in exploration and
production as well as market penetration in emerging geographies. Increased demand is expected to drive modest volume
increases in Epoxy. Dow Plastics Additives expects lower volume due to the announced closure of the Grangemouth, United
Kingdom manufacturing facility. Chlorinated Organics expects slight volume declines due to a depressed global market. A
modest sales increase is expected in Dow Automotive Systems, driven by a projected increase in global production in the
transportation sector. Amines, Oxygentated Solvents and Polyglycols, Surfactants & Fluids all expect sales growth, despite the