New Dow Opens for Business

08.04.2019 -

At the beginning of April, the new Dow – minus the suffix “Chemical” – became the first of three newly constituted companies to be spun out of the DowDuPont conglomerate created in August 2017 in the $130 merger of Dow and DuPont.

Remaining group units, the new DuPont and agrochemicals specialist Corteva, will start up at the beginning of June and will be based at Wilmington, Delaware, home base of the old DuPont, where earlier chemicals spin-off Chemours is also headquartered.

The new Dow headed by Jim Fitterling as CEO is based in Midland, Michigan, USA, headquarters of its predecessor Dow Chemical. The successor company, with 38,000 employees, will be heavy on materials – half of sales are in packaging – will be lighter on revenue with an annual pro forma figure of $49.7 billion, down by $12.5 billion against its former mass. Operating EBIT will be $6.2 billion. The debt burden carried over from the old Dow Chemical remains intact at $19.8 billion.

The company will also be missing its agriculture business, which will be integrated into Corteva but it is picking up high-end packaging assets from DuPont, as part of an earlier swap agreement. The new Dow also includes shares held by its predecessor in Middle East and Asian joint ventures such as Equate and Kuwait Olefins Company – both based in Kuwait and owned to 42.5% by Dow – Map Ta Phut Olefins Company based in Thailand (32.77%) and as Sadara in Saudi Arabia, a 35:65 joint venture with Saudi Aramco.

Fitterling said the new Dow’s near-term focus will be on incremental, less capital intensive fast payback projects, and the company will have a ”best-in-class" cost structure.

Biggest unit of the three new Dow operating units is the Packaging & Specialty Plastics business segment with pro forma annual sales of $24.3 billion. The portfolio includes the integrated businesses Hydrocarbons & Energy and Packaging and Specialty Plastics. Dow claims to be the world’s largest producer of ethylene, the bulk of which is used captively for its plastics production absorbs a major share. The segment is a leading producer of other polyolefins as well as elastomers and additives.

The Performance Materials & Coatings segment, with sales of $ 9.7 billion, has two global businesses: Coatings & Performance Monomers and Consumer Solutions. The first business speciailzes in coatings additives and acrylics, the second in silicones.

Dow’s new Industrial Solutions & Infrastructure, the smallest segment with sales of $ 1.3 billion, lays claim to being the world’s largest producer of purified ethylene oxide. Other businesses include polyurethanes, chlor-alkali and vinyls.

Since the creation of DowDupont, the short-lived conglomerate claims to have delivered on its promise to cut more than $3 billion in costs and recombine existing units into new units that can profit from synergies. Observers note, however, that the restructuring has taken a heavy toll on share prices. DowDuPont’s share lost 23% over the merger period.

On its first day of trading, Apr. 2, the new Dow made stock market gains before dipping slightly at the end of the week in response to a bearish analyst forecast.