Dow outlines cuts to make cost improvements and enhance competitiveness
The company will close some polyurethanes manufacturing sites as part of the restructuring program.
Chemical maker Dow Inc. has outlined the series of actions it will take to achieve what it calls “previously announced structural cost improvement targets” and “further enhance[ments] of its long-term competitiveness” as the global economy recovers from the coronavirus pandemic.
Midland, Mich.-based Dow is implementing a restructuring program to reduce its global workforce costs by approximately six percent and to rationalize certain manufacturing assets. These actions are expected to result in total annualized EBITDA savings of more than US$300 million by the end of 2021.
Manufacturing asset impacts include:
- Industrial Intermediates & Infrastructure, 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 what Dow calls “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,” Jim Fitterling, Dow chairman and CEO, said in a Sept. 30 statement. “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 US$500 million to US$600 million.
The restructuring program is in addition to the US$500 million of operating expense savings Dow will achieve by the end of 2020. Dow also said that it remains on target to achieve its reduced target of US$1.25 billion for capital expenditures in 2020, down from US$2 billion in 2019.
Dow also confirmed on Sept. 30 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 $US310 million.