Dow Inc.

Greetings and welcome to the Dow fourth quarter 2023 earnings conference call. 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 today. The accompanying slides are provided through this webcast and posted on our website. I'm Pankaj Gupta, Dow Investor Relations Vice President, and joining me are Jim Firming, Dow's Chair and Chief Executive Officer, and Jeff Tate, Chief Financial Officer. Please note our comments contain forward-looking statements and are subject to the related cautionary statement contained in the earnings news release and slides. Please refer to our public filings for further information about principal risks and uncertainties. Unless otherwise specified, all financials, where applicable, exclude significant items. We also will refer to non-GAAP measures, a reconciliation of the most directly comparable GAAP financial measure, and other associated disclosures are contained in the earnings news release and slides that are posted on our website. On slide two is our agenda for today's call. Jim will review our fourth quarter results, full year highlights, and operating segment performance. Jeff will provide an update on the macroeconomic environment, our strong financial position through the cycle, as well as the modeling guidance. To close, Jim will provide an update on key milestones for our long-term growth and sustainability roadmap, which will continue to drive shareholder value. 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, we continue to execute with discipline and advance our long-term strategy in the face of a dynamic macroeconomic environment. Net sales were $10.6 billion, down 10% versus a year ago period, reflecting declines in all operating segments. Sales were down 1% sequentially as volume gains in packaging and specialty plastics were more than offset by seasonal demand declines in performance materials and coatings. Volume increased 2% year over year, with gains across all regions except Asia Pacific, which was flat. Sequentially, volume decreased by 1%, including the impact of an unplanned event from a storm that was equivalent to a Category 1 hurricane at our Bahia Blanca site in Argentina. Local price decreased 13% year-over-year, with declines in all operating segments due to lower feedstocks and energy costs. Sequentially, price was flat, reflecting modest gains in most regions. Operating EBIT for the quarter was $559 million, down $42 million year-over-year, primarily driven by lower prices. Sequentially, operating EBIT was down $67 million, as gains in packaging and specialty plastics were more than offset by seasonally lower volumes in performance materials and coatings. Our cash flow generation and working capital management enabled us to deliver cash flow from operations of $1.6 billion in the quarter. We continued to reduce costs and focus on cash generation, completing our $1 billion of cost savings for the year. And in the fourth quarter, we pursued additional de-risking opportunities for our pension plans, including annuitization and risk transfer of $1.7 billion in pension liability and a one-time non-cash and non-operating settlement charge of $642 million. We also advanced our long-term strategy while returning $616 million to shareholders. And we reached final investment decision with our board of directors for our Path to Zero project in Fort Saskatchewan, Alberta. Now turning to our full year performance on slide four. Our 2023 results demonstrate strong execution and a commitment to financial discipline. Against the dynamic macroeconomic backdrop, Team Dow continued to take proactive actions. As a result, we generated $5.2 billion in cash flow from operations for the year, reflecting a cash flow conversion of 96%. We also returned $2.6 billion to shareholders through dividends and share repurchases. Our efforts continue to be recognized externally through industry-leading awards, certifications, and recognitions, and we continue to outpace our peers on leadership diversity. I'm proud of how TeamDAO is delivering for our customers, driving shareholder value, and supporting our community as we progress our long-term strategy. Now turning to operating segment performance on slide five. In the packaging and specialty plastic segment, Operating EBIT was $664 million, up $9 million compared to the year-ago period. Results were driven by lower input costs and higher operating rates, where we closed out the year strong and hit record ethylene production levels on a full-year basis. Local price declines were driven by lower global prices, while volume increases were led by higher packaging demand, primarily in the U.S., Canada, and Latin America. Sequentially, operating EBIT increased by $188 million. This was driven by higher integrated polyethylene margins, the impact of planned maintenance activity in the third quarter, and higher licensing revenue. Moving to the industrial intermediates and infrastructure segment, operating EBIT was $15 million compared to $164 million in the year-ago period. Results were driven by lower local prices in both businesses as well as reduced supply availability in industrial solutions. Sequentially, operating EBIT was down $6 million, driven by seasonally lower volumes in building and construction end markets, which were partially offset by seasonally higher demands for de-icing fluid and higher demands for mobility applications. And in the performance materials and coating segment, operating EBIT was a loss of $61 million compared to a loss of $130 million in the year-ago period. driven by lower costs and reduced planned maintenance turnaround activity. Volume was up year over year, driven by higher demand in project-driven building and construction and markets. Sequentially, operating EBIT decreased $240 million, primarily due to seasonally lower volumes. Next, I'll turn it over to Jeff to review our outlook and actions on slide six.