Dow Chemical 2014 Annual Report Download - page 72

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PERFORMANCE PLASTICS
The Performance Plastics segment is a market-oriented portfolio comprised of Dow Elastomers, Dow Electrical and
Telecommunications, Dow Packaging and Specialty Plastics, Energy and Hydrocarbons. The segment also includes the results
of TKSC, The SCG-Dow Group and Univation as well as a portion of the results of EQUATE, TKOC, Map Ta Phut Olefins
Company Limited and Sadara, all joint ventures of the Company.
Sales for the Energy business are primarily opportunistic merchant sales driven by market conditions and sales to customers
located on Dow manufacturing sites. Sales for the Hydrocarbons business are comprised primarily of sales of monomers and
ethylene by-products that are not required for internal use. Hydrocarbons sales can fluctuate significantly based on ethylene
production facility feedslates and operating rates, derivative demand and market prices for monomers and by-products. 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.
On December 2, 2013, the Company sold its global Polypropylene Licensing and Catalysts business to W. R. Grace & Co. On
September 30, 2011, the Company sold its global Polypropylene business to Braskem SA. These businesses were reported in
the Performance Plastics segment through the date of divestiture. See Note 5 to the Consolidated Financial Statements for
additional information on these divestitures.
Performance Plastics
In millions 2014 2013 2012
Sales $ 22,386 $ 21,910 $ 22,588
Price change from comparative period 2% 1 % (3)%
Volume change from comparative period —% (4)% (5)%
Volume change, excluding divestitures 1% (3)% 1 %
Equity earnings $ 257 $ 355 $ 130
EBITDA $ 4,422 $ 4,503 $ 2,924
Certain items impacting EBITDA $ — $ 544 $ (33)
Performance Plastics, Excluding Hydrocarbons and
Energy 2014 2013 2012
Price change from comparative period 4 % 4 % (4)%
Volume change from comparative period (1)% (3)% (6)%
Volume change, excluding divestitures 1 % (1)% 2 %
2014 Versus 2013
Performance Plastics sales for 2014 were $22,386 million, up 2 percent from $21,910 million in 2013 with price up 2 percent
and volume unchanged. Price increased in all geographic areas, except EMEAI, and in all businesses, except Hydrocarbons.
Price declined in Hydrocarbons primarily due to a significant drop in crude oil prices which drove monomers and other by-
products' prices down, primarily in Europe. Dow Packaging and Specialty Plastics prices were higher in most geographic areas,
notably North America, due to continued strong demand and tight supply conditions. Volume was mixed by geographic area as
increases in North America and EMEAI were offset by decreases in Asia Pacific and Latin America. Volume increased in
Hydrocarbons due to opportunistic sales of ethylene in North America and Asia Pacific and increased monomer sales in Europe
due to higher operating rates and the use of heavier feedslates. Volume declined in the Energy business due to reduced sales in
North America. Volume in Dow Packaging and Specialty Plastics and in Dow Electrical and Telecommunications was impacted
by the divestiture of the Polypropylene Licensing and Catalysts business and the Company’s 50 percent ownership interest in
Nippon Unicar Company Limited ("NUC"). Excluding the impact of these divestitures and Hydrocarbons and Energy sales,
price increased 4 percent and volume increased 1 percent. Despite production outages in North America in the second and third
quarters of 2014, Dow Packaging and Specialty Plastics volume improved due to price/volume management, most notably in
Europe where declining feedstock costs helped increase export sales. Dow Electrical and Telecommunications volume declined
slightly due to tight supply resulting from production outages in the first half of 2014 and weaker demand in the
telecommunications industry, which was partially offset by increased demand in the power industry.
The Company uses derivatives of crude oil and natural gas as feedstock in its ethylene facilities. In addition, the Company
purchases electric power, ethylene and propylene to supplement internal production, as well as other raw materials. The
Company's cost of purchased feedstock and energy decreased $392 million in 2014, a 2 percent decrease from 2013, primarily
due to decreased naphtha, condensate and propane costs in Europe.