Dow Chemical 2015 Annual Report Download - page 56

46
response to lower raw material costs. Volume increased in all geographic areas, except North America, and all businesses,
except Energy & Water Solutions. Dow Building & Construction reported volume growth in EMEAI and North America, as
demand continued to be strong for innovative product offerings, primarily in construction chemicals. Dow Coating Materials
volume increased due to higher demand for architectural coatings in EMEAI and higher demand for industrial coatings in
North America. Volume increased in Performance Monomers due to higher demand and improved asset utilization for vinyl
acetate monomers and acrylic monomers. In Energy & Water Solutions, volume declines in North American energy exploration
and fracturing market sectors and slow global demand for ion exchange resins used in industrial water applications more than
offset strong demand for reverse osmosis technologies.
EBITDA for 2015 was $1,021 million, compared with $817 million in 2014. EBITDA in 2015 included a $12 million gain
related to Dow Corning’s adjustment of its implant liability, $87 million of asset impairments and related costs in all businesses
and $26 million of restructuring charges. EBITDA in 2014 included a $500 million loss related to Dow Corning’s abandonment
of a polycrystalline silicon plant expansion in Clarksville, Tennessee, and a $252 million gain related to Dow Corning’s
adjustment of its implant liability. EBITDA in 2014 was also impacted by a $100 million charge for a warranty accrual
adjustment related to an exited business. See Notes 3, 9, 12 and 15 to Consolidated Financial Statements for additional
information on these certain items. Excluding these certain items, EBITDA decreased in 2015 as lower selling prices and lower
equity earnings from Dow Corning more than offset lower propylene and other raw material costs, the favorable impact of
currency on costs, lower operating costs and higher sales volume.
2014 Versus 2013
Infrastructure Solutions sales were $8,429 million in 2014, up from $8,339 million in 2013. Sales increased 1 percent, entirely
due to volume. Volume was higher in all geographic areas, except EMEAI which was impacted by weakened demand. Dow
Building & Construction volume increased due to higher demand for insulation products in North America. Dow Coating
Materials volume increased in all geographic areas due to higher demand for architectural and industrial coatings. Energy &
Water Solutions volume increased across most geographic areas due to strong demand fundamentals in the oil and gas industry
as well as higher demand for specialty materials used in energy and industrial water applications. Performance Monomers
volume decreased due to long acrylate market conditions, extended planned and unplanned maintenance turnarounds in vinyl
acetate monomers, and a plastic additives plant closure which reduced market participation. Price was flat as selling price gains
were offset by the unfavorable impact of currency. Price was mixed by geographic area as gains in Latin America and North
America were offset by declines in EMEAI and Asia Pacific. Price was down in all businesses, except Performance Monomers.
EBITDA for 2014 was $817 million, compared with $941 million in 2013. EBITDA in 2014 was negatively impacted by
$348 million of certain items, as previously discussed. EBITDA in 2013 included $95 million of asset impairments and related
costs in the Energy & Water Solutions and Performance Monomers businesses and a $1 million gain in Dow Building &
Construction for an adjustment to asbestos abatement costs related to the 1Q12 Restructuring program. See Notes 3 and 12 to
the Consolidated Financial Statements for additional information on these certain items. Excluding these certain items,
EBITDA increased in 2014 as higher equity earnings from Dow Corning and higher sales volume more than offset increased
propylene costs and higher freight expenses.
Infrastructure Solutions Outlook for 2016
Infrastructure Solutions sales are expected to grow modestly in 2016 due to higher demand partially offset by pressure on
selling prices as a result of unfavorable currency impacts due to the strengthening U.S. dollar. Dow Building & Construction
sales are expected to increase due to higher demand in the acrylics envelope, cellulosics chain and growth in construction end
markets. Dow Coating Materials expects strong sales growth driven by volume gains from innovative products and stable raw
material prices. Energy & Water Solutions expects sales consistent with 2015 levels with strong demand for water solutions,
primarily reverse osmosis technologies, while demand for products used in energy exploration and fracturing market sectors
will follow oil prices. Performance Monomers sales are expected to decline driven by lower sales of vinyl acetate monomers,
primarily due to increased internal consumption by downstream businesses, and lower sales of acrylates resulting from the
shutdown of 20 percent of the acrylate capacity at the Company's Deer Park, Texas, manufacturing facility.
On December 10, 2015, the Company entered into a definitive agreement to restructure the ownership of Dow Corning. Under
the terms of the agreement, Dow will become the 100 percent owner of Dow Corning, currently a 50:50 joint venture between
Dow and Corning. Dow and Corning will maintain their current equity stake in the Hemlock Semiconductor Group. The
transaction is expected to close in the first half of 2016.