Dow Inc.

Good day and welcome to Dow's 2Q 2022 earnings call. You may signal to ask a question by pressing star 1 at any time during today's presentation. Also, today's call is being recorded. I would now like to turn the call over to Pankaj Gupta, Vice President of Investor Relations. Please go ahead. Good morning.

Good morning. Thank you for joining Dow's second quarter earnings call. This call is available via webcast, and we have prepared slides to supplement our comments today. They are posted on the investor relations section of Dow's website and through the link to our webcast. I am Pankaj Gupta, Dow Investor Relations Vice President, and joining me today on the call are Jim Fitterling, Dow's Chairman and Chief Executive Officer, and Howard Underlyder, President and Chief Financial Officer. Please read the forward-looking statement disclaimer contained in the earnings news release and slides. During our call, we will make forward-looking statements regarding our expectations or predictions about the future. Because these statements are based on current assumptions and factors that involve risks and uncertainties, our actual performance and results may differ materially from our forward-looking statements. DAOs Forms 10-Q and 10-K include detailed discussions of principal risks and uncertainties which may cause such differences. Unless otherwise specified, all financials, where applicable, exclude significant items. We will also refer to non-GAAP measures. A reconciliation of the most directly comparable GAAP financial measure and other associated disclosures is contained in the Dow earnings release in the slides that supplement our comments today, as well as on the Dow website. On slide two, you will see our agenda for the call. Jim will begin by reviewing our second quarter results and operating segment performance. Howard will then share our outlook and modeling guidance. And then to close, Jim will discuss how we continue to advance our decarbonizing growth strategy to deliver value growth. Following that, we will take your questions. Now let me turn the call over to Jim.

Thank you, Pankaj. Beginning with slide three, in the second quarter, TeamDAO delivered top-line growth both year-over-year and sequentially. These results reflect the strength of our diverse global portfolio, our focus on execution, and our proactive pricing actions. As such, our team was able to navigate dynamic market conditions, the impacts of pandemic lockdowns in China, continued logistics constraints, and higher energy and raw material costs. Sales increased 13% year-over-year with gains in all operating segments and regions. Sequentially, sales were up 3% with gains in all regions except Asia Pacific. Local price increased in all operating segments, businesses, and regions, up 16% compared to the prior year period and up 6% sequentially with gains in all operating segments and regions. Volume was consistent with the prior year as growth in packaging and specialty plastics was primarily offset by declines in industrial intermediates and infrastructure. Sequentially, volume declined 2 percent, primarily due to lower demand in Europe and China in the quarter. With our low-cost position and industry-leading feedstock and derivative flexibility, we generated cash flow from operations of $1.9 billion and free cash flow of $1.4 billion. Our disciplined and balanced approach to capital allocation enabled us to further strengthen our balance sheet. We redeemed $750 million of outstanding notes in the quarter, lowering our annual interest expense by $27 million. As a result, we have no substantial long-term debt maturities due until 2027. We also returned more than $1.3 billion to shareholders in the quarter, including $800 million in share repurchases and $505 million through our industry-leading dividend. Furthering our commitment to transparency and accountability, this quarter we also published our annual integrated ESG report, Intersections. The report highlights our ESG leadership advancements and aligns our data and disclosures with key ESG frameworks. Notably, this year's report features convenient access to data, as well as enhanced disclosures and carbon emission reporting for Scope 1 and 2, intensity metrics, and full TCFD implementation. Key highlights from the report include executing our plan to decarbonize and grow, accelerating sustainability investments to enable design for recyclability and more circular plastics, taking deliberate actions to drive inclusion, diversity, and equity, and improving governance, transparency, and accountability. Dow's report is one of few in our industry to receive limited assurance against formal standards by its external audit firm. And with our latest report, we added our scope one and two emissions reporting in accordance with greenhouse gas protocol reporting to the assurance review. We're proud of our progress And if you haven't already accessed the report, we welcome you to do so through the link included in this presentation or on our website. Now turning to our operating segment performance on slide four. In the packaging and specialty plastics segment, operating EBIT was $1.4 billion compared to $2 billion in the year-ago period, which was elevated due to weather-driven events. Price increases year over year were more than offset by rapidly rising raw material and energy costs. Sequentially, operating EBIT was up $202 million, and operating EBIT margins increased by 120 basis points due to improved product mix and increased integrated margins despite higher raw material and energy costs, primarily in the United States and Canada. Moving to the industrial intermediates and infrastructure segment, operating EBIT was $426 million compared to $648 million in the year-ago period, as increased raw material and energy costs and planned maintenance activity were partly offset by higher pricing. Sequentially, operating EBIT was down $235 million, and operating EBIT margins declined by 490 basis points also primarily due to higher costs and planned maintenance. And finally, the performance materials and coating segment reported operating EBIT of $561 million, up $336 million year-over-year, as margins expanded by 960 basis points, primarily due to price gains for both silicones and coatings applications, as well as improved monomers supply compared to the prior year. Sequentially, operating EBIT declined $34 million as lower siloxane prices in Europe and China were partly offset by margin expansion in the coatings and performance monomers business. I'll now turn it over to Howard to review our outlook on slide five.