DOW CHEMICAL CO /DE/

RESULTS OF OPERATIONS

Net Sales

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

1. Portfolio & Other includes the sales impact of the flexible packaging laminating adhesives business, which was sold to Arkema S.A. in the fourth quarter of 2024.

Net sales in the second quarter of 2025 were $10.1 billion, down 7 percent from $10.9 billion in the second quarter of 2024, with local price down 7 percent, volume down 1 percent, and a favorable currency impact of 1 percent. Net sales decreased in all operating segments and all geographic regions. Local price decreased in all geographic regions and in Packaging & Specialty Plastics (down 10 percent), Industrial Intermediates & Infrastructure (down 5 percent), and Performance Materials & Coatings (down 3 percent). Volume decreased 1 percent, driven by EMEAI and Latin America (both down 3 percent) and Asia Pacific (down 1 percent), partially offset by an increase in the U.S. & Canada (up 2 percent). Volume increased in Packaging & Specialty Plastics (up 1 percent) and decreased in Industrial Intermediates & Infrastructure (down 2 percent) and Performance Materials & Coatings (down 3 percent). Currency favorably impacted net sales by 1 percent, driven by EMEAI (up 2 percent) and Asia Pacific (up 1 percent). Portfolio & other unfavorably impacted net sales in Packaging & Specialty Plastics (down 1 percent). Excluding the Hydrocarbons & Energy business, net sales decreased 8 percent.

Net sales for the first six months of 2025 were $20.5 billion, down 5 percent from $21.7 billion in the same period last year, with local price down 5 percent, portfolio & other down 1 percent, and volume up 1 percent. Net sales decreased in all operating segments and all geographic regions. Local price decreased in all geographic regions and in Packaging & Specialty Plastics (down 7 percent), Industrial Intermediates & Infrastructure (down 4 percent), and Performance Materials & Coatings (down 2 percent). Volume increased 1 percent, driven by the U.S. & Canada (up 3 percent) and Asia Pacific (up 1 percent), partially offset by declines in Latin America (down 4 percent) and EMEAI (down 1 percent). Volume increased in Packaging & Specialty Plastics (up 2 percent) and decreased in Industrial Intermediates & Infrastructure (down 1 percent) and Performance Materials & Coatings (down 2 percent). Excluding the Hydrocarbons & Energy business, net sales decreased 6 percent.

Cost of Sales

Cost of sales ("COS") was $9.5 billion in the second quarter of 2025, compared with $9.6 billion in the second quarter of 2024. COS decreased in the second quarter of 2025 primarily due to lower raw material and feedstock costs, decreased planned maintenance turnaround spending, adjustments to legacy groundwater contamination matters and the impact of the Company's cost reduction initiatives, partially offset by the impact of lower operating rates. For the first six months of 2025, COS was $19.3 billion, compared with $19.1 billion in the first six months of 2024. COS for the first six months of 2025 increased primarily due to the impact of lower operating rates and a charge related to an arbitration settlement agreement for historical product claims from a divested business, partially offset by adjustments to legacy groundwater contamination matters, lower raw material and feedstock costs and decreased planned maintenance turnaround spending. COS as a percentage of net sales was 94.2 percent in the second quarter of 2025 (87.9 percent in the second quarter of 2024) and 93.9 percent for the first six months of 2025 (88.0 percent for the first six months of 2024).

Research and Development Expenses

Research and development ("R&D") expenses totaled $188 million in the second quarter of 2025, compared with $196 million in the second quarter of 2024. R&D expenses for the first six months of 2025 were $388 million, compared with $400 million in the first six months of 2024. R&D expenses for the three and six months ended June 30, 2025 decreased primarily due to the Company's cost reduction initiatives.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses totaled $347 million in the second quarter of 2025, compared with $390 million in the second quarter of 2024. SG&A expenses decreased in the second quarter of 2025 primarily due to the impact of lower third-party purchased services. For the first six months of 2025, SG&A expenses were $713 million, compared with $832 million in the first six months of 2024. SG&A expenses for the first six months of 2025 decreased primarily due to lower third-party purchased services and decreased bad debt expense, including the impact of a favorable resolution of a dispute with a customer.

Amortization of Intangibles

Amortization of intangibles was $63 million in the second quarter of 2025 compared with $77 million in the second quarter of 2024. In the first six months of 2025, amortization of intangibles was $139 million, compared with $158 million in the first six months of 2024. Amortization of intangibles decreased primarily due to certain intangible assets becoming fully amortized in 2025.

Restructuring and Asset Related Charges - Net

On January 27, 2025, the Board approved targeted actions to further achieve the Company's cost reduction initiatives in response to ongoing macroeconomic uncertainty, while reinforcing its long-term competitiveness across the economic cycle. As a result of these actions, in the first quarter of 2025 the Company recorded pretax charges of $207 million for severance and related benefits costs, related to Corporate. These actions are expected to be substantially complete by the end of 2026. See Note 5 to the Consolidated Financial Statements for additional information.

On June 30, 2025, the Board approved restructuring actions to rationalize the Company's global asset footprint, including certain actions identified as part of the Company's previously announced strategic review of its European assets and certain corporate and other assets, and to enhance the Company's competitiveness over the economic cycle. The program includes asset write-down and write-off charges, severance and related benefit costs and other exit and disposal costs. As a result of these actions, in the second quarter of 2025 the Company recorded pretax restructuring charges of $591 million, consisting of severance and related benefit costs of $154 million, asset write-downs and write-offs of $334 million and costs associated with exit and disposal activities of $103 million. Restructuring charges by segment were as follows: $158 million in Packaging & Specialty Plastics, $89 million in Industrial Intermediates & Infrastructure, $147 million in Performance Materials & Coatings and $197 million in Corporate. See Note 5 to the Consolidated Financial Statements for additional information.

Actions related to the restructuring program approved by the Board on January 25, 2023 were complete at the end of the second quarter of 2025. In the first quarter of 2025, the Company recorded an additional pretax restructuring charge of $5 million for asset write-downs and write-offs and an asset related credit adjustment of $4 million, related to Industrial Intermediates & Infrastructure. See Note 5 to the Consolidated Financial Statements for additional information.

Equity in Earnings (Losses) of Nonconsolidated Affiliates

The Company's share of equity in losses of nonconsolidated affiliates was $30 million in the second quarter of 2025, compared with equity in earnings of nonconsolidated affiliates of $26 million in the second quarter of 2024. The Company's share of equity in losses of nonconsolidated affiliates was $50 million for the first six months of 2025, compared with equity in earnings of nonconsolidated affiliates of $43 million for the first six months of 2024. The decrease in both periods was primarily driven by lower results at the Company's Thai, Kuwait and non-principal joint ventures, partially offset by improved results at the Sadara joint venture. Cash dividends from nonconsolidated affiliates were $170 million for the first six months of 2025, compared with $199 million for the first six months of 2024.

Sundry Income (Expense) – Net

Sundry income (expense) - net for the three months ended June 30, 2025 was income of $147 million and $163 million for Dow Inc. and TDCC, respectively, compared with income of $76 million and $74 million, respectively, for the three months ended June 30, 2024. The second quarter of 2025 included a gain from the divestiture of the Company's soil fumigation product line, non-operating pension and postretirement benefit plan credits, and foreign currency exchange gains. The second quarter of 2024 included non-operating pension and postretirement benefit plan credits, gains on the sales of assets and investments and foreign currency exchange losses. See Note 6 to the Consolidated Financial Statements for additional information.

Sundry income (expense) - net for the six months ended June 30, 2025 was income of $160 million and $176 million for Dow Inc. and TDCC, respectively, compared with income of $137 million and $135 million, respectively, for the six months ended June 30, 2024. The first six months of 2025 included a gain from the divestiture of the Company's soil fumigation product line, non-operating pension and postretirement benefit plan credits, and foreign currency exchange gains, partially offset by a loss on early extinguishment of debt. The first six months of 2024 included non-operating pension and postretirement benefit plan credits and gains on the sales of assets and investments, partially offset by foreign currency exchange losses. See Note 6 to the Consolidated Financial Statements for additional information.

Interest Expense and Amortization of Debt Discount

Interest expense and amortization of debt discount was $209 million in the second quarter of 2025, compared with $197 million in the second quarter of 2024. Interest expense and amortization of debt discount was $425 million in the first six months of 2025, compared with $396 million in the first six months of 2024. The increase in interest expense is primarily due to increased issuances of commercial paper during the first six months of 2025. See Liquidity and Capital Resources in Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 13 to the Consolidated Financial Statements for additional information.

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 second quarter of 2025, the Company reported a provision for income taxes of $142 million, resulting in a negative effective tax rate of 21.5 percent and 22.2 percent for Dow Inc. and TDCC, respectively. In the second quarter of 2024, the Company reported a provision for income taxes of $150 million, resulting in an effective tax rate of 24.7 percent and 24.6 percent for Dow Inc. and TDCC, respectively. For the first six months of 2025, the Company reported a provision for income taxes of $58 million, resulting in a negative effective tax rate of 5.6 percent and 5.7 percent for Dow Inc. and TDCC, respectively. For the first six months of 2024, the Company reported a provision for income taxes of $61 million, resulting in an effective tax rate of 5.8 percent and 5.7 percent for Dow Inc. and TDCC, respectively.

The provision for income taxes for the three and six months ended June 30, 2025 was unfavorably impacted by the recording of valuation allowances in certain foreign jurisdictions of $242 million as well as losses attributable to jurisdictions for which no tax benefit can be recognized, and a tax credit of $89 million related to the sale of a portion of the Company's membership interest in its wholly owned subsidiary, Diamond Infrastructure Solutions, resulting in a negative effective tax rate for both periods. See Note 17 to the Consolidated Financial Statements for additional information related to the Diamond Infrastructure Solutions transaction. In the first quarter of 2024, the Company recorded a tax credit of $194 million related to a reassessment of interest and penalties on a tax matter in a foreign jurisdiction, resulting in a reduced effective tax rate for the first six months of 2024.

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.

On July 4, 2025, U.S. legislation formally titled "An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14” (“The Act”) and commonly referred to as the One Big Beautiful Bill Act was signed into law. The Act, among other things, extended key provisions of the 2017 Tax Cuts and Jobs Act and introduced targeted changes to the U.S. federal income tax regime. The Company is currently evaluating the impact of The Act on its results of operations and will recognize the related tax impacts in the period of enactment.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests was $34 million in the second quarter of 2025, compared with $19 million in the second quarter of 2024. Net income attributable to noncontrolling interests was $51 million in the first six months of 2025, compared with $41 million for the first six months of 2024. The increase in net income attributable to noncontrolling interests was primarily driven by the sale of 40 percent of the membership interests of the Company's wholly owned subsidiary, Diamond Infrastructure Solutions, in the second quarter of 2025. See Notes 17 and 22 to the Consolidated Financial Statements for additional information.

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

Dow Inc.

Net income (loss) available for Dow Inc. common stockholders was a loss of $835 million, or $1.18 per share, in the second quarter of 2025, compared with income of $439 million, or $0.62 per share, in the second quarter of 2024. Net income (loss) available for Dow Inc. common stockholders was a loss of $1,142 million, or $1.62 per share, in the first six months of 2025, compared with income of $955 million, or $1.35 per share, in the first six months of 2024. See Note 8 to the Consolidated Financial Statements for details on Dow Inc.'s earnings per share calculations.

TDCC

Net income (loss) available for the TDCC common stockholder was a loss of $816 million in the second quarter of 2025, compared with income of $441 million in the second quarter of 2024. Net income (loss) available for the TDCC common stockholder was a loss of $1,121 million in the first six months of 2025, compared with income of $962 million in the first six months of 2024. 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, 2024 ("2024 10-K"), filed with the SEC on February 4, 2025.

Dow’s measure of profit/loss for segment reporting purposes is Operating EBIT as this is the manner in which the chief executive officer, chief operating officer, chief financial officer, general counsel and corporate secretary, and senior vice president of corporate development, together the "executive committee" and chief operating decision maker ("CODM"), assesses performance and allocates resources. The CODM compares quarterly results to both the year-ago and sequential periods to assess performance and allocate resources to each segment. 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. See Note 23 to the Consolidated Financial Statements for reconciliations of these measures.

PACKAGING & SPECIALTY PLASTICS

1. Portfolio & other includes the sales impact of the flexible packaging laminating adhesives business, which was sold to Arkema S.A. in the fourth quarter of 2024.

Packaging & Specialty Plastics net sales were $5,025 million in the second quarter of 2025, down 9 percent from net sales of $5,515 million in the second quarter of 2024, with local price down 10 percent, portfolio & other down 1 percent and both volume and currency up 1 percent. Local price decreased in Packaging and Specialty Plastics in all geographic regions, driven by lower pricing of polyethylene and functional polymers. Local price decreased in Hydrocarbons & Energy, driven by EMEAI and the U.S. & Canada and primarily in aromatics. Volume decreased in Packaging and Specialty Plastics, in all geographic regions except EMEAI, driven by lower volumes in functional polymers and a decrease in nonrecurring licensing sales, partially offset by higher polyethylene volumes. Volume increased in Hydrocarbons & Energy, primarily due to higher energy sales in the U.S. & Canada. Currency had a favorable impact on sales in both businesses and was primarily driven by EMEAI.

Operating EBIT was $71 million in the second quarter of 2025, down $632 million from Operating EBIT of $703 million in the second quarter of 2024. Operating EBIT decreased primarily due to lower integrated margins and equity earnings at the Company's non-principal, EQUATE and Thai joint ventures, which were partially offset by the impact of the Company's cost reduction initiatives and lower planned maintenance costs.

Packaging & Specialty Plastics net sales were $10,335 million in the first six months of 2025, down 6 percent from net sales of $10,945 million in the first six months of 2024, with local price down 7 percent, portfolio & other down 1 percent, and volume up 2 percent. Local price decreased in Packaging and Specialty Plastics in all geographic regions, primarily driven by lower pricing of polyethylene and functional polymers. Local price decreased in Hydrocarbons & Energy, driven by EMEAI and the U.S. & Canada and primarily in aromatics. Volume increased in Packaging and Specialty Plastics, with higher volumes in Asia Pacific and EMEAI partially offset by a decline in Latin America, driven by an increase in nonrecurring licensing sales partially offset by lower functional polymers volumes. Volume increased in Hydrocarbons & Energy, primarily due to higher energy sales in the U.S. & Canada.

Operating EBIT was $413 million in the first six months of 2025, down $895 million from Operating EBIT of $1,308 million in the first six months of 2024. Operating EBIT decreased primarily due to lower integrated margins, partially offset by lower planned maintenance costs.

INDUSTRIAL INTERMEDIATES & INFRASTRUCTURE

Industrial Intermediates & Infrastructure net sales were $2,786 million in the second quarter of 2025, down 6 percent from net sales of $2,951 million in the second quarter of 2024, with local price down 5 percent, volume down 2 percent and a favorable currency impact of 1 percent. Local price decreased in both businesses, led by declines in Asia Pacific and EMEAI and in consumer durables, industrial, and building and construction applications. Volume decreased in Polyurethanes & Construction Chemicals, primarily in EMEAI, and was driven by lower demand, particularly in industrial applications. Volume increased in Industrial Solutions, with higher volumes in the U.S. & Canada and EMEAI partially offset by a decline in Asia Pacific, and was primarily driven by increased demand for energy applications. Currency had a favorable impact on sales in both businesses and was driven by EMEAI and Asia Pacific.

Operating EBIT was a loss of $185 million in the second quarter of 2025, down $192 million from Operating EBIT of $7 million in the second quarter of 2024. Operating EBIT decreased primarily driven by lower selling prices in both businesses and higher planned maintenance activity, partially offset by the impact of the Company's cost reduction initiatives.

Industrial Intermediates & Infrastructure net sales were $5,641 million in the first six months of 2025, down 5 percent from net sales of $5,959 million in the first six months of 2024, with local price down 4 percent and volume down 1 percent. Local price decreased in both businesses and across all geographic regions, led by industrial, consumer durables and building and construction applications. Volume decreased in Polyurethanes & Construction Chemicals, driven by declines in EMEAI and Latin America, primarily in industrial, mobility and consumer durables applications. Volume increased in Industrial Solutions, with higher volumes in the U.S. & Canada and EMEAI primarily in energy and industrial applications..

Operating EBIT was a loss of $313 million in the first six months of 2025, down $407 million from Operating EBIT of $94 million in the first six months of 2024. Operating EBIT decreased primarily due to margin compression, higher planned maintenance activity and lower results at the EQUATE and Sadara joint ventures.

PERFORMANCE MATERIALS & COATINGS

Performance Materials & Coatings net sales were $2,129 million in the second quarter of 2025, down 5 percent from net sales of $2,243 million in the second quarter of 2024, with local price and volume both down 3 percent and a favorable currency impact of 1 percent. Consumer Solutions local price decreased across all geographic regions, led by consumer and electronics and building and infrastructure applications. Local price decreased in Coatings & Performance Monomers in all geographic regions, led by acrylic monomers. Volume decreased in Consumer Solutions, driven by EMEAI and Asia Pacific. Volume declined in upstream siloxanes, partially offset by gains in downstream silicones, led by consumer and electronics applications. Volume decreased in Coatings & Performance Monomers in all geographic regions, primarily driven by lower demand for coatings applications, as building and construction end-markets continue to be challenged. The favorable currency impact was driven by EMEAI and Asia Pacific in both businesses.

Operating EBIT was $152 million in the second quarter of 2025, up $6 million from Operating EBIT of $146 million in the second quarter of 2024. Operating EBIT increased primarily due to margin expansion from lower input costs and the impact of the Company's cost reduction initiatives, partially offset by lower volumes in both businesses.

Performance Materials & Coatings net sales were $4,200 million in the first six months of 2025 compared with net sales of $4,395 million in the first six months of 2024, with local price and volume both down 2 percent. Consumer Solutions local price decreased across all geographic regions and was broad-based across end-markets. Local price decreased in Coatings & Performance Monomers in all geographic regions, primarily in acrylic monomers and architectural coatings. Volume decreased in Consumer Solutions with declines in EMEAI and Asia Pacific, while the U.S. & Canada and Latin America were flat. Volume decreased in upstream siloxanes, partially offset by an increase in downstream silicones, led by consumer and electronics applications. Volume decreased in Coatings & Performance Monomers in all geographic region except the U.S. & Canada, driven by lower demand for acrylic monomers and architectural coatings.

Operating EBIT was $201 million in the first six months of 2025, up $14 million from Operating EBIT of $187 million in the first six months of 2024. Operating EBIT increased primarily due to lower selling, general and administrative and research and development expenses and lower planned maintenance costs, partially offset by margin compression in both businesses and lower equity earnings.

CORPORATE

Net sales for Corporate, which primarily relate to the Company's insurance operations, were $164 million in the second quarter of 2025, a decrease from net sales of $206 million in the second quarter of 2024. Net sales were $359 million in the first six months of 2025, a decrease from net sales of $381 million in the first six months of 2024.

Operating EBITwas a loss of $59 million in the second quarter of 2025, compared with a loss of $37 million in the second quarter of 2024. Operating EBIT decreased primarily due to lower income from insurance operations. Operating EBIT was a loss of $92 million in the first six months of 2025, compared with a loss of $96 million in the first six months of 2024. Operating EBIT improved primarily due to lower environmental costs.