Dow anticipates Q4 2025 EBITDA of $725M with cost actions offsetting feedstock headwinds

Earnings Call Insights: Dow Inc. (DOW) Q3 2025

MANAGEMENT VIEW

* CEO James Fitterling stated that "In the third quarter, we executed against Dow's strategic priorities to deliver sequential earnings and cash flow improvement despite continued pressure across the industry. These results reflect our focus on navigating the near term while positioning the company for profitable growth when our industry recovers." He highlighted net sales of $10 billion, with gains in the Industrial Intermediates & Infrastructure segment offset by declines elsewhere. Fitterling also noted sequential EBITDA improvement and $1.6 billion in increased cash provided by operating activities, driven by working capital improvements and advance payments for low carbon solutions and supply agreements.
* Chief Operating Officer Karen Carter reported the completion or progression of more than $6.5 billion in actions, including the expansion of a strategic agreement with MEGlobal, closure of a strategic infrastructure asset partnership generating $3 billion in proceeds, two non-core divestitures totaling approximately $250 million, and a $1.4 billion bond issuance. Carter stated, "We are progressing the delivery of at least $1 billion in targeted cost savings by the end of 2026. We are on track to deliver approximately $400 million of the cost savings this year."
* Carter explained that CapEx spending was lowered in alignment with a $1 billion reduction target, largely due to the delayed Alberta project. She confirmed continued commitment to the project's long-term value but emphasized timing would depend on market recovery.
* Carter detailed segment performance, noting Packaging & Specialty Plastics net sales were down year-over-year, with polyethylene volumes increasing but offset by lower olefins volumes in Europe. Industrial Intermediates & Infrastructure saw volume gains and increased operating EBIT, while Performance Materials & Coatings faced pricing pressures and lower EBIT.
* CFO Jeffrey Tate stated, "We completed the second phase of our strategic partnership with Macquarie for the sale of a 49% equity stake in select U.S. Gulf Coast infrastructure assets, receiving approximately $3 billion in total cash proceeds this year." Tate emphasized progress in optimizing working capital and bond issuances totaling $2.4 billion, with cash and equivalents above $4.5 billion and $10 billion in available liquidity.

OUTLOOK

* Tate stated, "Based on current indicators and normal seasonality, we anticipate our fourth quarter EBITDA to be approximately $725 million." Sequential tailwinds are expected from cost actions and lower planned maintenance, but seasonality and margin compression from feedstock costs will be headwinds. In Packaging & Specialty Plastics, lower maintenance and cost reduction actions will provide a $50 million sequential tailwind, while a fire at the Poly-6 unit in Texas will result in a $25 million unfavorable impact. Industrial Intermediates & Infrastructure EBITDA is expected to be approximately $20 million lower than Q3, and Performance Materials & Coatings is expected to see a $100 million sequential decrease in EBITDA. Management signaled continued focus on accelerating cost savings to offset higher feedstock costs and normal seasonality.

FINANCIAL RESULTS

* Net sales for the third quarter were $10 billion. EBITDA was $868 million. Cash provided by operating activities increased by $1.6 billion sequentially. Dividends delivered totaled $249 million. The company reported a $400 million cost savings target for the year, with $1 billion in targeted cost savings by the end of 2026. Carter noted the impact of recently completed and ongoing strategic actions totaling more than $6.5 billion. CapEx spending was reduced in line with a $1 billion reduction target.
* Segment performance included a sequential increase in operating EBIT for Packaging & Specialty Plastics, driven by higher integrated margins and the benefit of a new polyethylene unit; improved volumes and operating EBIT in Industrial Intermediates & Infrastructure; and ongoing margin compression in Performance Materials & Coatings, partly offset by fixed cost reductions.

Q&A

* Vincent Andrews, Morgan Stanley: Asked for reconciliation on better-than-expected Q3 results. Carter responded that sequential improvement was due to "higher integrated margins in both P&SP and II&I" and volume exceeding expectations, with cost efforts showing "in a visible way." Tate added that cost reductions yielded a $25 million improvement over guidance, and cash from operations improved by $1.6 billion due to working capital and supply agreements.
* Hassan Ahmed, Alembic Global Advisors: Sought details on rationalization and new project cancellations, especially in China. Fitterling cited "line of sight to about 9,300 kilotons of global capacity" being rationalized and speculated about potential delays in Chinese projects due to market conditions and trade pressures.
* Michael Sison, Wells Fargo: Asked about the $0.01 global margin contraction in Q4 and the impact of demand trends. Carter attributed margin decline to higher feedstock costs and indicated, "We have $0.05 on the table" for October price increases. Fitterling described market uncertainty as a challenge for projections and cited resilience in demand for electronics, data centers, and construction.
* Joshua Spector, UBS: Inquired about CapEx range for 2026. Fitterling said, "if we continue the way we are, you could see another $2.5 billion next year," with further guidance to come in January.
* Jeffrey Zekauskas, JPMorgan: Asked about the potential for joint venturing the Alberta cracker. Fitterling said, "I don't have anything specific to say...certainly, all possibilities are things that we would consider."
* Matthew Blair, TPH: Asked about polyurethanes business and tariffs. Carter noted recent antidumping findings were leading to reduced Chinese imports and some volume gains, but not yet much pricing impact.
* Kevin McCarthy, Vertical Research Partners: Sought comments on Q4 order book and guidance. Fitterling reported September was strong, October order books looked good, and the company is positioned "right down the middle" in terms of conservatism.
* Christopher Parkinson, Wolfe Research: Queried cost curve implications for Alberta returns. Fitterling assured that the Alberta asset "will be a low-cost asset and will be a first quartile asset."
* Patrick Fischer, Goldman Sachs: Asked about ethane pricing and operating rates in Q4. Fitterling said, "we got $0.04 in -- on the ethane in the quarter," and asset utilization will remain strong in the Americas.
* Patrick Cunningham, Citi: Requested quantification of run-rate earnings from new Gulf Coast investments. Carter estimated $100 million to $200 million annualized, with $40 million in Q3.
* Matthew DeYoe, BofA Securities: Questioned the sustainability of the GDP multiplier for polyethylene demand. Fitterling maintained the multiplier is "still there" and product mix is a factor in performance.

SENTIMENT ANALYSIS

* Analysts pressed management for clarity on the sustainability of cost reductions, the impact of strategic actions, and the durability of demand, with a slightly positive tone buoyed by sequential improvement but tempered by persistent market uncertainty and a focus on risk factors.
* Management's tone in prepared remarks was confident, citing strategic progress and strong execution, but turned more cautious in the Q&A, acknowledging headwinds, uncertainty, and the need for ongoing cost control. Fitterling used phrases such as "We are confident" and "We are focused," but also referenced market ambiguity and the challenges of projecting demand.
* Compared to the previous quarter, the current call reflected a more constructive sentiment, with improved sequential results and greater visibility on cost savings, though management continued to stress external uncertainties. The previous quarter had a more defensive tone, with dividend reduction and pronounced focus on maintaining flexibility.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for Q4 2025 EBITDA is $725 million, compared to prior Q3 guidance of $800 million, reflecting increased caution due to seasonality and feedstock headwinds.
* The company reported sequential improvement in cash flow and EBITDA, attributed to improved working capital and cost actions.
* Strategic focus shifted from dividend reduction and immediate cash preservation in Q2 to execution of cost savings, asset optimization, and selectively pursuing growth investments in Q3.
* Analysts in both quarters focused on cash flow, cost discipline, and demand recovery, but current quarter questions emphasized the sustainability of improvements and the impact of recent strategic actions.
* Management exhibited more confidence in recent results, highlighting strong execution, but maintained a measured approach given ongoing uncertainty in end markets and trade dynamics.

RISKS AND CONCERNS

* Management highlighted the ongoing impact of a prolonged industry down cycle, oversupply, and global economic uncertainty as primary challenges.
* Tate cited "macroeconomic dynamics" and limited visibility into customer buying patterns, with consumer and business sentiment subdued.
* Carter noted that the timing of the Alberta project remains uncertain and will be updated in the next quarter, with decisions centered on value maximization.
* Fitterling discussed ongoing trade and tariff risks, industry rationalization, and the need to monitor global supply and demand signals.
* The company is actively engaged in government discussions on anticompetitive behaviors and pursuing actions to protect local industries, including recent antidumping measures.

FINAL TAKEAWAY

Dow’s third quarter results reflect sequential improvement in earnings and cash flow, driven by targeted cost actions, strategic divestitures, and the ramp-up of new Gulf Coast assets. The company projects Q4 EBITDA of approximately $725 million, supported by ongoing cost reduction initiatives, though normal seasonality and higher feedstock costs are expected to be headwinds. Management remains focused on executing its cost savings program, optimizing its asset footprint, and maintaining flexibility as it monitors uncertain demand patterns and industry rationalization efforts. The timing of major growth investments, such as the Alberta project, will be dictated by market recovery and value creation opportunities.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/dow/earnings/transcripts]

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