"Dow" Q2 2026 Earnings Call - Self-Help Initiatives Accelerate to $1.3 Billion Annual Target as Portfolio Shifts Toward Higher-Margin Growth

Conference Call Operator: Greetings, and welcome to the Dow second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If you would like to ask a question at that time, please press star followed by the 1 on your telephone keypad. As a reminder, this conference is being recorded. I will now turn it over to Dow Investor Relations Vice President, Andy Keicker. Mr. Keicker, you may begin.

Andy Keicker, Vice President, Investor Relations, Dow: Good morning. Thank you for joining today. The accompanying slides are provided through this webcast and posted on our website. I’m Andy Keicker, Dow’s Investor Relations Vice President. Leading today’s call are Karen S. Carter, Chief Executive Officer, and Jeff Tate, Chief Financial Officer. Please note, our comments contain forward-looking statements and are subject to the related cautionary statement contained in the earnings news release and slides. Please refer to our public filings for further information about principal risks and uncertainties. Unless otherwise specified, all financials, where applicable, exclude significant items. We will also refer to non-GAAP measures. A reconciliation of the most directly comparable GAAP financial measure and other associated disclosures are contained in the earnings news release that is posted on our website. On slide two is our agenda for today’s call.

Karen will begin with an overview of the actions we are taking to create long-term value over the cycle, as well as details on our second quarter performance. Following that, Jeff will share more about each of our operating segments as well as our outlook for the third quarter. Karen will also share some timely updates about how we’re advancing our priorities while also remaining focused on our actions to improve earnings and cash flow. Jeff will share some insights about our continued commitment to financial discipline and our balanced capital allocation approach. As always, we’ll leave plenty of time for your questions at the end. With that, let me turn the call over to Karen.

Karen S. Carter, Chief Executive Officer, Dow: Good morning, and thank you for joining us. As I assumed the role of CEO this month, I couldn’t help to reflect on the many fundamentals that have made Dow successful throughout our nearly 130-year history, many of which are still true today. We have a strong portfolio, a world-scale global asset base, deep customer relationships, and exceptional talent. Before reviewing our near-term performance and outlook, I want to reiterate how we are using these strengths to continue building a more competitive company that consistently delivers long-term value. We have laid out our top priorities on slide three. We will stay focused on the areas we can control while acting decisively in response to those we cannot. This means we will set our sights on these key priorities, holding ourselves accountable to deliver on our commitments and ensuring we are consistently grounded and creating value.

First, we will drive focused growth and innovation in the high-value markets where Dow can win and create differentiated value with our customers. We will prioritize targeted innovation, technology, and commercial excellence to strengthen our competitive position, deepen customer relationships, and accelerate growth where we have the greatest opportunity to lead. Second, we’re enhancing our portfolio competitiveness. This means operating with a best owner mindset across our portfolio, investing in leading businesses, technologies, and low-cost positions, while also taking action where we are no longer competitive. Third, we will continue to hold ourselves accountable for taking a balanced approach to capital allocation. This includes using consistent principles to strengthen our balance sheet, driving a focus on cash flow, and ensuring maximum financial flexibility. Jeff and I will share additional details later on today’s call and in the coming months on each of these priorities.

First, let’s turn to slide four. We delivered solid results in the second quarter. This reflects our industry leadership as we translated improved market fundamentals and disciplined execution into meaningful earnings growth, margin expansion, and cash generation. Net sales were $12.1 billion, reflecting a 20% increase versus the year ago period, and operating EBITDA was $2.3 billion. We demonstrated meaningful progress toward ensuring lasting competitiveness, delivering more than $300 million of benefits in the quarter through our targeted self-help actions. This includes, first and foremost, the completion of our $1 billion 2025 cost savings program. Additionally, Transform to Outperform is beginning to deliver meaningful impact, and we shut down our upstream siloxanes unit in Barry, U.K. We also announced new product and innovation capabilities across our silicones franchise.

This allows us to capitalize on higher value downstream opportunities and grow in attractive end markets like consumer and mobility applications where Dow is providing a wide range of enhanced solutions. The key takeaway is this: Team Dow is executing with discipline. We are doing so in an uncertain environment and taking bold actions within our control to deliver lasting competitiveness for Dow and improve value creation. We advanced meaningful self-help actions, and we have a clear path to creating long-term value with greater earnings durability and stronger cash flow through the cycle. I will hand it over to Jeff to cover our operating segments and third quarter outlook.

Jeff Tate, Chief Financial Officer, Dow: Thank you. Good morning to everyone joining today. As Karen mentioned, before I get into segment results, Dow’s second quarter earnings reflect pricing leadership, better integrated margins, improved cash flow, and the benefit of our self-help initiatives. This all showed up in the bottom line. As a result, we adjusted our expected performance-based compensation compared to recent years. Turning to our Packaging and Specialty Plastics segment on Slide five. Net sales were $6.4 billion, up 27% versus the year ago period. Operating EBIT was approximately $1.3 billion, reflecting an increase over the same period last year. This was primarily driven by higher polyethylene pricing, which lifted local price by more than 40%. Benefits from these higher prices in the Packaging and Specialty Plastics business were seen broadly across all regions and all applications.

This more than offset lower polyethylene volumes, which declined in Europe, the Middle East, Africa, and India, as well as Asia Pacific, while growing in the resilient Americas. The Hydrocarbons & Energy business reported higher net sales, driven by increased olefins pricing, which more than offset lower volumes from plant maintenance on the U.S. Gulf Coast. Importantly, while operating rates in the Hydrocarbons & Energy business declined to 84% because of planned maintenance activity, we also successfully restarted our lowest cost, most flexible European cracker, Terneuzen, to match market conditions and optimize margins. Turning to Industrial Intermediates & Infrastructure on slide six, the segment delivered a strong year-over-year improvement in the second quarter. Net sales were up 14% versus the year ago period, driven by a 15% increase in local price. This reflects gains across both businesses in all regions.

Operating EBIT improved to $246 million, up from the same quarter last year, supported by higher margins, our self-help initiative, and lower plant maintenance activity. Polyurethanes & Construction Chemicals benefited from local price gains. Our Industrial Solutions business delivered improved sales, continuing to benefit from the startup of our alkoxylation growth investments, which serve attractive end markets such as home care, pharma, and energy. We also generated incremental earnings this quarter from the sale of non-core land in Taiwan, where we had previously shut down production. This action aligns directly to our efforts to actively optimize our portfolio with the best owner mindset. Moving to Performance Materials & Coatings on slide seven, the segment delivered solid top-line growth, with net sales up 11% versus the year ago period. This improvement was supported by increased volume and price.

Volume gains were led by continued growth in downstream silicones, as well as improvements in acrylic monomers and architectural coatings. In addition, the Consumer Solutions business benefited from gains in attractive end markets, including consumer, electronics, and home care applications. Operating EBIT was $133 million, which is down year-over-year. This is largely due to higher costs, including plant maintenance activity and the shutdown of our Barry Siloxanes unit, which offset the price and volume gains, as well as our self-help actions. If you step back and look across the entire company, Dow continues to lead by remaining agile, staying close to our customers, and capitalizing on our competitive advantages regardless of external factors. Turning next to slide eight. I’ll share some context around the regional and macroeconomic conditions that are most impactful to Dow. First, we are benefiting from some key market-driven tailwinds.

For example, packaging remains resilient globally, and data center demand is outpacing supply. In addition, our teams are winning even in areas where the market is still challenged and less constructive. For example, we are gaining market share through our silicones business with electronics for mobility applications, as adoption for EVs grows across both Europe and Asia. This is also true in our coatings business in North America, where we continue to earn a seat at the design table with customers serving high-value markets and applications. Looking around the globe, in the Americas, consumers have remained steady, economic activity is constructive, and spending has held up, even as the U.S. housing market is still soft under the weight of affordability concerns and high mortgage rates. In the Middle East, geopolitical tensions remain elevated, and logistics are still constrained.

In addition to this, traffic through the Strait of Hormuz remains below historical levels, continuing to disrupt global supply chains. The geopolitical impacts on energy and feedstocks continue to support higher risk premiums, and we’re seeing renewed value placed on supply security, including both reliability and logistics. In Europe, deeper structural pressures like high operating and labor costs persist. With that, some constructive dynamics are beginning to emerge, including government support and trade protection measures. This includes recently announced support for EU anti-dumping and anti-subsidy actions. Each of which support a more balanced environment for European produced products, including polyols that have been impacted by anti-competitive imports. Across Asia Pacific, we continue to see mixed signals. Regional consumer demand remains soft with weakened retail sales in May, but industrial production and manufacturing activity have recently accelerated.

In the energy space, refinery operations are normalizing in China, improving energy availability across the region. Globally, a supportive but higher cost feedstock environment paired with resilient but uneven demand, leads us to expect a more measured but still solid third quarter. Let’s look at the specifics on slide nine. Given the uncertainty across so many of our markets today, especially with the ongoing conflict in the Middle East, projecting the quarter ahead is difficult. If we become aware of any meaningful changes as the quarter unfolds, we will provide timely updates as appropriate and as you’ve come to expect from us. Our expectation for third quarter EBITDA is approximately $1.7 billion. This sequential decline accounts for anticipated margin compression from the recent North American polyethylene price settlement in June, as well as the normal patterns that typically follow high seasonal demand in the second quarter.

We expect $130 million in sequential tailwinds from our self-help efforts, including Transform to Outperform and the initial uplift from our Barry shutdown. These benefits across the enterprise will more than offset headwinds associated with plant maintenance and non-repeating benefit of a land sale in the second quarter. Turning to our operating segments. In Packaging and Specialty Plastics, we expect the averaging effect of the June price decline to work its way through the third quarter, but are not assuming any further price movement. On top of that, we expect the benefits from Transform to Outperform to more than offset higher plant maintenance activity, mostly at our U.S. Gulf Coast assets. For Industrial Intermediates and Infrastructure, we expect to see normal seasonal declines in building and construction, along with some expected margin pressure in Europe. With that, our continued implementation of self-help actions should provide a partial offset.

In Performance Materials and Coatings, we anticipate that declines will be driven by typical seasonal slowdown in coatings demand, as well as a planned PO/PG turnaround in the quarter. Self-help actions, including the benefit from the Barry shutdown, are expected to help offset some of the pressure in the quarter. Overall, Dow’s third quarter outlook demonstrates that even as we navigate a dynamic macro environment, our disciplined execution continues to build, supporting improved earnings over time. With that, I will turn the call back over to Karen to share some details about each of our near-term priorities, which aim to ensure long-term value creation.

Karen S. Carter, Chief Executive Officer, Dow: Thank you, Jeff. As I outlined at the top of the call, our priorities are helping to enable a stronger and more resilient Dow with an enhanced ability to outperform across market cycles. Slide 10 outlines our first priority, focused growth and innovation, where we will prioritize our resources in attractive end markets and win with our customers. For example, rapid data center growth is creating new demand for solutions that address thermal management, water usage, energy demand, and noise abatement needs. Dow is partnering with hyperscalers and leaders in this industry, leveraging our closed-loop liquid cooling solutions, advanced thermal fluids, carbon mitigation technologies, and acoustic materials. Last quarter, we launched the Dow Coolant Care Network, expanding our offering to support this fast-growing market. Our new integrated service model helps customers improve cooling system reliability, reduce operational risk, and maximize uptime, all of which are critical to data center growth.

Separately, we progressed long-term agreements with both P&G and Univar, locking in durable, high-quality demand for low carbon products across key markets like beauty and personal care, home care, food, pharmaceutical, and a variety of industrial performance markets. This is another example of how we are translating innovation into commercial value while securing growth in attractive end markets. Lastly, in the second quarter, we announced that we are expanding our product and innovation capabilities in specialty silicones that allow us to meet growing global demand in mobility, electronics, and healthcare applications. By expanding these capabilities, we are better able to meet increasing consumer demand, strengthen our global supply chain capabilities, and enable customers to move faster from innovation to commercialization. Next on slide 11, our second priority focuses on enhancing the competitiveness of our portfolio.

To start, aligned to our previously announced European asset actions, we shut down our upstream higher cost siloxanes unit in Barry, U.K. As a reminder, this represents approximately 25% of European siloxane industry capacity. Doing this further reshapes our Performance Materials & Coatings portfolio. It increases our focus on downstream differentiated product offerings, while importantly maintaining integration in our silicones value chain. We expect this action to deliver $60 million of EBITDA uplift in the second half of this year. Additionally, in our Packaging & Specialty Plastics operating segment, we restarted our lowest cost and most flexible European cracker, Terneuzen in the Netherlands, that has been idled since mid-2025. Relatedly, the shutdown of our Bohlen cracker remains on track for completion in 2027. At the same time, the Alberta project is progressing as planned, where our focus remains on disciplined completion and maximizing returns.

Taken all together, these actions will further improve our position on the cost curve while maintaining important flexibility across our global asset base. Next, I’ll turn the call back over to Jeff to share some details on our third priority, balanced capital allocation, and how strengthening our financial position remains a critical priority for Dow’s management team now and well into the future.

Jeff Tate, Chief Financial Officer, Dow: Thank you, Karen. On slide 12, our approach to financial discipline is consistent, and our outlook for the year puts us in a stronger position than when we entered 2026. We continue to take actions that enhance Dow’s balance sheet and financial performance. This includes meaningful improvement in our leverage metrics and overall credit profile. In addition, we are maintaining approximately $14 billion of total available liquidity, giving us the flexibility to invest through the cycle while protecting our balance sheet. Importantly, our approach to balanced capital allocation remains consistent with the framework we’ve shared over the last several years. With improved earnings and cash conversion, we will prioritize any excess cash towards de-leveraging. In addition to that, we have no substantive debt maturities due until 2029, and we recently extended our revolving credit facility out to 2031.

Throughout this year, we will also continue to implement smart trade-off decisions to improve working capital. We currently expect a minimum release of more than $500 million in the second half of the year. Furthermore, on the cash front, we received approximately $1 billion in compensation from the NOVA litigation in the first quarter and the remaining approximately $300 million early in the third quarter. We also continue to make progress with our partner, Aramco, related to Sadara, all aimed at ensuring long-term success that optimizes each shareholder’s value. Before I turn the call back to Karen, I want to reiterate that each of the three priorities she and I covered over the past several minutes outline a clear path to enhance competitiveness. We’ll get there through focused growth and innovation and decisive portfolio execution. Our commitment to a balanced capital allocation approach remains consistent.

Next, Karen will share more about how our near-term self-help actions are underpinning each of these priorities.

Karen S. Carter, Chief Executive Officer, Dow: Turning to slide 13. The actions outlined here demonstrate the tangible progress we are making against our self-help commitments, which we expect will generate a total of more than $1.3 billion in benefits this year, reflecting an increase of $200 million from our prior target. First, we have materially completed the remaining cost savings associated with the $1 billion program that we announced in January 2025. In addition, we continue to execute several strategic moves that will uniquely position Dow to win, including capitalizing on our recently completed incremental growth investments and advancing our previously announced European asset shutdowns, as I mentioned earlier on the call. Moving to Transform to Outperform, we expect this work will deliver an upsized benefit of approximately $700 million this year, clearly demonstrating the early value we are capturing.

Importantly, we remain confident in the $2 billion total opportunity that these efforts will deliver by the end of next year. We are seeing significant early results from the productivity work aligned to Transform to Outperform, which as a reminder, represents two-thirds of the total expected benefit. For example, we have implemented approximately 55% of the total Dow role reductions, which are expected to contribute more than $200 million of EBITDA uplift in the second half of this year. Additionally, we have completed our site transformation playbook at six of our largest sites, which is expected to deliver approximately $50 million alone in the second half of this year. The actions we are taking include improving production yields, driving maintenance productivity and energy efficiency, and optimizing third-party spending.

On the growth side, which represents one-third of the expected benefits from Transform to Outperform, we are seeing initial results from accelerated commercial and market-focused strategies. Targeted growth platforms delivered increased profitability during the quarter, supported by strategic opportunity management, strong commercial execution, and the deployment of digital pricing and demand planning capabilities. We remain encouraged by these early wins and the value they are generating for Dow. These examples give us confidence in the magnitude of the opportunities and in our ability to deliver against them. I’ll close on slide 14, which highlights what this quarter really demonstrates about Dow. This is a dynamic period. The geopolitical and macro backdrops remain volatile and demand signals are mixed. We are not waiting for conditions to turn in our favor.

We are leading with deliberate actions and controlling what we can control, that rigor is clear in our second quarter results. Our self-help is delivering. Teams across the company are redesigning how work gets done, modernizing how we serve our customers, and improving decision-making to drive both growth and productivity. This mindset will guide where we go from here, and it comes down to the three priorities we outlined today. On focused growth and innovation, we are putting our capital and our talent behind attractive end markets where we can win with our customers. We are driving actions across our global portfolio to strengthen Dow’s world-scale, low-cost footprint in every region and across each of our operating segments. Lastly, we are enhancing our balance sheet and financial flexibility.

This includes a consistent and unwavering approach to balanced capital allocation, while also maintaining ample liquidity and prioritizing deleveraging with any excess cash. Taken together, these priorities are designed to enhance Dow’s lasting competitive advantages. Importantly, our self-help is not simply a one-time event. It is a mindset and a discipline, fundamentally resetting how we run our company, how we serve our customers, and how we deliver lasting value. This discipline, combined with the strength of our portfolio and our people, is exactly why Dow is a compelling investment opportunity. Now, I’ll turn the call back to Andy to get us started with the Q&A.

Andy Keicker, Vice President, Investor Relations, Dow: Thank you, Karen. Now let’s move on to your questions. I would like to remind you that our forward-looking statements apply to both our prepared remarks and the following Q&A. Operator, please provide the Q&A instructions.

Conference Call Operator: Thank you. Ladies and gentlemen, we will now begin our Q&A session. If you have dialed in and would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star one again. We kindly ask everyone limits themselves to one question. Your first question comes from Hassan Ahmed with Alembic Global.

Hassan Ahmed, Analyst, Alembic Global: Morning, Karen and Jeff. Look, a two-part question, primarily on polyethylene. The first part of it is that, you guys obviously talked about flat polyethylene pricing for your Q3 guidance. The first part of the question is, how are you sort of factoring in the recent rally that we’ve seen in crude oil prices and obviously the continued sort of blockage of the Strait of Hormuz and the like, how that factors into the pricing assumption. The second part, just around inventories. A lot of the energy industry executives are talking about sort of energy inventories being at critical levels. As I take a look at China, it seems China, through Q2 at least, produced less, call it polyethylene and other commodity chemical products, yet exported more. It means, at least to me, that there’s been a fairly substantial destock over there.

How should that be factored in? Could we expect maybe potentially a restock going forward?

Karen S. Carter, Chief Executive Officer, Dow: Thank you for your question. Just a couple of things on that. Let’s start with kind of a guide and what we have in the guide, then I’ll talk about where we go from here in terms of the current conditions. We tried to take a pretty balanced view on the $1.7 billion guide. Just to be clear, what’s in that in relation to polyethylene margins, that guide assumes $0.10 per pound decline in global integrated margins compared to the second quarter. What that includes is the $0.15 down June settlement, then that works its way through the third quarter. As Jeff articulated earlier on the call, that also assumes no additional quarterly price movement. To your point, a lot of things have changed.

If you look at this week, oil is up $10 just the beginning of the week to now. Key feedstocks are also on the rise, polyethylene prices are also up, particularly in China. You mentioned this, their inventories are declining, that is reflected also in our order books. Just the last few days, we’ve really seen an increase in our order loading. When we saw those market dynamics changing, we announced our $0.05 per pound in North America. If you look at the oil dynamics from now, the Strait of Hormuz basically being blocked again, we saw yesterday the attack in the Red Sea. Those dynamics plus resilient demand and polyethylene and all the other things I’ve mentioned really do set the ground for our price increases going up from here.

If they do occur, that would be an upside to the $1.7 billion guide. What I would say is that things continue to be volatile. We’re going to work on maximizing the quarter as we always do, if things change materially, we’ll be sure to come back to you and update you on that.

Conference Call Operator: Your next question comes from Vincent Andrews with Morgan Stanley.

Vincent Andrews, Analyst, Morgan Stanley: Thank you, and good morning, everyone. Karen, thank you for the capital allocation discussion. Just wanted to follow up a little bit on that, particularly as it relates to Alberta. Do you have any just sort of high-level update on that project’s progression? Secondarily, given obviously there’s been a change in the global landscape and clearly North America is more attractive today. It was always attractive, but it’s probably more attractive today than it was prior to the conflict. Is there any incremental opportunity to bring a partner in on that project or to do anything creative with it?

Karen S. Carter, Chief Executive Officer, Dow: Our focus right now on Alberta is really disciplined execution and finishing the project, also maintaining our accountability on the returns that we’ve committed to. Where we sit today is that about 60% of the CapEx has been spent. The project is progressing as planned. We have about 40% left to spend. Most of that is on labor. The other thing I would just reiterate is that the incentives remain intact, and most of the critical labor contracts have been awarded. Again, we’re squarely focused on getting that project over the goal line. We’ve looked at potential partners before. I think we talked about it on this call, and we remain open to that. They must be financially accretive and meet our return threshold.

In summary, what we’re really focused on now is getting the project over the goal line, of course, safely, but also on the revised timeline, so that we can get both the growth and the returns on that investment.

Conference Call Operator: Your next question comes from Frank Mitsch with Fermium Research.

Frank Mitsch, Analyst, Fermium Research: Good morning, congrats on posting $2-plus billion. I’m a little bit puzzled with respect to P&SP. When you offered the guide back on April 23rd, you offered $1.75 billion EBITDA. Jeff gave an update in raising the total EBITDA from $2 billion to $2.2 billion, I assume that that increased the P&SP. Can you talk about why P&SP came in below the expectations that you had laid out back in April and then upgraded back in June?

Karen S. Carter, Chief Executive Officer, Dow: I’ll make a couple of comments, then Jeff, if you have something else that you want to add here. There’s a couple of things. First, the $0.15 price decline in June was not incorporated into the numbers that Jeff was talking about, particularly on second quarter, also going into the third quarter. The other thing is that we not only had some planned maintenance, we also had a couple of UPEs that impacted the actual numbers in the second quarter. Jeff, anything else you want to add to that?

Jeff Tate, Chief Financial Officer, Dow: The only thing I would add, and good morning, Frank, is that you’re spot on in terms of P&SP, the offset that we saw occurred in II&I that brought us in pretty close to our overall updated guide number that I updated in June, where we saw margin increases there due to some of the supply disruptions that occurred, as well as some of the feedstock constraints. We also had a land sale that I mentioned in my prepared remarks in second quarter that was approximately $50 million. With the lower than expected on P&SP, which was offset by the better than expected II&I, we still came in very close to the updated guide number that we have for second quarter.

Karen S. Carter, Chief Executive Officer, Dow: Just maybe one other thing before we go to the next question I think it’s important to mention is also that our self-help continues to over-deliver. If you look through the first half, we committed to $100 million. We’ve delivered $190 million, that’s why we’re really confident in upsizing, particularly the Transform to Outperform portion of our self-help actions, which, as we articulated before, will now deliver $700 million versus the $500 million guide. That’s the other thing, Jeff, that I would just mention that’s helping us to not only achieve in the second quarter, will also help to maximize EBITDA for the rest of the year.

Conference Call Operator: Your next question is from Jeff Zekauskas with JPMorgan Chase.

Jeff Zekauskas, Analyst, JPMorgan Chase: Thanks very much. Your Transform to Outperform program is in full swing. When I look at your SG&A expenses, they’re up about $200 million year-over-year and $100 million sequentially. As a percentage of sales, they’ve lifted about one percentage point. Is the $535 number that you reported a normal number or an abnormal number? Second, for Jeff on the prioritization of where cash flows are going, does it make any sense to take some amount of cash flow and offset dilution from share issuance because of the high cost of equity and your share price is low relative to its history, so the cash flow outflow is not really that much?

Jeff Tate, Chief Financial Officer, Dow: Good morning, Jeff. This is Jeff. I’ll take both parts of those questions here. First starting with the SG&A component. First of all, our SG&A continues to be top quartile when you look across our peer group. We’re close to 6%, which is best in class. We had a couple of things that occurred in the second quarter related specifically to SG&A. We had our one-time significant items associated with some of the costs related to Transform to Outperform, which you would see reflected in the SG&A area, as well as our increased performance-based compensation, which I mentioned in the prepared remarks. Those were two sizable items that we had in the quarter that overshadowed the continued improvement that we see through our self-help actions, not only from Transform to Outperform, but also from the 2025 cost-out program that we materially completed during the course of second quarter.

As we ramp those self-help actions into the second half of the year, you will continue to see those SG&A numbers come down from what you saw in the second quarter’s results. Moving to your comments around capital allocation and the uses of cash, a couple of comments I would make there. One of the things that we are going to continue to stay committed to, Jeff, is our investment-grade credit profile. As we look at our prioritization here, our intent is to continue to pay down some of the debt that especially we’ve accumulated over the past 12 months or so, which is a little over $1 billion. That’ll be the first priority, which will give us the opportunity to increase our financial flexibility, manage our liability profile, and obviously strengthen our balance sheet as we work our way through the economic cycle.

We actually paid off approximately $80 million of debt during the course of second quarter. We’re continuing to make progress with the excess cash that we have to continue to de-lever. We’ll continue to look at opportunities for share buyback in the future, but the expectation is that we would not have those during the course of 2026.

Karen S. Carter, Chief Executive Officer, Dow: Maybe just to add on to that, I do want to just address the headcount directly, because to Jeff’s point, you can’t yet see it in the SG&A number. We committed as part of this that we would have 4,500 Dow role reductions as part of the program. 55% of those have been implemented, you will see a $200 million EBITDA uplift in the second half based on that action. To your point, it is in full swing. It’s not just about Dow role reductions. There’s a number of actions that are in flight pertaining to both growth and productivity. The other one I just mentioned is that we are executing our site transformation playbook. We’ve done so across six of our largest sites. We plan to do it across 18.

That effort will also deliver about a $50 million EBITDA uplift in the second half as well.

Conference Call Operator: Your next question is from John McNulty with BMO Capital Markets.

John McNulty, Analyst, BMO Capital Markets: Good morning. Thanks for taking my question. I just wanted to unpack II&I a bit more because it certainly seemed like you had a really chunky jump, and I understand some of it is on the asset sale, but it does seem still a bit stronger than what we were expecting. Can you help us to think about what drove some of the strength there and the sustainability of that? Also, I think you spoke to some of the data center growth and opportunities. Can you help us to scale that in terms of how big that is now, the type of growth that you’re seeing and how we should be thinking about that going forward? Thank you.

Karen S. Carter, Chief Executive Officer, Dow: Sure. On II&I, the jump in second quarter was driven primarily by higher margins. That was resulting from some supply disruptions that we saw in the Americas impacting our peers, MDI and PO specifically. You ask about the durability. The fundamentals, and particularly in building and construction, are still pretty weak overall. I would say that as we expect, particularly going into third quarter, and this is part of our 32 guide, that those sort of supply disruptions will start to dissipate. You’ll start to see normalization on those margins. To your point around data centers, this is a great news story for our DIS business, which of course is part of II&I. They also helped to deliver that sequential jump in earnings. We are seeing higher integrated margins across all product lines in DIS.

Data centers remain a really strong source of growth for our thermal cooling solutions in particular. We’re also seeing growth in home care solutions, think cleaning, laundry detergent. Of course, we announced growth investments last year in our alkoxylation capacity that’s directly impacting that. We’re also seeing growth in PEGs and surfactants, which also impact cleaning and laundry detergent applications. The other thing I’d say about data centers is not just the products that we’re selling into it, but one of the things that we launched in second quarter is something called our Dow Coolant Care Network that’s servicing data centers in terms of their thermal management needs. These data centers are pretty hot, managing the heat is one of the critical issues that they have.

We’re pretty excited about what this new integrated service model is going to bring to us in terms of additional margins, but also additional revenue.

Conference Call Operator: Your next question comes from David Begleiter with Deutsche Bank.

David Begleiter, Analyst, Deutsche Bank: Thank you. Good morning. Karen, Jeff, just on your U.S. polyethylene exports, can you talk to how much your production was exported in Q2, what you expect for Q3, and how the decline in U.S. polyethylene export prices are manifesting themselves in your Q3 guide of down, I think, $0.10 for global integrated margins? Thank you.

Karen S. Carter, Chief Executive Officer, Dow: I’m going to go back to, again, just what we have in the guide for third quarter, because I just want to be really clear on what’s happening there. This $0.10 decline in integrated margin is a global number that does incorporate the $0.15 per pound down in North America in June. Again, that works its way through. There’s no further price movement that we have as part of that $1.7 billion guide for third quarter. Let me just talk a little bit about industry inventories and our view on what happened at the end of second quarter and how that’s going to impact third quarter. You did see another slight build in June on the back of the build that happened in May. A really important point is that DJI actually declined in June, following the May spike.

That actually reflected recovering sales volume in the period. You saw both exports as well as domestic sales rise. I mentioned earlier on the call that our order books already here in July have picked up. We are starting to see more orders come in from China. We fully expect to sell the products that we were able to produce. We’re continuing to have a big cracker turnaround that’s happening in the third quarter. Some of that inventory that we built was also in advance of that turnaround that started in second quarter but will end here in third quarter. We are pretty optimistic about our ability to sell the demand that we have in inventory. The $0.05 per pound, as I indicated before, the dynamics are there for us to get that.

That’s where we’re squarely focused.

Conference Call Operator: Your next question is from Patrick Cunningham with Citi.

Patrick Cunningham, Analyst, Citi: Hi. Good morning. This is Alex on for Patrick. Just a couple questions on silicones. Maybe can you just help us understand what prompted the additional round of investments globally on the specialty side? What sort of a return should we expect on some of those investments in U.S. and Asia?

Karen S. Carter, Chief Executive Officer, Dow: We continue to see really strong downstream demand on silicones. It’s one of the reasons we took the action in Europe, to rightsize our high-cost upstream siloxanes capacity to really liberate more investment for the downstream silicones. We are seeing double-digit growth in EVs, also in consumer electronics and industrial electronics. Data centers, of course, is also a really bright spot for us in silicones. As we continue to focus on those downstream markets, which by the way, are all growing above GDP, we expect to see 20% or higher returns on that volume that we are selling. The other point I just want to make is on the siloxanes capacity that we shut down in Europe. It’s about 25% of the regional capacity, which is going to deliver $60 million in EBITDA uplift in the second half.

Again, just want to reiterate that that was an action for us to further reshape that business so that we can continue to focus more on high-value markets downstream that are not only growing above GDP, but where we are also taking share. Think about it in the context of about 20% or higher returns.

Conference Call Operator: Your next question is from Matthew DeYoe with Bank of America.

Matthew DeYoe, Analyst, Bank of America: Morning, everyone. I wanted to just ask a little bit on Transform to Outperform and kind of the aggregate cost initiatives in general. To Jeff’s point earlier, I kind of would have expected a little bit more traction on SG&A and R&D. This isn’t necessarily a 2Q question, but as we grade your progress, where do we see it? Are any of these line items going to drop on absolute terms? As a follow-up, say slide 13, if I choose 2025 EBITDA, which is like $3.2 billion as a base, are you basically saying that by 2028, EBITDA should be greater than $6 billion, all else equal if we assume 2025 economics? Are there other headwinds there, or is there inflation? Do you need volume growth to hit some of that?

Just a better macro, which is kind of often the case when we hear about cost cuts and ability to capture stuff. Can you expand on that?

Karen S. Carter, Chief Executive Officer, Dow: Absolutely. Let me walk through the $3 billion in self-help actions that we committed to, and then I’ll ask Jeff to maybe talk a little bit about where you’ll see it show up. As you indicated, we ended last year around $3.3 billion. Our commitment is another $3 billion in self-help actions. These are largely independent of the macro. A billion dollars from the cost-out program that we announced in 2025, that’s materially complete. That’s the billion dollars. The second thing we announced were asset actions, both from a growth perspective, which we’re largely seeing the benefit of that. That’s both in polyethylene and then alkoxylation capacity. Those projects are complete. The other part of the asset actions were the three European asset shutdowns that we announced in the middle of last year.

The siloxanes capacity that I talked about that we just shut down in second quarter in Barry, U.K., is the first of those three actions. The other two actions, CAV, also the cracker in Bohlen, we are on track to continue to shut those down at the end of next year. The third one is Transform to Outperform. Just as a reminder, two-thirds of that’s coming from productivity, one-third of that is coming from growth, and that’s the $2 billion that we’re committed to delivering by 2028. As I indicated before, we’re actually outpacing the original timeline that we anticipated. Delivered $190 million in the first half. We will deliver $700 million of benefit by the end of this year, which is $200 million better than we originally anticipated of end year benefit.

Overall, $3 billion of self-help, largely independent from the market macro, all to deliver by 2029 if you include the European asset actions. That’s three plus three, which is six, a little north of six, which gets us in this free cash flow breakeven range, which I will tell you that the Dow management team is squarely focused on. Jeff, you want to talk a little bit about where we should start to see it?

Jeff Tate, Chief Financial Officer, Dow: Yeah. One of the things, Matthew, that we will be reporting each and every quarter in our Qs as well as our K at year-end will be the headcount movement that we’re seeing through our transformation efforts. That’s one of the things we have not done previously, but we will start to provide that level of transparency so you can start to see, at least on the productivity side, specific to the headcount progress that we’re making each and every quarter, how that is progressing. That will start to reflect itself not only in our start lines as we move forward, but also in other areas of the P&L, especially in cost of goods sold.

Conference Call Operator: Your next question is from Kevin McCarthy with Vertical Research Partners.

Kevin McCarthy, Analyst, Vertical Research Partners: Yes. Thank you and good morning. Maybe a two-part question from me on the subject of operating rates. Can you talk about what you’re baking into your guide for U.S. Gulf Coast operations in the third quarter relative to where you ran in the second quarter? A similar question as it relates to your overseas assets. I think in recent months there’s been talk about various parts of Asia, in particular, being constrained for feedstock and so forth. Maybe you can talk a little bit about how your JVs are able to run nowadays and whether you would foresee any variance there in the third quarter versus the second quarter. Thank you.

Karen S. Carter, Chief Executive Officer, Dow: Thank you for the question. Operating rates should run above 90%. That’s where we expect them to run as we get into the third quarter. Again, we have one of our crackers that are down in a planned maintenance turnaround. Once that gets back up, though, we’ll be in above 90% range on operating rates. In terms of our JV in Thailand, the margins there have improved. We expect that to continue into third quarter. They’re able to get the feedstock that they need, so we’re not seeing any constraints there as we move forward as well into third quarter.

Conference Call Operator: Your next question is from Abigail Elberts with Wells Fargo.

Abigail Elberts, Analyst, Wells Fargo: Hi there. Thanks for taking my question. One more on MDI. I think you kind of covered it in the last comment. Are you facing any issues with carbon monoxide or chlorine supply? With oil prices coming back up, do you expect to give back some of that margin benefit you saw from lower benzene prices this quarter? Thanks.

Karen S. Carter, Chief Executive Officer, Dow: Thanks for the question. No, we’re not having any issues on your first question. Again, things continue to be quite volatile. We are seeing benzene, of course, that’s related to oil that’s starting to come back up. You could see some margin come back in into third quarter that we do not have baked into our third quarter guide. As I indicated before, we’re going to focus on maximizing the quarter just as we did in second quarter. If things materialize greatly differently than the 1.7, we’ll come back to you with more information.

Conference Call Operator: Your next question is from Josh Spector with UBS.

Josh Spector, Analyst, UBS: Yeah. Hi, good morning. I wanted to do another follow-up on the II&I side of things. Just when you were talking about the delta versus expectations, you were talking a lot about volumes and some of the success you had there. Your reported II&I volumes are down about a couple of % year-over-year. It looks like more of the benefit was spread related. I guess within the quarter or maybe a couple of hundred million better, about half of that seems like that’s kind of be one-timey with the land sale. The other half, are you assuming that you hold onto more of that? Is there something structural you would talk about that’s helped II&I from the spread side here that we should be maintaining? Is this more just a reflection that the markets still are tighter? What is your view there? Thanks.

Karen S. Carter, Chief Executive Officer, Dow: Thanks for the question. On the volume side, it’s really Sadara. That’s the gap that you’re seeing, that asset continues to be down. That’s negatively impacting our volumes in the II&I segment, particularly on Polyurethanes. As we look at the third quarter guide, we are assuming lower margins overall, really driven by typical lower seasonal demand, also downward pricing pressure in Europe to the point that, again, we’re in a really volatile environment, we could see some of that margin come back in in Europe, which would give us some upside to that $1.7 billion. You mentioned the land sale that’s also serving as a sequential headwind in third quarter. Let’s see what happens.

Again, we’re also seeing some normalization on the MDI and PO that we said was impacting peers before, we do have a bit of a tailwind baked into the $1.7 guide on that. If it takes the peers longer to get back up, that too could be a positive for us versus the guide.

Conference Call Operator: Your next question is from Duffy Fischer with Goldman Sachs.

Duffy Fischer, Analyst, Goldman Sachs: Yeah. I just wanted to go back, if we could, to polyethylene. I was surprised your volumes were down. Maybe that’s because Terneuzen and year-over-year was a benefit last year and isn’t this year in the turnaround, stuff like that. How much volume did you sell relative to what you had available in Q2? Were you constrained on volume to sell more? As we go from Q2 to Q3, you’ve got one more turnaround in Q3, you anniversary Terneuzen and you get one turnaround back. Do you have more volume available to sell in Q3 than you do in Q2?

Karen S. Carter, Chief Executive Officer, Dow: When you looked at the volumes in second quarter, we had planned maintenance. Again, I mentioned the cracker turnaround, that did constrain some of the volume that we had to sell. The other thing that’s just really important to highlight is that we were maximizing margins in the second quarter. There was some volume that we just decided not to sell into in order to make sure that we restored the margins to where the levels they needed to be. You mentioned that we did restart Terneuzen 3. I’ll just make a comment on that and then turn it over to Jeff for any additional comments. Terneuzen 3 is our lowest cost, most flexible cracker in Europe. It is a first quartile cracker in that region.

That’s also going to provide some financial benefit for us as we get into the second half. Just a reminder that as naphtha has gone up again over the last week, that’s in direct correlation with oil. Propane has also gone up, but it’s gone up less. This is a dynamic that we were seeing in second quarter where you’ve got the pro-nap spread that’s widening, and we have 2x more flexibility in terms of what we can crack in Europe versus our closest peer. Having that first quartile cracker back up, Terneuzen 3 in Europe, is really beneficial for us, particularly given the current market dynamics. Jeff, anything else from your side?

Jeff Tate, Chief Financial Officer, Dow: Yeah, definitely. The only thing that I would add is that the turnaround that we have in the U.S. Gulf Coast that Karen mentioned in the second quarter also goes over into the third quarter, as planned. It’ll wrap up during the course of this quarter. You have a little bit of that overlay from 2Q to 3Q related to the Gulf Coast cracker turnaround.

Conference Call Operator: Your next question is from John Roberts with Mizuho.

John Roberts, Analyst, Mizuho: Thank you. Did any empty or ballast ships for chemicals or refined products enter the Persian Gulf yet? Is that something we need to focus on? Do we need to have empty ships coming in before we can ramp capacity back up for refined products and chemicals in the Persian Gulf?

Karen S. Carter, Chief Executive Officer, Dow: Yes, thanks for the question. I don’t have any intel or information on that particularly. I can tell you from a Dow perspective, we have been tracking that for our own shipments, we’re not aware of any of our shipments that are there. That’s a tough question for me to opine on. Andrew, do you have a thought here?

Andy Keicker, Vice President, Investor Relations, Dow: Yeah. John, we’ve been tracking it. I think what we’re looking at right now just most closely is how the supply chain logistic network actually normalizes. We’ve talked a lot about this. You will need vessels to come back through. We’ve talked about this probably over the last three to four months, of there’s going to have to be a clearing of everything in the region, that will naturally start letting other vessels come back in and refill. That needs to transpire, as that plays out, we’ll give you our latest thinking. I think right now we’re still expecting it’s going to be a little bumpy to see what happens.

I think that’s what you’re seeing a little bit in third quarter when you’re seeing pricing and maybe some of the Asian movements right now where things have gotten into pretty low levels. We’ll stay close on it and give you updates as we get more information.

Karen S. Carter, Chief Executive Officer, Dow: We are seeing customers really focus on supply reliability. This is where our global asset footprint has really been a benefit to us because we’ve been able to meet the demand across all of our businesses. That’s a benefit for us as well.

Conference Call Operator: Your next question is from Matthew Blair with Tudor, Pickering.

Matthew Blair, Analyst, Tudor, Pickering: Thanks. Good morning. Can I get your general thoughts on U.S. ethane going forward? In particular, there’s some new Permian natural gas pipes that either recently started up or are in the pipeline. Do you think those pipes will help improve pricing, like help raise pricing for U.S. ethane on the Gulf Coast going forward?

Karen S. Carter, Chief Executive Officer, Dow: Our view is that pricing will stay low. There’s ample supply. Again, this is a benefit where you got oil going up, but natural gas and ethane in the U.S. are staying relatively low. That’s really because you got ample supply. So, you’re right. There’s some growing infrastructure, and gas plants, pipelines, fractionators, et cetera. All of that is really meeting the supply needs of domestic crackers and some export demand. Our view is that those prices stay low as we move forward, which again, is a benefit because we have so many of our assets that are in the feedstock advantage regions, actually over 60%, which is providing, again, that margined uplift that you saw in the second quarter. Even with the 1.7 guide, which is incorporated into that’s 2x what we were able to deliver in the first quarter.

That’s our view.

Conference Call Operator: I’m sorry. Go ahead.

Karen S. Carter, Chief Executive Officer, Dow: Just wanted to close out the call and say thank you, and we really appreciate all of your questions today and look forward to answering more. If there’s one message to take away, it’s really this, that we continue to execute with discipline in a really uncertain environment. I talked about at the beginning of the week to now, you’re seeing $10 in oil increase, but then also what’s happening in the Red Sea and in other places. What I really want you to know is that we’re not only going to maximize the quarter, but we’re going to take action to manage what’s in our control and ensure lasting competitiveness for the company. We also have a really clear path to creating long-term value for our investors, but also for our customers as well as our colleagues.

The actions that we are taking today are not just short-term, but they’re also longer term and positioning us to deliver greater earning durability, stronger cash flow, which we are squarely focused on, and then improving shareholder returns through the cycle. I wanted to thank you for your continued interest and support of our company. Jeff and I both look forward to continuing to engage with you. Thanks for joining the call today.

Andy Keicker, Vice President, Investor Relations, Dow: Thank you everyone for joining our call. For your reference, a copy of our transcript will be posted on Dow’s website within 48 hours. This concludes our call.

Conference Call Operator: This concludes today’s conference call. You may now disconnect.