On 30 September 2020, Dow Inc. outlined the series of actions it will take to achieve previously announced structural cost improvement targets and further enhance its long-term competitiveness as the global economy recovers from the coronavirus pandemic.
As announced during the company’s second quarter earnings on 23 July 2020, Dow is implementing a restructuring programme to reduce its global workforce costs by approximately 6 % and to rationalise certain manufacturing assets. These actions are expected to result in total annualised EBITDA savings of more than USD 300 million by the end of 2021.
Manufacturing asset impacts include:
- Industrial Intermediates & Infrastructure will rationalise its asset footprint by shutting down certain amines and solvents facilities in the USA 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 rationalise its upstream asset footprint in Europe, the USA 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, Dow chairman and CEO. “We continue to stay focused on delivering strong cashflow, strengthening our financial profile and maximising our operational advantages, and we remain well positioned to capture significant growth as market conditions improve.”
Dow said the company will record a charge in Q3 2020 for costs associated with the restructuring programme activities. In total, these costs are expected to be in the range of USD 500 million to USD 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 programme is in addition to the USD 500 million of operating expense savings Dow will achieve by the end of 2020. The company said it also remains on target to achieve its reduced target of USD 1.25 billion for capital expenditures in 2020, down from USD 2 billion in 2019. Dow said it will involve local stakeholders as defined in each country and in compliance with relevant information and consultation processes.
Dow also confirmed that on 30 September 2020 it closed 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 USD 310 million. Earlier in September 2020 the company also announced plans to divest certain marine and terminal operations and assets to Vopak Industrial Infrastructure Americas for cash proceeds of USD 620 million, which is expected to close by year-end.