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 third quarter of 2024 were $10.9 billion, up 1 percent from $10.7 billion in the third quarter of 2023. Volume was up 1 percent and local price was flat. Net sales increased in all operating segments except Industrial Intermediates & Infrastructure. Volume increased 1 percent, driven by the U.S. & Canada and EMEAI (both up 3 percent), partially offset by a decline in Asia Pacific (down 6 percent), and Latin America was flat. Volume was flat in Packaging & Specialty Plastics, decreased in Industrial Intermediates & Infrastructure (down 2 percent), and increased in Performance Materials & Coatings (up 5 percent). Local price remained flat, with gains in the U.S. & Canada and EMEAI (both up 2 percent) offset by declines in Asia Pacific and Latin America (both down 2 percent). Local price increased in Packaging & Specialty Plastics (up 1 percent), was flat in Industrial Intermediates & Infrastructure, and declined in Performance Materials & Coatings (down 1 percent). Excluding the Hydrocarbons & Energy business, net sales increased 2 percent.

Net sales for the first nine months of 2024 were $32.6 billion, down 4 percent from $34.0 billion in the same period last year, with local price down 5 percent and volume up 1 percent. Net sales decreased in all geographic regions and all operating segments except Performance Materials & Coatings, which was flat. Local price decreased in all geographic regions and in Packaging & Specialty Plastics (down 4 percent), Industrial Intermediates & Infrastructure (down 7 percent), and Performance Materials & Coatings (down 4 percent). Volume increased in the U.S. & Canada, and was flat in all other geographic regions. Volume decreased in Packaging & Specialty Plastics (down 2 percent), and increased in Industrial Intermediates & Infrastructure (up 1 percent) and Performance Materials & Coatings (up 5 percent). Excluding the Hydrocarbons & Energy business, net sales decreased 3 percent.

Cost of Sales

Cost of sales ("COS") was $9.8 billion in the third quarter of 2024, compared with $9.6 billion in the third quarter of 2023. For the first nine months of 2024, COS was $28.9 billion compared with $30.1 billion in the first nine months of 2023. COS for the three months ended September 30, 2024 increased on higher volume and a charge related to an arbitration settlement agreement for historical product claims from a divested business, and was partially offset by lower global energy and feedstock costs. COS for the nine months ended September 30, 2024 decreased primarily due to lower raw material costs, lower global energy and feedstock costs and the impact of structural cost improvements, partially offset by increased planned maintenance turnaround spending and a charge related to an arbitration settlement agreement for historical product claims from a divested business. COS as a percentage of net sales was 90.2 percent in the third quarter of 2024 (89.4 percent in the third quarter of 2023) and 88.7 percent for the first nine months of 2024 (88.5 percent for the first nine months of 2023).

Research and Development Expenses

Research and development ("R&D") expenses totaled $208 million in the third quarter of 2024, compared with $197 million in the third quarter of 2023. R&D expenses for the first nine months of 2024 were $608 million compared with $616 million in the first nine months of 2023.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses totaled $396 million in the third quarter of 2024, compared with $380 million in the third quarter of 2023. SG&A expenses increased in the third quarter of 2024 primarily due to higher bad debt expense and performance-based compensation costs. For the first nine months of 2024, SG&A expenses were $1,228 million, compared with $1,216 million in the first nine months of 2023. SG&A expenses for the first nine months of 2024 increased primarily due to higher bad debt expense, including expense incurred as a result of a resolution of a dispute with a customer, which was partially offset by the impact of structural cost improvements.

Amortization of Intangibles

Amortization of intangibles was $76 million in the third quarter of 2024 compared with $81 million in the third quarter of 2023. In the first nine months of 2024, amortization of intangibles was $234 million, compared with $243 million in the first nine months of 2023.

Equity in Earnings (Losses) of Nonconsolidated Affiliates

The Company's share of equity in earnings of nonconsolidated affiliates was $2 million in the third quarter of 2024, compared with equity in losses of nonconsolidated affiliates of $7 million in the third quarter of 2023, an increase of $9 million, primarily due to improved performance at the Kuwait joint ventures and slightly offset by lower results at the Sadara and Thai joint ventures. The Company's share of equity in earnings of nonconsolidated affiliates was $45 million for the first nine months of 2024, compared with equity in losses of nonconsolidated affiliates of $112 million for the first nine months of 2023, primarily due to improved performance at the Kuwait and Sadara joint ventures and slightly offset by lower results at the Thai joint ventures. Cash dividends from nonconsolidated affiliates were $266 million in the first nine months of 2024, compared with $188 million in the first nine months of 2023.

Sundry Income (Expense) – Net

Sundry income (expense) - net for the three months ended September 30, 2024 was income of $119 million and $118 million for Dow Inc. and TDCC, respectively, compared with income of $92 million and $71 million, respectively, for the three months ended September 30, 2023. The increase in sundry income is primarily due to higher gains on the sales of assets and investments and lower foreign currency exchange losses, which were partially offset by a decrease in non-operating pension and postretirement benefit plan credits.

Sundry income (expense) - net for the nine months ended September 30, 2024 was income of $256 million and $253 million for Dow Inc. and TDCC, respectively, compared with income of $202 million and $169 million, respectively, for the nine months ended September 30, 2023. The increase in sundry income is primarily due to lower foreign currency exchange losses and higher gains on the sales of assets and investments, which were partially offset by a decrease in non-operating pension and postretirement benefit plan credits.

Interest Expense and Amortization of Debt Discount

Interest expense and amortization of debt discount was $199 million in the third quarter of 2024, compared with $192 million in the third quarter of 2023. Interest expense and amortization of debt discount was $595 million in the first nine months of 2024 compared with $549 million in the first nine months 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.

Provision 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 third quarter of 2024, the Company reported a provision for income taxes of $84 million, resulting in an effective tax rate of 25.9 percent and 25.1 percent for Dow Inc. and TDCC, respectively. In the third quarter of 2023, the Company reported a provision for income taxes of $90 million, resulting in an effective tax rate of 21.6 percent and 22.5 percent for Dow Inc. and TDCC, respectively. For the first nine months of 2024, the Company reported a provision for income taxes of $145 million, resulting in an effective tax rate of 10.5 percent and 10.4 percent for Dow Inc. and TDCC, respectively. For the first nine months of 2023, the Company reported a provision for income taxes of $253 million, resulting in an effective tax rate of 25.1 percent and 25.7 percent for Dow Inc. and TDCC, respectively. See Note 7 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 Available for Common Stockholder(s)

Dow Inc.

Net income available for Dow Inc. common stockholders was $214 million, or $0.30 per share, in the third quarter of 2024, compared with $302 million, or $0.42 per share, in the third quarter of 2023. Net income available for Dow Inc. common stockholders was $1,169 million, or $1.65 per share, in the first nine months of 2024, compared with $694 million, or $0.97 per share, in the first nine months of 2023. See Note 9 to the Consolidated Financial Statements for details on Dow Inc.'s earnings per share calculations.

TDCC

Net income available for the TDCC common stockholder was $224 million in the third quarter of 2024, compared with $285 million in the third quarter of 2023. Net income available for the TDCC common stockholder was $1,186 million in the first nine months of 2024, compared with $672 million in the first nine months 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 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 $5,516 million in the third quarter of 2024, up 1 percent from net sales of $5,454 million in the third quarter of 2023, with local price up 1 percent and volume and currency flat. Local price increased in Packaging and Specialty Plastics, primarily in EMEAI and the U.S. & Canada, driven by higher pricing of polyethylene which more than offset lower pricing of downstream polymers. Local price increased in Hydrocarbons & Energy, primarily in the U.S. & Canada and EMEAI from third-party olefins sales. Volume increased in Packaging and Specialty Plastics due to higher demand for downstream polymers and an increase in non-recurring licensing sales, which was partially offset by lower polyethylene volumes. Volume decreased in Hydrocarbons & Energy in all geographic regions, led by the U.S. & Canada, primarily driven by lower third-party aromatics and energy sales.

Operating EBIT was $618 million in the third quarter of 2024, up $142 million from Operating EBIT of $476 million in the third quarter of 2023. Operating EBIT increased due to lower raw material costs and higher selling prices, which more than offset the impact of an unplanned ethylene facility outage.

Packaging & Specialty Plastics net sales were $16,461 million in the first nine months of 2024, down 6 percent from net sales of $17,508 million in the first nine months of 2023, with local price down 4 percent, volume down 2 percent and currency was flat. Local price decreased in Packaging and Specialty Plastics in all geographic regions, primarily driven by lower pricing of downstream polymers. Local price was flat in Hydrocarbons & Energy. Volume increased in Packaging and Specialty Plastics, primarily in EMEAI and the U.S. & Canada, due to higher downstream polymers and polyethylene demand. Volume decreased in Hydrocarbons & Energy in all geographic regions, led by EMEAI, primarily driven by higher internal derivative demand and lighter feedslate cracking.

Operating EBIT was $1,926 million in the first nine months of 2024, down $110 million from Operating EBIT of $2,036 million in the first nine months of 2023. Operating EBIT decreased primarily due to lower selling prices, lower volumes in Hydrocarbons & Energy, higher planned maintenance costs and the impact of an unplanned ethylene facility outage, which were partially offset by lower raw material, energy and feedstock costs.

INDUSTRIAL INTERMEDIATES & INFRASTRUCTURE

Industrial Intermediates & Infrastructure net sales were $2,962 million in the third quarter of 2024, down 2 percent from net sales of $3,035 million in the third quarter of 2023, with volume down 2 percent and local price and currency flat. Volume decreased in Polyurethanes & Construction Chemicals and in all geographic regions except Latin America and reflected the impact of a force majeure in methylene diphenyl diisocyanate following a third-party supplier outage in the U.S. & Canada. Volume increased in Industrial Solutions, led by EMEAI and Latin America, and included the benefit of increased supply availability following the restart from an outage in 2023 related to a significant unplanned event at the Louisiana Operations Glycol-2 unit in Plaquemine, Louisiana. Local price decreased in Polyurethanes & Construction Chemicals, offset by an increase in Industrial Solutions.

Operating EBIT was a loss of $53 million in the third quarter of 2024, down $74 million from Operating EBIT of $21 million in the third quarter of 2023. Operating EBIT decreased primarily due to higher planned maintenance activity and lower integrated margins, partially offset by improved equity earnings at the EQUATE joint venture.

Industrial Intermediates & Infrastructure net sales were $8,921 million in the first nine months of 2024, down 7 percent from net sales of $9,590 million in the first nine months of 2023, with local price down 7 percent, volume up 1 percent and an unfavorable currency impact of 1 percent. Local price decreased in both businesses and across all geographic regions. Volume increased in Polyurethanes & Construction Chemicals, with gains in EMEAI and Latin America partially offset by declines in Asia Pacific and the U.S. & Canada and led by building and construction and industrial applications. Volume was flat in Industrial Solutions, as increased demand for coatings and mobility applications was offset by declines in the U.S. & Canada, reflecting the impact from an outage in 2023 at the Louisiana Operations Glycol-2 unit in Plaquemine, Louisiana, which successfully restarted at the end of June 2024. Currency had an unfavorable impact on sales in Polyurethanes & Construction Chemicals, driven by EMEAI and Asia Pacific, and was flat in Industrial Solutions.

Operating EBIT was $41 million in the first nine months of 2024, down $68 million from Operating EBIT of $109 million in the first nine months of 2023. Operating EBIT decreased primarily due to lower selling prices in both businesses and an outage in 2023 at the Louisiana Operations Glycol-2 unit in Plaquemine, Louisiana, which successfully restarted at the end of June 2024, which were partially offset by lower raw material, energy and feedstock costs and improved results at the EQUATE and Sadara joint ventures.

PERFORMANCE MATERIALS & COATINGS

Performance Materials & Coatings net sales were $2,214 million in the third quarter of 2024, up 4 percent from net sales of $2,130 million in the third quarter of 2023, with volume up 5 percent, local price down 1 percent and currency was flat. Volume increased in Consumer Solutions and in all geographic regions, primarily in downstream silicones, led by home and personal care and consumer and electronics applications. Volume increased in Coatings & Performance Monomers and in all geographic regions except EMEAI, primarily due to gains in industrial coatings and plastic additives which were partially offset by declines in acrylic monomers. Local price decreased in Consumer Solutions across all geographic regions and was broad-based. Local price increased in Coatings & Performance Monomers, as a result of higher raw material costs, in all geographic regions except Latin America, which was flat.

Operating EBIT was $140 million in the third quarter of 2024, down $39 million from Operating EBIT of $179 million in the third quarter of 2023. Operating EBIT decreased primarily due to higher raw material costs, partially offset by improved demand.

Performance Materials & Coatings net sales were $6,609 million in the first nine months of 2024 compared with net sales of $6,603 million in the first nine months of 2023, with volume up 5 percent, local price down 4 percent, and an unfavorable currency impact of 1 percent. Volume increased in both businesses and in all geographic regions. Volume increased in Consumer Solutions across all end-markets. The volume increase in Coatings & Performance Monomers was led by acrylic monomers and industrial and architectural coatings. Price decreased in both businesses and was broad-based. Local price decreased in Consumer Solutions across all geographic regions and in Coatings & Performance Monomers in all geographic regions except Asia Pacific. Currency unfavorably impacted sales in Consumer Solutions, driven by Asia Pacific, and was flat in Coatings & Performance Monomers.

Operating EBIT was $327 million in the first nine months of 2024, up $47 million from Operating EBIT of $280 million in the first nine months of 2023. Operating EBIT increased primarily due to improved demand and higher operating rates, which were partially offset by lower selling prices and higher raw materials costs.

CORPORATE

Net sales for Corporate, which primarily relate to the Company's insurance operations, were $187 millionin the third quarter of 2024, an increase from net sales of $111 million in the third quarter of 2023. Net sales were $568 million in the first nine months of 2024, an increase from net sales of $300 million in the first nine months of 2023.

Operating EBIT was a loss of $64 million in the third quarter of 2024, compared with a loss of $50 million in the third quarter of 2023. Operating EBIT was a loss of $160 million in the first nine months of 2024, compared with a loss of $206 million in the first nine months of 2023. Operating EBIT loss improved primarily due to lower environmental costs and increased income from insurance operations.