Dow Chemical Company (The) (DOW)

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The Dow Chemical (DOW)

Q1 2011 Earnings Call

April 28, 2011 10:00 am ET

Executives

William Weideman - Chief Financial Officer and Executive Vice President

Howard Ungerleider - VP of IR

Andrew Liveris - Executive Chairman, Chief Executive Officer, President, Chairman of Executive Committee, Member of Environment, Health & Safety Committee and Member of Business Operations Committee

Doug May - Vice President of Investor Relations

Analysts

David Begleiter - Deutsche Bank AG

Donald Carson - Susquehanna Financial Group, LLLP

Andrew Cash - UBS Investment Bank

Robert Koort - Goldman Sachs Group Inc.

John McNulty - Crédit Suisse AG

Frank Mitsch - BB&T Capital Markets

Kevin McCarthy

Hassan Ahmed - HSBC

P.J. Juvekar - Citigroup Inc

Presentation

Operator

Good day, and welcome to The Dow Chemical Company's First Quarter 2011 Earnings Results Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Doug May, Vice President of Investor Relations. Please go ahead, sir.

Doug May

Thanks, John. Good morning, everyone, and welcome. As usual, we're making this call available to investors and the media via the webcast. This call is property of The Dow Chemical Company. Any redistribution, retransmission or rebroadcast of this call in any form without Dow's written consent is strictly prohibited. On the call with me today are Andrew Liveris, Dow's Chairman and Chief Executive Officer; Bill Weideman, Executive Vice President and Chief Financial Officer; Howard Ungerleider, outgoing Vice President of Investor Relations; and David Johnson, Director of Investor Relations.

Around 6:30 this morning, April 28, our earnings release went out on Business Wire and was posted on the Internet on dow.com. We have prepared slides to supplement our comments on this conference call. These slides are posted on our website on the presentations page of the Investor Relations section and through the link to our webcast.

As you know, some of our comments today may include statements about 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'd like more information on the risks involved in forward-looking statements, please see our SEC filings. In addition, some of our comments reference non-GAAP financial measures. A reconciliation of the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release and on our website.

Unless otherwise specified, all comparisons presented today will be on a year-over-year basis. Sales comparisons will exclude recent divestitures, and earnings comparisons will exclude certain items. Our earnings release as well as recent SEC filings are available on the Internet at dow.com. The agenda for today's call is on Slide 3.

I will now hand it over to Andrew Liveris.

Andrew Liveris

Thank you, Doug, and welcome aboard. Good morning, everyone, and thank you for joining us. If you take a look at Slide 4, you'll see that this quarter was a breakout quarter for Dow. Our results clearly demonstrate our accelerating momentum and our discipline, determined focus on execution. We are firmly on our performance trajectory. A fact you can see across multiple fronts and most importantly by our robust top and bottom line growth.

Earnings per share were up substantially, nearly double the year-ago period. We delivered EBITDA of $2.4 billion, representing the second highest result in our company's long history. And once again, we delivered significant margin expansion with Coatings and Infrastructure, and Performance Products in particular achieving significant margin gains. In fact, in Performance Products, we achieved year-over-year margin expansion in every business. This segment expanded margins by more than 500 basis points and also drove margins higher sequentially.

And also our Chemicals and Energy and our Plastics segments benefited from our positive U.S. Gulf Coast speed stock and energy fundamentals. These strong results were also fueled by record sales in EBITDA in Health and Agricultural Sciences, another quarter of strong performance from Electronic and Specialty Materials, as well as broad-based volume growth and rigorous price management across our portfolio.

Our results illustrate that we did exactly what we said we would do even in the face of headwinds, notably the high and volatile feedstock costs. We are focused, and we executed. And speaking of execution, we also delivered against another key priority mainly continuing to enhance our financial flexibility. We told you we will further strengthen our balance sheet and to that end, in the first quarter, we paid down $2.5 billion in high coupon debt, which is immediately accretive to earnings. We maintained our focus on delivering value to stockholders demonstrated by our recent announcement to significantly raise our dividend.

This is the power of Dow in action. These results reflect the company with a powerful and diverse portfolio and expanding geographic presence and an increased capacity for investments in growth. We have the momentum to deliver and catalyst that will further propel our growth. And I'll provide an update on these in a few moments.

But before we get down to business, I would like to take a moment to acknowledge the recent tragic events in Japan, which remind us of the fragility of life and extend our ongoing sympathies and support to the people of that nation. Our Dow team moved quickly to assess the situation, and we are pleased to say that we fully accounted for the safety of all Dow employees in Japan. I'm extremely proud of the team's efforts in the aftermath and the continued focus as Japan and its people begin the rebuilding process.

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