DOW INC

RESULTS OF OPERATIONS

Net Sales

The following tables summarize net sales and sales variances by operating segment and geographic region from the prior year:

Net sales in the first quarter of 2024 were $10.8 billion, down 9 percent from $11.9 billion in the first quarter of 2023, with local price down 10 percent, volume up 1 percent and currency flat. Net sales decreased in all operating segments and geographic regions. Local price decreased in Packaging & Specialty Plastics (down 8 percent), Industrial Intermediates & Infrastructure (down 14 percent), and Performance Materials & Coatings (down 9 percent), driven by lower global feedstock and energy costs. Volume increased in all geographic regions except EMEAI (down 2 percent). Volume decreased in Packaging & Specialty Plastics (down 3 percent), driven by Hydrocarbons and Energy primarily due to higher downstream derivative polymer demand, as well as lighter feedslate cracking in EMEAI, and increased in Industrial Intermediates & Infrastructure and Performance Materials & Coatings (both up 4 percent). Excluding the Hydrocarbons & Energy business, net sales decreased 7 percent.

Cost of Sales

Cost of sales ("COS") was $9.5 billion in the first quarter of 2024, compared with $10.6 billion in the first quarter of 2023. COS in the first quarter of 2024 decreased primarily due to lower raw material costs, lower global energy and feedstock costs and the impact of structural cost improvements. COS as a percentage of net sales was 88.1 percent in the first quarter of 2024 (89.7 percent in the first quarter of 2023).

Research and Development Expenses

Research and development ("R&D") expenses totaled $204 million in the first quarter of 2024, compared with $214 million in the first quarter of 2023. R&D expenses in the first quarter of 2024 decreased primarily due to the impact of structural cost improvements and lower fringe benefit expenses, which were partially offset by higher performance based compensation costs.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses totaled $442 million in the first quarter of 2024, compared with $428 million in the first quarter of 2023. SG&A expenses increased in the first quarter of 2024, primarily due to higher bad debt expense as the result of the resolution of a dispute with a customer and performance based compensation costs, which were partially offset by the impact of structural cost improvements.

Amortization of Intangibles

Amortization of intangibles was $81 million in the first quarter of 2024 and 2023.

Equity in Earnings (Losses) of Nonconsolidated Affiliates

The Company's share of equity in earnings of nonconsolidated affiliates was $17 million in the first quarter of 2024, compared with equity in losses of nonconsolidated affiliates of $48 million in the first quarter of 2023, an increase of $65 million primarily due to improved performance at the Kuwait and Sadara joint ventures, partially offset by losses at the Company's non-principal joint ventures. Cash dividends from nonconsolidated affiliates were $92 million in the first three months of 2024, compared with $53 million in the first three months of 2023.

Sundry Income (Expense) – Net

For the three months ended March 31, 2024, Sundry income (expense) - net was income of $61 million for Dow Inc. and TDCC compared with income of $79 million and $69 million, respectively, for the three months ended March 31, 2023. The first quarter of 2024 and 2023 included non-operating pension and postretirement benefit plan credits and gains on the sales of assets and investments, which were partially offset by foreign currency exchange losses.

Interest Expense and Amortization of Debt Discount

Interest expense and amortization of debt discount was $199 million in the first quarter of 2024, compared with $185 million in the first quarter of 2023. The increase in interest expense is primarily due to borrowings outside of the United States and $1.25 billion of senior unsecured notes issued in the first quarter of 2024.

Credit for Income Taxes

The Company's effective tax rate fluctuates based on, among other factors, where income is earned, the level of income relative to tax attributes and the level of equity earnings, since most earnings from the Company's equity method investments are taxed at the joint venture level. In the first quarter of 2024, Dow Inc. and TDCC reported a credit for income taxes of $89 million, resulting in a negative effective tax rate of 19.8 percent and 19.6 percent, respectively. In the first quarter of 2023, the Company reported a credit for income taxes of $47 million, resulting in an effective tax rate of 39.2 percent and 37.0 percent for Dow Inc. and TDCC, respectively. See Note 6 to the Consolidated Financial Statements for additional information about the Company's income taxes and effective tax rates.

The Company continues to monitor and evaluate legislative developments related to the Global Anti-Base Erosion Proposal Regime ("GloBE") established by the Organization of Economic Cooperation and Development’s ("OECD") Pillar Two framework. Several countries in which the Company operates have adopted GloBE into their legislation and several others are expected to enact these rules in the future. To date, such legislation has not materially impacted the Company's effective tax rate.

Net Income (Loss) Available for Common Stockholder(s)

Dow Inc.

Net income (loss) available for Dow Inc. common stockholders was income of $516 million, or $0.73 per share, in the first quarter of 2024, compared with a loss of $93 million, or $0.13 per share, in the first quarter of 2023. See Note 7 to the Consolidated Financial Statements for details on Dow Inc.'s earnings (loss) per share calculations.

TDCC

Net income (loss) available for the TDCC common stockholder was income of $521 million in the first quarter of 2024, compared with a loss of $100 million in the first quarter of 2023. TDCC's common shares are owned solely by Dow Inc.

SEGMENT RESULTS

For further discussion of the Company's segments, see Part I, Item 1. Business of the combined Dow Inc. and TDCC Annual Report on Form 10-K for the fiscal year ended December 31, 2023 ("2023 10-K"), filed with the SEC on January 31, 2024.

Dow’s measure of profit/loss for segment reporting purposes is Operating EBIT as this is the manner in which the Company's chief operating decision maker assesses performance and allocates resources. The Company defines Operating EBIT as earnings (i.e., "Income (loss) before income taxes") before interest, excluding the impact of significant items. Operating EBIT by segment includes all operating items relating to the businesses; items that principally apply to Dow as a whole are assigned to Corporate.

PACKAGING & SPECIALTY PLASTICS

Packaging & Specialty Plastics net sales were $5,430 million in the first quarter of 2024, down 11 percent from net sales of $6,114 million in the first quarter of 2023, with local price down 8 percent, volume down 3 percent and currency flat. Local price decreased in Packaging and Specialty Plastics in all geographic regions, driven by lower raw material and energy prices and unfavorable supply and demand dynamics. Local price decreased in Hydrocarbons & Energy, primarily in the U.S. & Canada, due to lower energy and feedstock costs. Volume increased in Packaging and Specialty Plastics, primarily in Asia Pacific, due to higher functional polymers and polyethylene demand, which more than offset decreases for non-recurring licensing sales in EMEAI. Volume decreased in Hydrocarbons & Energy, primarily due to higher internal derivative demand and lighter feedslate cracking which resulted in lower third-party hydrocarbon sales in EMEAI and the U.S. & Canada.

Operating EBIT was $605 million in the first quarter of 2024, down $37 million from Operating EBIT of $642 million in the first quarter of 2023. Operating EBIT decreased primarily due to lower selling prices, which were partially offset by lower raw material, energy and feedstock costs.

INDUSTRIAL INTERMEDIATES & INFRASTRUCTURE

Industrial Intermediates & Infrastructure net sales were $3,008 million in the first quarter of 2024, down 11 percent from $3,378 million in the first quarter of 2023, with local price down 14 percent, volume up 4 percent and an unfavorable currency impact of 1 percent. Local price decreased in both businesses and across all geographic regions, driven by unfavorable supply and demand dynamics in Polyurethanes & Construction Chemicals and lower energy and raw material costs in Industrial Solutions. Volume increased in Polyurethanes & Construction Chemicals across all geographic regions, led by EMEAI, primarily in building and construction and industrial applications. Volume decreased in Industrial Solutions, with a decline in the U.S. & Canada due to an ongoing outage from 2023 related to a significant unplanned event at the Louisiana Operations Glycol-2 unit in Plaquemine, Louisiana, which was partially offset by increases in Asia Pacific and Latin America. Currency had an unfavorable impact on sales in both businesses, driven by Asia Pacific and EMEAI.

Operating EBIT was $87 million in the first quarter of 2024, down $36 million from Operating EBIT of $123 million in the first quarter of 2023. Operating EBIT decreased primarily due to lower selling prices in both businesses, which was partially offset by lower raw material, energy and feedstock costs, improved results at the EQUATE and Sadara joint ventures and volume gains in Polyurethanes & Construction Chemicals.

PERFORMANCE MATERIALS & COATINGS

Performance Materials & Coatings net sales were $2,152 million in the first quarter of 2024, down 5 percent from net sales of $2,276 million in the first quarter of 2023, with local price down 9 percent, volume up 4 percent and currency flat. Local price decreased in both businesses and across all geographic regions, primarily driven by unfavorable supply and demand dynamics. Volume increased in Coatings & Performance Monomers across all geographic regions, primarily driven by increased demand for acrylic monomers. Volume was flat in Consumer Solutions, with increases in the U.S. & Canada and Latin America offset by decreases in EMEAI and Asia Pacific.

Operating EBIT was $41 million in the first quarter of 2024, up $6 million from Operating EBIT of $35 million in the first quarter of 2023. Operating EBIT increased primarily due to improved demand and higher operating rates, which were partially offset by margin compression.

CORPORATE

Net sales for Corporate, which primarily relate to the Company's insurance operations, were $175 million in the first quarter of 2024, an increase from net sales of $83 million in the first quarter of 2023.

Operating EBIT was a loss of $59 million in the first quarter of 2024, compared with a loss of $92 million in the first quarter of 2023. Operating EBIT increased primarily due to lower environmental costs.