Dow Chemical 2014 Annual Report Download - page 73

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EBITDA for 2014 was $4,422 million, down from $4,503 million in 2013. EBITDA in 2013 was favorably impacted by a
pretax gain of $451 million on the sale of the Polypropylene Licensing and Catalysts business, an $87 million pretax gain on
the sale of a 7.5 percent ownership interest in Freeport LNG Development, L.P. and a $6 million gain for adjustments to
contract cancellation fees related to the 4Q12 Restructuring plan. See Notes 3, 5 and 12 to the Consolidated Financial
Statements for additional information on these items. Excluding these certain items, EBITDA improved as the impact of higher
selling prices and lower feedstock costs more than offset lower equity earnings. Equity earnings were $257 million in 2014,
down from $355 million in 2013, as a result of significantly lower earnings from EQUATE, TKSC and higher equity losses
from Sadara.
2013 Versus 2012
Performance Plastics sales for 2013 were $21,910 million, down 3 percent from $22,588 million in 2012, with volume down
4 percent and price up 1 percent. Volume declined in Hydrocarbons primarily from the expiration of propylene supply contracts
related to the divestiture of Dow's Polypropylene business as well as lower by-product sales resulting from lower production
and the use of lighter feedslates in Europe. Dow Packaging and Specialty Plastics volume declined due to the impact of the
Company's shutdown of a polyethylene manufacturing facility in Tessenderlo, Belgium, which more than offset volume growth
due to increased demand in all other geographic areas. Volume declined in Dow Electrical and Telecommunications reflecting
weaker demand in the telecommunications and power industries and significantly lower supply in Asia Pacific due to the
Company's divestiture of its 50 percent ownership interest in NUC. Price declined in Hydrocarbons primarily due to lower
butadiene prices in the United States and Europe as well as lower prices for other by-products in Europe. Dow Packaging and
Specialty Plastics prices were significantly higher in all geographic areas due to low industry inventories and the Company’s
focus on higher margin products and customers. Excluding the impact of the NUC divestiture and Hydrocarbons and Energy
sales, price increased 5 percent and volume declined 2 percent.
The Company's cost of purchased feedstock and energy increased $319 million in 2013, a 2 percent increase from 2012,
primarily due to increased propylene and natural gas costs.
EBITDA for 2013 was $4,503 million, up significantly from $2,924 million in 2012. EBITDA improved as the impact of higher
selling prices, lower feedstock costs, and improved equity earnings more than offset the decline in sales volume. Equity
earnings were $355 million in 2013, up from $130 million in 2012, as a result of significantly improved earnings from
EQUATE, TKSC and Univation and lower equity losses from The SCG-Dow Group. EBITDA in 2013 was also positively
impacted by $544 million of certain items, as previously discussed. EBITDA in 2012 was negatively impacted by $33 million
of restructuring charges consisting of asset write-offs of $9 million, costs associated with exit or disposal activities of
$8 million related to the shutdown of the Company's polyethylene manufacturing facility in Tessenderlo, Belgium, a $9 million
charge related to the impairment of the Company's investment in NUC and a $7 million charge for the write-off of certain
capital projects. See Note 3 to the Consolidated Financial Statements for additional information on these charges.
Performance Plastics Outlook for 2015
In 2015, crude oil and feedstock prices are expected to remain volatile and sensitive to external factors such as economic
activity and geopolitical tensions. The Company expects crude oil and naphtha prices, on average, to be significantly lower
than 2014, resulting in lower feedstock and energy costs. Natural gas prices in the United States are also expected to decline
compared with 2014 levels. Global ethylene margins are expected to be compressed and gas-based producers in the United
States are expected to continue to benefit from shale gas dynamics. Ethylene margins could vary materially from these
expectations depending on crude oil and naphtha prices, global GDP growth and global operating rates. Volume is expected to
increase in Dow Packaging and Specialty Plastics due to continued strong supply and demand fundamentals and increasing
global operating rates. In addition, Sadara's polyethylene and olefins production facilities are expected to start up in the second
half of 2015, providing additional polyethylene volume. Dow Elastomers is expected to experience moderate volume growth in
most market segments despite new global industry capacity coming on-line in 2015. Dow Electrical and Telecommunications
volume is expected to be slightly higher driven by increased use of fiber optic applications used in telecommunications and
increased demand in power industries, partially offset by new industry capacity in EMEAI and Asia Pacific. Sales for both Dow
Elastomers and Dow Electrical and Telecommunications are expected to decrease slightly due to downward pressure on price
from lower global crude oil prices.
The Company has a number of investments in the U.S. Gulf Coast to take advantage of increasing supplies of low-cost natural
gas and natural gas liquids derived from shale gas including a new on-purpose propylene production facility (expected start-up
in mid-2015) and a new world-scale ethylene production facility (expected start-up in the first half of 2017), both located in
Freeport, Texas. As a result of these investments, the Company's exposure to purchased ethylene and propylene is expected to
decline, offset by increased exposure to ethane and propane feedstocks. Dow's ethylene production capabilities are expected to
increase by as much as 20 percent. In addition, the Company is building four new production facilities on the U.S. Gulf Coast
to leverage an advantaged feedstock position to support profitable growth of the Company's high value Performance Plastics