Dow Chemical accelerates discussions around new partnerships

07 Jan '09

6 min read

"Prior to signing the definitive agreement with our Kuwaiti partners about the K-Dow joint venture, we had other options and partners to consider," Liveris said. "Some of these discussions were active as recently as November, and we have already been contacted by other interested parties & have begun discussions. This can be done on an accelerated timeline due to the considerable groundwork that has already been established in anticipation of the K-Dow joint venture."

Dow believes that the identification of an alternative joint venture partner for Dow's basic plastics business combined with the acceleration of planned divestitures and several additional divestments that are consistent with the Company's strategy will yield proceeds greater than the funds Dow expected to receive in connection with the K-Dow joint venture.

Remaining Responsive to a Volatile Global Economic Environment
While the status of the K-Dow joint venture has created an unexpected hurdle for Dow's corporate strategy, the Company has a long history of responding quickly and aggressively to the rapidly changing external events that are characteristic of the global economy in the 21st century.

Indeed, many of the elements of the transformational strategy Dow has pursued since 2005 were created in response to the rapidly changing global environment. For example, extreme fluctuations in hydrocarbon prices in the US and other parts of the world led to the development of Dow's "asset light" strategy which has sought to develop new facilities in parts of the world where hydrocarbon costs are lower and more consistently predictable.

Earlier in 2008, with petroleum costs at an all-time high, Dow again responded aggressively with company-wide price increases that reinforced Dow's commitment to assuring financial performance despite rapidly changing external factors.

"In this volatile economic environment, the marketplace will reward companies committed to becoming leaner, more agile and more responsive to both challenges and opportunities," Liveris said. "Dow will be precisely this kind of company, and we intend to emerge from the current economic climate a more formidable competitor, better able to meet the considerable opportunities of this century."

Commitment to Financial Discipline and Maintaining Strong Investment Grade Credit Ratings
Since the onset of the global financial crisis in September 2008, Dow has taken aggressive actions to reduce capital spending, working capital and operating expenses. With further weakening in the global economy, Dow announced a restructuring in December which will reduce the Company's workforce by approximately 11 percent, close facilities in high-cost locations and divest several non-strategic businesses. "We undertake actions like these with a very clear outcome in mind -- to preserve our financial flexibility and improve our financial performance.

We took aggressive action in 2008 and we will accelerate these actions even faster and more aggressively in 2009," said Liveris. "The measures will also allow us to preserve our strong investment grade rating - a commitment we take very seriously. These actions include an acceleration of expense and capital reduction programs as well as cash preservation measures that ensure we retain our options and financial flexibility during these volatile and uncertain times."

Commitment to Dow Shareholders
The combination of planned actions on cash flow as well as operating earnings will allow Dow to continue to pay our regular, quarterly cash dividend, which the Company has done for 389 consecutive quarters without reduction or interruption, since 1912.

The Dow Chemical Company

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