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Dow Chemical’s Infrastructure Solutions Segment: High 1Q17 EBITDA


May. 1 2017, Updated 9:08 a.m. ET

Dow Chemical’s Infrastructure Solutions segment’s performance

Dow Chemical’s (DOW) Infrastructure Solutions segment reported revenue of $2.5 billion in 1Q17, a 58.4% rise year-over-year compared to $1.6 billion in 1Q16. The segment accounted for 19.1% of DOW’s total revenue compared to 14.9% in 1Q16, representing a rise of 4.2 percentage points year-over- year.

DOW’s Infrastructure Solutions segment reported operating EBITDA (earnings before interest, tax, depreciation, and amortization) of $511.0 million in 1Q17, a 74.4% rise year-over-year compared to $293.0 million in 1Q16. The segment’s operating margin also rose 20.2% in 1Q17 compared to 18.4% year-over-year, representing a margin growth of 180 basis points.

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Driving factors

Volumes across all businesses in this segment rose. The primary driver is mainly due to the inclusion of the silicone business as part of the integration of the Dow-Corning (GLW) acquisition. Strong volume growth from styrofoam insulation and BLUEDGE polymeric flame retardant. The coating materials business volumes also rose, driven by growth in Asia-Pacific for architectural coatings.

Segment’s outlook

The Infrastructure Solution silicone business will continue to drive growth. The synergy effect from the Dow-Corning integration will drive the segment’s EBITDA.

You can indirectly hold Dow Chemical by investing in the ProShares Ultra Basic Materials (UYM), which has invested 8.0% of its portfolio in Dow Chemical. The other top holdings of the fund include DuPont (DD), Monsanto (MON), and Praxair (PX) with weights of 7.9%, 5.8%, and 4.0%, respectively, as of April 27, 2017.

In the next part, we’ll analyze the performance of Dow Chemical’s Performance Materials & Chemicals segment in 1Q17.


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