Dow Chemical 2015 Annual Report Download - page 44

34
RESULTS OF OPERATIONS
Net Sales
Net sales for 2015 were $48.8 billion, down 16 percent from $58.2 billion in 2014, with volume up 1 percent and price down
17 percent. Price decreased in all operating segments and geographic areas, driven primarily by a decline in average crude oil
prices of approximately 45 percent and the unfavorable impact of currency, which represented nearly 30 percent of the price
decline. Double-digit price declines were reported in all geographic areas and all operating segments, except Agricultural
Sciences (down 8 percent) and Consumer Solutions (down 7 percent). Volume increases in Performance Plastics (up 5 percent),
Infrastructure Solutions (up 2 percent) and Consumer Solutions (up 1 percent) more than offset lower volume in Performance
Materials & Chemicals (down 6 percent) and Agricultural Sciences (down 4 percent). Volume increased in Asia Pacific (up
3 percent) and remained flat in North America, EMEAI and Latin America. Excluding recent acquisitions and divestitures(1),
Performance Materials & Chemicals volume was up 1 percent and Agricultural Sciences volume was down 3 percent. Volume
increased in all geographic areas, led by Asia Pacific (up 4 percent).
Net sales for 2014 were $58.2 billion, up 2 percent from $57.1 billion in 2013, with volume up 2 percent and price flat. Volume
increased in all operating segments, except Performance Plastics which remained flat, with notable increases in Agricultural
Sciences and Consumer Solutions (both up 3 percent). Excluding the impact of recent divestitures, Performance Plastics
volume was up 1 percent. Volume increased in all geographic areas, led by EMEAI (up 4 percent). Price was flat as increased
selling prices were offset by the unfavorable impact of currency. Price increases in Performance Plastics (up 2 percent) were
offset by price declines in Agricultural Sciences and Consumer Solutions (both down 1 percent). Infrastructure Solutions and
Performance Materials & Chemicals price remained flat. Price increased in North America (up 2 percent) and Latin America
(up 1 percent), which was offset by a decline in EMEAI (down 1 percent). Price in Asia Pacific remained flat.
Sales in the United States accounted for 35 percent of total sales in 2015, 33 percent of total sales in 2014 and 33 percent of
total sales in 2013. See the Sales Volume and Price tables at the beginning of the section titled “Segment Results” for details
regarding the change in sales by operating segment and geographic area. In addition, sales and other information by operating
segment and geographic area are provided in Note 26 to the Consolidated Financial Statements.
Gross Margin
Gross margin was $10.9 billion in 2015, $10.7 billion in 2014 and $9.5 billion in 2013. Gross margin increased in 2015 driven
by an $8,542 million decrease in purchased feedstock and energy costs and the favorable impact of currency on costs which
was partially offset by lower selling prices, including the unfavorable impact of currency. In 2015, gross margin was reduced by
$91 million of pretax charges for asset impairments and related costs, including the shutdown of manufacturing assets and
facilities in the Dow Building & Construction, Energy & Water Solutions and Dow Packaging and Specialty Plastics businesses
and the abandonment of certain capital projects in the Dow Building & Construction and Dow Coating Materials businesses,
which was reflected in the following segments: Infrastructure Solutions ($34 million) and Performance Plastics ($57 million).
Gross margin was also reduced by $24 million of pretax charges for nonrecurring transaction costs associated with portfolio and
productivity actions (reflected in Corporate) and a $12 million pretax loss related to Univation for the fair value step-up of
inventories assumed in the step acquisition (reflected in Performance Plastics). See Notes 4 and 12 to the Consolidated
Financial Statements for additional information regarding these items.
Gross margin in 2014 was positively impacted by increased sales volume, a $392 million decrease in purchased feedstock and
energy costs, lower other raw material costs and increased operating rates. Gross margin in 2014 was reduced by a $100 million
warranty accrual adjustment related to an exited business (reflected in Infrastructure Solutions) and by $23 million for asset
impairments related to the Dow Electronic Materials business (reflected in Consumer Solutions). See Notes 12 and 15 to the
Consolidated Financial Statements for additional information regarding these items.
Gross margin in 2013 was positively impacted by higher selling prices, lower maintenance turnaround costs, and lower
expenses resulting from the 2012 Restructuring activities which more than offset a $319 million increase in purchased
feedstock and energy costs and increased performance-based compensation costs. Gross margin in 2013 was reduced by
$181 million for asset impairments and related costs, including the shutdown of manufacturing facilities in the Chlor-Alkali and
Vinyl business, Energy & Water Solutions business, Polyurethanes business, Performance Monomers business, Epoxy business
(1) Excludes prior period sales of recent divestitures including the chlorine value chain, divested on October 5, 2015 (primarily Performance
Materials & Chemicals and Performance Plastics), the AgroFresh business, divested on July 31, 2015 (Agricultural Sciences), ANGUS
Chemical Company, divested on February 2, 2015 (Performance Materials & Chemicals), the global Sodium Borohydride business,
divested on January 30, 2015 (Performance Materials & Chemicals), the Polypropylene Licensing and Catalysts business, divested on
December 2, 2013 (Performance Plastics) and sales related to Nippon Unicar Company Limited, divested on July 1, 2013. Also excludes
current period sales of recent acquisitions including Univation Technologies, LLC, acquired on May 5, 2015 (Performance Plastics) and
Coodetec, acquired on February 1, 2015 (Agricultural Sciences).