Dow Chemical Company (The) (DOW)

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The Dow Chemical Company (DOW)

Q1 2009 Earnings Call

April 30, 2009 10:00 AM ET


Howard Ungerleider - Vice President of Investor Relations

Andrew N. Liveris - Chairman and Chief Executive Officer

Geoffery E. Merszei - Executive Vice President and Chief Financial Officer

Pierre R. Brondeau - President and Chief Executive Officer, Dow Advanced Materials


Sergey Vasnetsov - Barclays Capital

Prashant Juvekar - Citi

Kevin McCarthy - Bank of America

David Begleiter - Deutsche Bank

Frank Mitsch - BB&T Capital Markets

Donald Carson - UBS

Peter Butler - Glen Hill Investments

Michael Judd - Greenwich Consultants LLC

John Mcnulty - Credit Suisse



Good day, everyone, and welcome to The Dow Chemical Company's First Quarter 2009 Earnings Results Conference Call. Today's call is being recorded. At this time, I am pleased to turn the conference over to Mr. Howard Ungerleider, Vice President of Investor Relations. Please go ahead, sir.

Howard Ungerleider

Thanks Jennifer. Good morning, everyone, and welcome. As usual, we are making this call available to investors and the media via webcast. This call is the property of The Dow Chemical Company. Any redistribution, retransmission or rebroadcast of this call, in any form, without Dow's expressed written consent is strictly prohibited.

On the call with me today are Andrew Liveris, Dow's Chairman and Chief Executive Officer, Geoffery Merszei, Dow's Executive Vice President and Chief Financial Officer, Pierre Brondeau, President and CEO of Dow Advanced Materials, and Jeff Tate, Director, Investor Relations.

Around 6:30 this morning, April 30, our earnings release went out on PR Newswire, and was posted on the Internet on Dow's website, We have prepared some slides to supplement our comments on this conference call. The slides are posted on our website, on the presentations page of the Investor Relations section, or through the link to our webcast.

As you know, some of our comments today may include statements about our expectations for the future. Those expectations involve risks and uncertainties. We can't guarantee the accuracy of any forecasts or estimates, and we don't plan to update any forward-looking statements during the quarter. If you would like more information on the risks involved in forward-looking statements, please see our SEC filings.

In addition, some of our comments may reference non-GAAP financial measures, a reconciliation to the most directly comparable GAAP financial measure, and other associated disclosures are contained in our earnings release or on our website.

Our earnings release, as well as recent SEC filings, are available on the Internet at in the Financial Reports page of the Investor Relations section.

On slide three, I would like to run through the agenda for today's call. Andrew will begin the call with a high level overview of our first quarter results and our achievements of the last 90 days. He'll also outline our operating plan and our balance sheet de-leveraging plan, both of which were recently reviewed and approved by our board.

Geoffrey will then review our first quarter results and discuss some of the business trends we observed in the quarter. Geoffrey will also give a brief overview of our first quarter results for Rohm and Haas, before turning the call over to Pierre, who'll provide an update on our integration efforts. Andrew will then end our prepared remarks today with a discussion of our outlook and our 2009 priorities.

Now, I would like to turn the call over to Andrew.

Andrew N. Liveris

Thank you, Howard, and good morning, everybody. I would like to begin with an update on the progress we have made in the first part of this year, against the backdrop of what we can all agree, has been incredibly challenging operating environment.

Let me start with some context around our first quarter results, which actually showed sequential improvement from last quarter. Geoffrey is going to give you a deep dive into the numbers. But, I want to point out what we have done to actually drive these results.

These results reflect the demand destruction that continued into the first quarter, balanced of course by strong results from Dow AgroSciences. Inventory de-stocking appears to be over. So, at least one major component of demand destruction is behind us.

We are encouraged by the operating very improvements that we have seen each month sequentially from December to April.

Cost reduction actions we took also had a positive impact, as we adapted quickly to the environment, and they drove much of our sequential improvement in profitability.

While we expect the recessionary environment to continue through the end of the this year, we actually have seen a few bright spots and some moderation in the pace of decline in the industry. And we're going to provide some color around this.

We know that we have more work to do. But we also know that operational excellence and cost discipline are two of the hallmarks of Dow, and it shows particularly well in these times.

We are taking the necessary actions to manage what is in our control, and we have in place operating plans to maintain and build on our strength, despite the challenges. The path is very clear to us.

Now, turning to our progress in restoring stability to our company. We have made enormous strides by any measure. If you turn to slide four, you will see that since late January, we renegotiated the financing for our acquisition of Rohm and Haas, and settled a litigation to a satisfactory financial outcome.

Two, we restructure the financial terms that allows us to both preserve financial flexibility, and advance our transformational strategy.

Three, we announced the sale of Morton Salt on the same day we closed Rohm and Haas, and at a full price.

Four, these actions have essentially reduced our original bridge loan by nearly 50%.

And five, in addition, we have increased the cost synergies for the acquisition by over 40%; 4, 0.

Six, we have validated the Rohm and Haas growth synergies of $3 billion.

And seven, we announced and implemented cost savings that helped to enable a significant sequential improvement in earnings from fourth quarter of 2008, to first quarter 2009.

Now, although we have made substantial progress, we know that there remains much work to do. And if you turn to slide five, you will in this regard that we have three key areas of focus. Strengthening our balanced sheet to protect our investment grade credit rating. Managing our business through a poor and uncertain operating environment, and successfully integrating Rohm and Haas into the new Dow.

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