Dow Inc. recently outlined a series of actions it will take in an effort to achieve structural cost improvement targets as the global economy recovers from the coronavirus pandemic. The company announced during its second quarter earnings on July 23, 2020, that it is implementing a restructuring program to reduce its global workforce costs by approximately 6% and to rationalize certain manufacturing assets. These actions are expected to result in total annualized EBITDA savings of more than $300 million by the end of 2021. Manufacturing asset impacts include:
- Industrial Intermediates & Infrastructure will rationalize its asset footprint by shutting down certain amines and solvents facilities in the U.S. and Europe, as well as select small-scale downstream polyurethanes manufacturing facilities.
- Performance Materials & Coatings will shut down manufacturing assets, primarily small-scale coatings reactors, and will also rationalize its upstream asset footprint in Europe and in the U.S. and Canada by adjusting the supply of siloxane and silicon metal to balance to regional needs.
“Given the expected gradual and uneven global economic recovery from COVID-19, we announced in July that we are taking necessary actions to continue to optimize our asset footprint, reduce structural costs and enhance the competitiveness of our business over the long-term,” said Jim Fitterling, chairman and CEO. “We continue to stay focused on delivering strong cashflow, strengthening our financial profile and maximizing our operational advantages, and we remain well positioned to capture significant growth as market conditions improve.”
Dow will record a charge in the third quarter of 2020 for costs associated with the restructuring program activities. In total, these costs are expected to be in the range of $500 million to $600 million and will consist of severance and related benefit costs, costs associated with exit and disposal activities, and asset write-downs and write-offs.
The restructuring program is reportedly in addition to the $500 million of operating expense savings Dow will achieve by the end of 2020. The company also reports that it remains on track to achieve its reduced target of almost $1.3 billion for capital expenditures in 2020, down from $2 billion in 2019.
Dow has also confirmed that it will close the sale of its rail infrastructure assets at six North American sites to Watco three months ahead of its initial planned closing, for cash proceeds in excess of $310 million. The company has also announced plans to divest certain marine and terminal operations and assets to Vopak Industrial Infrastructure Americas for cash proceeds of $620 million; this is expected to close by year-end.
For more information, visit www.dow.com.