Dow Inc.

At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If you would like to ask a question at that time, please press star followed by one on your telephone keypad. As a reminder, this conference is being recorded. I will now turn it over to Dow Investor Relations Vice President Pankaj Gupta. Mr. Gupta, you may begin.

Good morning. Thank you for joining Dow's fourth 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 Federling, Dow's Chairman and Chief Executive Officer, and Howard Ungerleiter, President and Chief Financial Officer. Please read the forward-looking statement disclaimer contained in the earnings news release and slides. During our call, we'll 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. 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 the agenda for our call. Jim will begin by reviewing our fourth quarter results and operating segment performance. Howard will then share our outlook and modeling guidance. And to close, Jim will then outline our competitive position for long-term value creation. Following that, we will take your questions. Now let me turn the call over to Jim.

Thank you, Pankaj. Beginning on slide three, in the fourth quarter, TeamDAO continued to take proactive actions to navigate slower GDP growth, challenging energy markets, and customer destocking. We proactively lowered our operating rates to effectively manage working capital, implemented operational mitigation plans and cost-saving measures, and prioritized higher-value products where demand remained resilient, including in functional polymers and performance silicones, as well as in mobility, renewable energy, and pharma end markets. These actions, combined with our continued focus on cash enabled us to deliver cash flow from operations of $2.1 billion in the quarter. Cash flow conversion was 166%, and we returned $620 million to shareholders. Dow's cash generation reflects our continued focus on operational and financial discipline, which was important as we navigated an extremely dynamic year in 2022, as you see on slide four. In the first half of the year, We capitalized on strong demand across our diverse global portfolio while leveraging our derivative and feedstock flexibility and low-cost positions to mitigate higher raw material and energy costs. In the second half of the year, economic conditions deteriorated, driven by record inflation, rising interest rates, ongoing pandemic lockdowns in China, and continued geopolitical tensions. In the face of these evolving market dynamics, Dow was resilient, generating cash flow from operations of $7.5 billion for the full year while executing our disciplined and balanced approach to capital allocation. We delivered returns on invested capital of 15% above our 13% across the economic cycle target as we prioritized higher return, lower risk, and faster payback investments. We achieved credit rating and outlook upgrades as a result of our strengthened balance sheet, and we have no substantive debt maturity due until 2027. And we returned a total of $4.3 billion to shareholders, including $2.3 billion in share repurchases and $2 billion in dividends. At the same time, we continued to advance our decarbonize and grow strategy and accelerate circularity to create long-term shareholder value as we meet growing customer demand for more sustainable solutions. I'm proud of how Team Dow continues to deliver for our customers, drive shareholder value, and support our communities as we progress toward our 2050 carbon neutrality target. And you can see a number of those highlights depicted on this slide. Now turning to our operating segment performance on slide five. In the packaging and specialty plastic segment, Net sales were $6.1 billion, down 16% year over year, as price gains across all regions and functional polymers were more than offset by lower polyethylene and olefin prices. Volume declines were driven primarily by lower olefins and packaging demand in Europe, which was partly offset by resilient global demand for functional polymers. Sequentially, net sales were down 17%, driven by lower hydrocarbon sales and polyethylene prices. Operating EBIT for the segment was $655 million compared to $1.4 billion in the year-ago period, primarily due to lower integrated polyethylene margins. Sequentially, operating EBIT was down $130 million as lower raw material and energy costs were more than offset by lower polyethylene prices and operating rates. Moving to the industrial intermediates and infrastructure segment, net sales were $3.7 billion, down 20% from the year-ago period. Volumes declined primarily due to lower demand in Europe for industrial, consumer durables, and building and construction applications. Sequentially, net sales were down 10%, and seasonal demand increases for de-icing fluid were more than offset by declines in building and construction, consumer durables, and industrial applications. Operating EBIT for the segment was $164 million compared to $595 million in the year-ago period, driven by lower demand and increasing energy costs, particularly in Europe. Sequentially, operating EBIT margins expanded by 40 basis points as lower energy costs versus the prior quarter were partly offset by lower volumes. And in the performance materials and coating segment, we reported net sales of $2.1 billion, down 20% year over year, as local price gains for performance silicones and architectural coatings were more than offset by lower prices for siloxanes and acrylic monomers. Volume was down as resilient demand and mobility was more than offset by declines primarily in building and construction and markets. Sequentially, net sales were down 22% due to seasonally lower demand for coatings, industrial and building and construction applications, as well as local price declines for siloxanes and acrylic monomers. Operating EBIT for the segment was a loss of $130 million compared to earnings of $295 million in the year-ago period due to local price declines primarily in siloxanes and lower operating rates in the quarter. Sequentially, operating EBIT declined $432 million, driven by lower prices, demand, and operating rates. I'll now turn it over to Howard to review our outlook and actions on slide six.