Dow to expand European assets review, puts on hold Canadian project to lower costs
US chemical firm Dow Inc has said that it is widening the review of its European assets and delaying the construction of its multi-billion dollar Path2Zero Alberta project in Canada as it looks at conserving cash amid unfavourable market conditions.
Along with other chemicals firms, Dow has been struggling with higher feedstock and energy costs as well as weak demand and prices for its products, especially in markets such as Europe.
The company says it is expanding the scope of the review and has identified three initial assets primarily in polyurethanes - two of which are in Germany and one in the UK. The plants identified include: Packaging & Specialty Plastics: ethylene cracker in Böhlen, Germany, resulting in idle or shut down; Industrial Intermediates & Infrastructure: chlor-alkali & vinyl (CAV) assets in Schkopau, Germany, resulting in idle or shut down and Performance Materials & Coatings: Basics siloxanes plant in Barry, UK, resulting in shut down.
Taken together, these new and previously announced actions total approximately US$6 billion in cash support to effectively manage the extended downcycle. Of this, up to approximately US$3 billion will come from the company's partnership with Macquarie Asset Management to create a newly formed infrastructure-focused company – Diamond Infrastructure Solutions – resulting in the sale of a minority stake in select US Gulf Coast infrastructure assets; first tranche of US$2.4 billion anticipated at closing on 1 May.
The challenging conditions are expected to persist in the near term, given increased macroeconomic and geopolitical volatility, the company said.
Dow has initiated several steps to help mitigate the impact of lacklustre demand and margin pressures and reduce spending, including job cuts and a strategic review of some of its European assets.
It expects to complete the review by the middle of the year, Dow said.
With the delay in the construction of its Path2Zero project in Alberta, it expects total enterprise capital expenditure for 2025 to be US$2.5 billion, compared to its original plan of US$3.5 billion.
Dow adds it remains committed to its Path2Zero project and the growth upside it will enable in targeted applications like pressure pipe, wire and cable, and food packaging. The project is being built at an existing Dow site in a significantly cost-advantaged region. It is expected to be a first quartile asset with attractive returns and the added benefit of being the world's first net-zero Scope 1 and 2 emissions integrated ethylene cracker and derivatives facility.
"We remain focused on disciplined execution and increased actions to improve profitability and support cash flow," said Jim Fitterling, Dow chair/CEO. "Despite ongoing macroeconomic challenges, Team Dow delivered a sixth consecutive quarter of year-over-year volume growth while taking actions to reduce costs and right-size capacity. The significant impact of slower GDP growth and volatile market conditions on our industry underscores the importance of our proactive management and best-owner mindset. Today's announcements build on Dow's cost actions that are already underway, aiming to further strengthen our financial flexibility and support a balanced capital allocation approach."
(PRA)SUBSCRIBE to Get the Latest Updates from PRA Click Here»
