Dow Inc.

Operator: Greetings, and welcome to the Dow Inc. First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If you would like to ask a question at that time, please press star followed by the number one on your telephone keypad. As a reminder, this conference call is being recorded. I will now turn the call over to Dow Inc. Investor Relations Vice President Andrew Riker. Mr. Riker, you may begin. Andrew Riker: Good morning. Thank you for joining today. The accompanying slides are provided through this webcast and posted on our website. I am Andrew Riker, Dow Inc.’s Investor Relations Vice President. Leading today’s call are James R. Fitterling, chair and chief executive officer; Karen S. Carter, chief operating officer; and Jeffrey L. Tate, chief financial officer. Please note our comments contain forward-looking statements and are subject to the related cautionary statement contained in the earnings news release and slides. Please refer to our public filings for further information about principal risks and uncertainties. Unless otherwise specified, all financials, where applicable, exclude significant items. We will also refer to non-GAAP measures. A reconciliation of the most directly comparable GAAP financial measure and other associated disclosures are contained in the earnings news release that is posted on our website. On slide two is our agenda for today’s call. James R. Fitterling and Karen S. Carter will start with a summary of our first quarter performance, including details on each of our three operating segments. Karen S. Carter will then provide an update on current industry dynamics, including how global supply disruptions are influencing market conditions. She will also discuss Dow Inc.’s competitive advantages, particularly our purpose-built asset footprint and advantaged feedstock positions. We will then outline several actions underway to deliver a step-change improvement in earnings across the cycle, including progress on Transform to Outperform and our other self-help initiatives. Jeffrey L. Tate will close with our outlook for the second quarter and an overview of our capital allocation priorities and focus areas for disciplined financial management, both in 2026 and across the cycle. Following the prepared remarks, we will open the call for Q&A. I will now turn the call over to James R. Fitterling. James R. Fitterling: I would like to first take a moment to recognize our colleagues, neighbors, customers, and partners in the Middle East who are facing significant turmoil and uncertainty. Our thoughts are with everyone affected by this conflict, and we wish for their safety and well-being during these difficult times. On slide three, I will cover additional details from the first quarter. The solid results we delivered reflect our commitment to controlling what we can control. While January and February order books were solid, we experienced a sharp positive inflection in March with the beginning of the conflict in the Middle East. We expect the supply disruption will persist throughout 2026. During this quarter, we focused on Dow Inc.’s strengths of prioritizing our customers, managing costs aggressively, and operating with safety, reliability, and long-term value creation. We delivered 3% sequential volume growth, net sales of $9.8 billion, and operating EBITDA of $873 million. And with our self-help actions well underway, we delivered approximately $193 million in period cost savings. As we look ahead to the second quarter and beyond, we are taking actions to enhance Dow Inc.’s agility and resilience. We are also entering a seasonally high-demand period, providing additional tailwinds as we move through the next couple of quarters. In addition, an increasingly positive margin backdrop continues to unfold, and we expect the pricing momentum that began in March to continue across every business and every region in Dow Inc.’s portfolio. On the supply side, the conflict in the Middle East has created constraints that are clearly evident in the near term. This includes supply chain disruption for an extended period of time. We also anticipate impact to future investments, including potential delays or cancellations of planned industry capacity additions, as well as increased pressure for capacity rationalization. And lastly, we expect that the higher global oil and naphtha prices will steepen the global cost curve. Against this backdrop, our in-flight actions serve to further strengthen Dow Inc.’s competitiveness and position us to drive margin improvement and capture earnings upside. First, our incremental growth investments are delivering returns, like our new world-scale polyethylene train in Freeport, Texas. And we are making progress on our Alberta project where the overarching merits of this investment and the cost-advantaged Americas are further reinforced by the current global dynamics. In addition, the benefits from our previously announced European asset shutdowns begin this year. And lastly, we are building a Dow Inc. that is more agile and resilient through any cycle. A company that delivers through periods of volatility, and one that focuses on capturing upside, improving margins, and outperforming our peers to effectively reset the competitive benchmark. We will share more details on all of this later in the call, and Karen S. Carter is going to cover our first quarter operating segment performance. But before that, I would like to briefly address our recent leadership announcement. Effective July 1, Karen will assume the role of chief executive officer and I will move to the role of executive chair. This announcement follows a deliberate multiyear succession process in partnership with our board and ensures continuity as we execute our strategy. Serving as CEO of Dow Inc. has been the privilege of a lifetime, and I am incredibly proud of what our team has accomplished together. This transition comes at the right time as we transform our company for its next phase of growth. I have full confidence in Karen’s leadership, her deep operational experience, and her ability to drive performance and value creation. As CEO, she will continue our efforts to transform Dow Inc., positioning us for greater agility and resiliency through any phase of the cycle. She is exactly the right leader to guide our company and deliver on our strategic priorities with discipline and rigor. Thank you. Karen S. Carter: Good morning to everyone joining today. I am honored to step into the role of CEO of Dow Inc. Having spent my entire career with the company, I have a deep appreciation for our people, our innovation capabilities, and the critical role we play in enabling our customers’ growth. As we look ahead, our priorities remain consistent. We will continue to drive operational excellence, maintain disciplined capital allocation, and advance high-value growth in our core markets. Dow Inc. is well positioned with our advantaged global portfolio, a strong balance sheet, and a talented global team. My focus will be on driving execution, delivering value for our customers, and ensuring consistent long-term value for our shareholders. I am excited about the opportunities ahead and confident in our ability to continue to deliver for all stakeholders. Turning now to our first quarter results by segment. As James R. Fitterling mentioned, Team Dow Inc. remains focused on disciplined execution in every business throughout the first quarter. As the situation in the Middle East unfolded in March, we continued to manage costs and cash tightly while also prioritizing our customers. We delivered solid results in January and February, and then dynamics in the Middle East quickly impacted industry supply-demand conditions. In fact, our operations outside the region experienced the largest percent sales gain from February to March that we have seen in our company’s history. Our teams remain focused on balancing near-term dynamics with discipline while also progressing our long-term objectives, and this agility continues to be a key differentiator for Dow Inc. In Packaging & Specialty Plastics on slide four, first quarter net sales were $4.9 billion, reflecting price decline versus the same period last year. Polyethylene volumes increased in all regions both versus the prior year and last quarter, supported by continued global growth in flexible food and specialty packaging applications. Polyethylene volume gains were offset by lower merchant olefins sales following a turnaround in the U.S. Gulf Coast and lower licensing revenue. With safety and reliability at the forefront of our priorities, this turnaround is now complete. The unit is fully operational, and our team is shifting their focus to completing our second cracker turnaround for the year, which is planned for the second quarter. Operating EBIT was $[inaudible] million driven by lower integrated margins and higher planned maintenance activity. This was partly offset by higher polyethylene volumes, as well as tailwinds from the company’s cost-reduction efforts. Looking ahead, our significant Americas footprint, including our new Poly7 asset, will enable our teams to capture improved margins. Next, turning to our Industrial Intermediates & Infrastructure segment on slide five. Net sales were $2.6 billion, down 8% year over year. This was largely due to lower prices in both businesses as well as lower volumes in polyurethanes as a result of impacts from the Middle East conflict. Our proactive cost-savings actions in both businesses provided tailwinds that offset some of the decline. Volume declined in the quarter as well, primarily due to our actions to reset our competitiveness by shutting down our higher-cost upstream propylene oxide asset late last year. As a reminder, this action rationalized approximately 20% of North American PO industry capacity. And while we are experiencing a prolonged weak demand landscape across building and construction, our new alkoxylation assets are driving growth in Industrial Solutions, which serves attractive end markets such as home care, pharma, and energy. Moving to the Performance Materials & Coatings segment on slide six. Net sales were $2.1 billion, which is flat compared to the same period last year, with higher volumes in both businesses. Volume increased 2% year over year, largely in downstream silicones, particularly in electronic and home and personal care end markets. Notably, downstream silicones continue to be a growth engine for the business, delivering high single-digit volume improvement versus last quarter. The business remains focused on advancing our multiyear asset and market strategy which will help us grow with key customers. The strategy includes shifting our mix towards higher-value products in markets like electronics and mobility, while rightsizing higher-cost upstream capacity. And this work is further advanced by our previously announced European asset actions, including the shutdown of our basic siloxanes plant in Barry, UK by the middle of this year. This capacity represents approximately 25% of European siloxane industry capacity. Next, on slide seven, I will frame further details on the current macroeconomic environment. The headline is this: demand across many markets is steady. At the same time, supply is short, and arbitrage is increasing. On the demand side, for our core polyethylene packaging markets, conditions remain resilient. But we are seeing mixed signals in other key markets that Dow Inc. serves. For example, in the U.S., inflationary pressures and higher interest rates are still weighing on existing home sales. This continues to be reflected in our Industrial Intermediates & Infrastructure and Performance Materials & Coatings segments, both of which serve the building and construction market. Consumer spending has shown some modest improvement but the landscape and behaviors are likely to remain cautious until we see a significant inflection in macroeconomic conditions. Moving to supply dynamics. We anticipate that shutdowns, feedstock limitations, and logistical constraints will continue to reshape polyethylene product availability across regions. These conditions are creating ripple effects well beyond the Middle East, including significant impacts to logistics costs and transit times. Supply and feedstock into Asia and Europe are constrained, which is triggering price increases globally. It is also leading to increased production in the Americas and is providing Dow Inc. the opportunity to capture new business in Europe. The duration and severity of these constraints increase the likelihood of lasting industry impacts, including the potential for accelerated capacity rationalization in this context, as well as delays or cancellations of planned capacity additions. Expectations for higher U.S. supply are helping to ease some of the pressure and provide stability. North American LNG markets remain well supplied and regionally insulated from these disruptions. In addition, U.S. Gulf Coast NGLs, including ethane, continue to be largely unimpacted. All of these factors underscore the benefits of Dow Inc.’s cost-advantaged footprint in the Americas. Next on slide eight, we will unpack some of the current regional and industry impacts in more detail. In the two months since the conflict began, the scale of disruption we have seen is unprecedented. Roughly 20% of global oil capacity is currently offline and approximately half of global ethylene and polyethylene supply is either offline, constrained, or directly impacted. These are unparalleled numbers reflecting a combination of physical infrastructure damage, feedstock limitations, and severe logistics disruptions. Transit through the region remains significantly impaired, largely driven by the ongoing disruption in the Strait of Hormuz. And the disruption has been amplified across Asia and Europe, tightening feedstock availability and pushing producers to reduce production or increase prices to cover the rapidly escalating costs occurring from the conflict. Looking across regions, a large portion of Middle East capacity remains offline with increasing risk of lasting infrastructure damage. In Asia Pacific, feedstock constraints are limiting operating rates and reducing export availability, challenging producers who are operating at uncompetitive levels. And in Europe, high costs will require continued price increases to justify additional production. In contrast, the Americas continue to operate at high rates, highlighting the importance of Dow Inc.’s cost and feedstock advantages in the region. Currently, it is estimated that roughly three quarters of announced global capacity additions would be either directly impacted by the conflict or dependent on supply chains that remain highly constrained. The longer these conditions persist, the greater the potential for further industry changes. And lastly, it is not likely that the pricing impact of these events will be temporary. We expect rising global production costs and a steepening global cost curve to continue influencing pricing and spreads. Next, on slide nine, we will discuss how Dow Inc.’s specific advantages drive near-term value. At the beginning of the Middle East conflict, petrochemical prices, especially polyethylene, were at multiyear unsustainable lows. Despite broader near-term market volatility, we anticipate packaging demand will remain resilient, providing meaningful pricing potential as evidenced by recent March settlements. That brings me to our advantaged global asset footprint. Dow Inc. operates a large portion of our light cracking capacity in the cost-advantaged Americas, with assets in the U.S., Canada, and Argentina, all of which continue to operate at high rates. Our consistent focus on investing in the Americas gives us reliability, feedstock security, and cost stability at a time when global supply chains are strained. In Europe, our feedstock flexibility remains a critical differentiator. With naphtha supplies impaired and pro-nap spreads increasing, Dow Inc.’s ability to optimize across feedstocks provides a clear cost and availability advantage versus peers. This allows us to protect and expand margins through running our assets competitively, even in a volatile energy and feedstock environment. And specific to our Packaging & Specialty Plastics segment, Dow Inc. has higher North American capacity than our closest peer, further supported by the 2025 startup of our Poly7 polyethylene train in Freeport, Texas. Additionally, approximately 80% of our P&SP product sales go into higher-value, resilient applications including packaging, consumer, and health and hygiene. These end markets have historically demonstrated lower risk of demand destruction. The structural advantages we have deliberately built over time give us confidence in Dow Inc.’s ability to manage through volatility while capturing value at any point in the cycle. In addition to these portfolio advantages, slide 10 outlines the key areas where we remain committed to self-help actions that will strengthen Dow Inc.’s earnings power. First, we are on track to deliver the remaining cost savings from our previously announced $1 billion program by the end of this year. We are also executing a series of strategic moves that will uniquely position Dow Inc. to win. This includes earnings upside following the completion of our remaining incremental growth investments in cost-advantaged regions, as well as benefits this year from the beginning of our European asset shutdowns. Additionally, Transform to Outperform is expected to deliver at least $2 billion in near-term EBITDA improvement. As a reminder, we expect approximately two-thirds of that to come from productivity gains, and the remaining one-third from growth. Next, I will share a few examples of early opportunities that we have identified and are taking action on. First, we have begun transformation assessments at approximately 25% of our large sites with a goal to deliver sustained improvements in returns from all of them over the next two years. We are evaluating and driving improvements in production yields, asset utilization, maintenance productivity, energy efficiency, and third-party spending, and we expect this work will result in more than $400 million of the $1.3 billion in productivity improvements that we committed to. The first site transformation identified approximately $80 million in run-rate EBITDA improvement, well exceeding our initial projection. We are also seeing early growth gains from expanded use of digital commercial capabilities and more disciplined opportunity management. Pilot efforts in these areas have meaningfully improved the quality, size, and value capture from new opportunities. Learnings are quickly being scaled to support and accelerate targeted growth across the portfolio. And since completing comprehensive evaluation, our dedicated end-to-end process owners have shifted from assessment to execution. For example, in our plan-to-fulfill work process, we defined a clear end state from demand planning to manufacturing operations all the way through to customer delivery. We are now redesigning work and leveraging technology to simplify workflows. This enables increased efficiency for Dow Inc. and service reliability to our customers. Additionally, in the first quarter, we announced a series of senior leadership changes that delivered an approximately 20% reduction in both headcount and cost at that level. We remain confident that our collective efforts in Transform to Outperform will ramp sharply to $400 million in the second half of the year, creating a Dow Inc. that is more resilient across the cycle while consistently delivering growth, customer success, and improved shareholder value. And as an important reminder, all of our self-help actions and the upside they provide are additive to the potential upside we anticipate going into the second quarter. Next, I will turn the call over to Jeffrey L. Tate, who will cover our second quarter modeling guidance and Dow Inc.’s key financial strength. Thank you. Jeffrey L. Tate: As we look ahead, I would like to provide some context around our earnings expectations for the second quarter and for the remainder of the year. As we have noted throughout today’s prepared remarks, the situation in the Middle East has introduced volatility and uncertainty into the broader market environment, including how customers secure product. We remain committed to taking actions to position Dow Inc. for success amidst this ongoing turmoil. Karen S. Carter shared the ways in which we are quickly pivoting to several of the areas that are directly within our control. This includes leveraging our advantaged manufacturing footprint and activating pricing levers across all businesses and all geographies, including our largest operating segment, Packaging & Specialty Plastics. These levers give Dow Inc. significant near-term advantages. Our expectation for second quarter is approximately $12 billion of revenue and EBITDA of $2 billion. This sequential improvement is driven by pricing gains, expanding margins, increased asset utilization, typical seasonal demand improvement, and our continued focus on reducing cost—all of which are expected to more than offset rising feedstock and energy costs, planned maintenance activity, and expected sequential decreases in licensing revenue. In Packaging & Specialty Plastics, our global pricing strategies—especially for polyethylene—are designed to capture value in key markets, helping to mitigate external pressures. We expect this to drive significant sequential improvement versus the first quarter. For Industrial Intermediates & Infrastructure, we expect normal seasonality and improved margins to provide sequential gains. With that, higher plant maintenance and lower licensing activity in the second quarter are expected to mute these tailwinds. And in the Performance Materials & Coatings segment, we anticipate a modest impact from the Middle East conflict. However, rising propylene costs are likely to delay seasonal demand uplift that we would normally see across building and construction end markets. On equity earnings, several factors will impact Dow Inc.’s sequential earnings expectations. First, we anticipate a headwind from the safe proactive shutdown of our facilities in Kuwait as a result of the Middle East conflict. Lower feedstock availability at our Thailand joint ventures will also be a headwind. Additionally, beginning this quarter, we suspended Sadara equity loss recognition in accordance with U.S. GAAP. The carrying value of all liabilities on the balance sheet reached a total of Dow Inc.’s existing relevant obligations and commitments. This is also reflected in our updated full-year equity earnings expectation which can be found in the appendix of today’s presentation. In summary, predicting global macroeconomic and end market dynamics in this period will continue to be difficult. But we expect more potential upside to these projections than downside. All of this represents our best assessment during a period of rapid change. We will provide updates later in the quarter if there are any significant developments compared to our current expectations. Next, on slide 12, I will spend a few minutes on our consistent approach to disciplined financial management, which remains another core differentiator for Dow Inc., especially in environments like we faced over the past few years. First and foremost, our capital allocation framework remains consistent. Everything starts with safe and reliable operations. In addition, we continue to maintain a solid balance sheet as well as our longstanding commitment to an investment-grade credit profile. On capital deployment, we remain focused on high-quality organic investments, with capital expenditures expected to be at or below depreciation and amortization across the cycle. This includes prioritizing advantaged assets, regions, high-return projects, and investments that strengthen our cost position and earnings durability. With our near-term growth investments behind us, Path2Zero remains our only planned major project. Returning cash to shareholders through dividends and share repurchases also remains a clear priority across the cycle. Looking ahead to the balance of the year, our cash priorities are clear. In March, we received a cash payment from the Nova litigation, and we expect to receive the remaining tax withholdings of approximately $300 million later this year. At the same time, we remain focused on delivering the full benefits of our self-help actions, which we expect to total approximately $1.1 billion this year. This includes the remaining $600 million from our 2025 program, as well as $500 million in growth and productivity improvements from Transform to Outperform. As we mobilize the teams and complete several assessments in the immediate term, we expect to demonstrate a significant portion of the in-year value in the second half of this year. We will also continue to take a disciplined approach to working capital, making prudent trade-offs to support customers and operations while protecting our cash position as earnings improve. This was evident in the first quarter as we saw a year-over-year improvement in working capital of greater than $300 million. Importantly, all of this is underpinned by our strong liquidity position and well-laddered debt profile, with no substantive maturities until 2029. We have approximately $14 billion of total liquidity, inclusive of cash on hand and committed bilateral credit lines. Our revolving credit facility was recently renewed through 2030, and our committed accounts receivable securitization includes the recent renewal of our European facility through 2029. We also ended first quarter with over $4 billion of cash on hand. This liquidity positions us well to manage through macro or industry volatility without compromising our near-term priorities or Dow Inc.’s long-term strategy. Our intentional actions give us confidence that Dow Inc. can continue to navigate the current environment, invest in the right opportunities, and deliver sustained value to shareholders across the cycle. Next, I will turn the call back to James R. Fitterling to provide closing remarks on slide 13. James R. Fitterling: Thank you, Jeffrey L. Tate. As I look at slide 13, it really captures how we position Dow Inc., not just for this quarter or this year, but for long-term value creation through the cycle. First, even in a disrupted industry environment, we are well positioned to navigate market dynamics, which was apparent in our first quarter results. Our order books were solid in January and February, and we saw a sharp positive inflection in March, and we expect that to continue throughout 2026. As a result, the positive momentum from announced pricing actions across every business and every region is taking hold and building. At the same time, our mix continues to shift toward higher-value sales, including functional polymers where Dow Inc.’s differentiation clearly shows up in our “pound for polyolefins” benchmarking. We published this peer benchmarking today on our investor relations website. This annual process provides important insights into our performance and that of the broader industry, and it is what ultimately led to Dow Inc.’s actions to effectively reset a competitive benchmark through Transform to Outperform, which is underway. This year’s results demonstrate that Dow Inc. is delivering consistent outperformance in many areas. This includes superior performance in our advantaged polyolefins portfolio, as well as outperforming the peer median on EBITDA growth for downstream silicones across all markets. That is not accidental. It is the result of disciplined execution and a focus on value. Our teams understand Dow Inc.’s strengths and have aligned our R&D and innovation to the areas of our portfolio where Dow Inc. wins and our customers value it the most. Second, we have focused relentlessly on building long-term agility and resilience. We are acting thoughtfully but decisively to improve the quality of our portfolio and improve our long-term earnings. And we are not backing off. Transform to Outperform is already driving new value that is additive to near-term market upside. We are leveraging our strengths to enable faster, more efficient operations, improve innovation, and modernize how we serve our customers in high-value markets. At the same time, we are seeing tangible benefits from decisive portfolio actions, including the completion of our incremental investments in high-growth areas of our portfolio, as well as the shutdown of higher-cost upstream assets in Europe that will begin later this year. And with a revised timeline, our Alberta project will enable growth and resilience in high-value applications like pressure pipe, wire and cable, and food packaging. We remain confident that Dow Inc. can capture outsized growth in these markets for years to come, which will create additional value for shareholders. And lastly, foundational to everything we do is the financial discipline and flexibility that we have built. That discipline matters. It is what allows us to be steady when others are reactive and to keep investing when it counts. So when we say Dow Inc. remains a compelling investment opportunity, we say it with confidence, grounded in actions. We entered 2026 in a strong position and we remain on solid footing. Our long-term vision, our strategic priorities, and the steps we have taken to navigate a challenging down cycle inflected in a way that positions our company for stronger, more resilient growth for years to come. I am incredibly proud of how Team Dow Inc. has navigated all the challenges that we have encountered over the years. They have adapted quickly to changing market signals while staying focused on cash generation and improving margins. Thank you for your continued interest and support of Dow Inc. I will now turn the call back to Andrew Riker to get us started with the Q&A. Andrew Riker: Thank you. We will now open the call for questions. I would like to remind you that our forward-looking statements apply to both our prepared remarks and the following Q&A. Operator, please provide the Q&A instructions. Operator: Thank you. Ladies and gentlemen, we will now begin our question-and-answer session. If you have dialed in and would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. We kindly ask that everyone limit themselves to one question. Your first question comes from the line of Hassan Ahmed from Alembic Global. Your line is live. Hassan Ahmed: Morning, James and Karen, and congratulations to both of you on your new roles. A question around the timelines associated with the normalization of supply chains in a post–peace declaration sort of environment, and also the sustainability of some of these pricing initiatives, particularly for polyethylene, that you have announced. It seems that, in a no–facility damage environment, it would take at least probably three quarters for supply chains to normalize. Then there are questions around how much damage to facilities has actually been done, what impact that may have on the availability of supply, and the availability of feedstocks as well. And in a higher oil, higher naphtha pricing environment, would rationalization be accelerated? Would love to hear your views about the sustainability of pricing and timelines associated with normalization, particularly as consensus estimates seem to be factoring in a V-shaped normalization of these supply chains. James R. Fitterling: I will take a shot, and then I will ask Karen to talk about the pricing. When I was at CERAWeek at the very beginning of the conflict in early March, I mentioned that we did some modeling at that time that it would be 275 days or longer for the supply chain disruption to unwind. And a lot has changed since then. There have been more attacks in the Middle East. More assets have had to be shut down. This week, the last cargoes of crude to go to refiners landed at refiners. So the way I look at that is the first ripple effects of the shutdown of the straits hit the shores this month—two months later. And we do not have any sign that the straits are going to reopen. In fact, any ships that have attempted have been turned back. The straits moved over 130, probably close to 150 cargoes a day—very different cargoes: very large crude carriers, LNG cargoes, marine-packed cargo for moving plastics, bulk chemical shipments, refined fuel shipments. All that stopped, and all that tankage is full and sitting in the Arabian Gulf. And so we have to clear that, and I just gave you a pretty good estimate of what it takes to clear it and get it out to market, and then you have to get vessels back in and get them offloaded. You are going to have to get a lot of empty vessels back in the Gulf before you can restart plants because the plants are at tank tops. When we looked at it, we said shipments that go out of the straits are going to be prioritized. I do not think it is very likely that petrochemical and plastic shipments will be prioritized first. I think it is more likely that crude oil, fuel, fertilizers would be prioritized first because those affect national security and food security for a lot of countries. You have got repairs that have to be made. In some cases, the repairs may be made because of the duration of this before the straits reopen, so if there is anything good here, you have got some time to get repairs made before the straits reopen. But you have to have human capital, and you have to be able to get the equipment in that you need to repair some things. The 275 days I mentioned was the logistics unwind from talking to our logistics providers. We were going into this in March, at the end of February, with low inventories, pricing momentum, and good order books. We had 3% volume growth sequentially in the first quarter, and now we are seeing a tick up. So I think everything is poised for strong demand and really tight supply, and I think that bodes well for price and outlook. Karen S. Carter: Exactly, and on the pricing—thanks for the question—I think we should go back to January and remember that you had $0.05 in January. Then in March, in relation to the Middle East crisis, there was another $0.10 settlement. If you look at ACC data for the month of March, the way I would calculate it, it was a record month. Demand has remained steady, but both exports and domestic sales set second-highest month ever records. Then, if you look at overall total sales, it was also a record as well. Industry operating rates surged to 97% while DTI declined. So all of that sets us up for strong price momentum. If you look at the announcements, for the month of April we have $0.30 per pound on the table, and then we have another price increase out there for the month of May of $0.20. So when you look at the $2 billion guide that we have for second quarter, there is $0.26 per pound of margin improvement globally that is baked into that, and that is also aligned with our view of the duration. Based on James’s comments around the duration, we believe that there is more room for prices to move up, and as we do that, that will present upside to the $2 billion guide. Operator: Your next question comes from the line of Michael Joseph Sison from Wells Fargo. Your line is live. Michael Joseph Sison: Good morning, and congrats as well to Karen and James. When you think about the $1.75 billion for P&SP in 2Q, can you frame whether that is kind of a mid-cycle EBITDA or a peak EBITDA? And then when you think about the sustainability of these integrated margins into 2027 as supply chains come back, where do you think we could end up post all this? James R. Fitterling: Karen, do you want to take it? Karen S. Carter: Sure. I will go back to the $0.26 per pound integrated margin improvement that we expect to get here in the second quarter. That is mid-cycle, perhaps a bit above mid-cycle. It is important to go back to the impact of this, which is really 3x what we saw in 2021 from Winter Storm Uri. There, you really did see us move over about a six-month period to mid-cycle and above prices. So my response is that if it is mid-cycle, we are moving to peak levels. But with the supply shock overnight, that is why you are seeing the ramp and price increases go faster than even what we saw in 2021. And again, as I indicated in my last answer, we expect that this environment is going to continue in alignment with the duration of the recovery, which we believe is going to take six months to 18 months to resolve. Operator: Your next question comes from the line of Vincent Stephen Andrews from Morgan Stanley. Your line is live. Vincent Stephen Andrews: Thank you. Good morning, and I echo the sentiment on the leadership transition. Could I ask, James, if you think when we get to the other side of the conflict, there could be any changes in the cost curve on a sustainable basis, and in particular, whether you think Europe’s position can improve at all on the other side? And then, in the nearer term, how are you thinking about the profitability of your own European assets over the course of the next couple of quarters? Do you think prices will improve enough to reset profitability there, or how are you thinking about it? James R. Fitterling: Good morning, Vince. On Europe, a couple of things are having an impact right now. The tightness in the marketplace from the shutdown of the straits is not just the inability to move product, but the magnitude of the impact. About 20% of Middle East oil production was shut in with the straits, and about 40% of Asian naphtha production was shut in through the straits. You saw the effect of that being force majeures in Asia of the high-cost producers because they could not get feedstock. On top of that, we are seeing in China restrictions on the refiners. They are being forced to produce fuel and jet fuel at the expense of something like naphtha, and that is going to continue to keep pressure on the availability of naphtha there. That has helped in Europe. Europe has a little bit closer access to some naphtha and they have some refining capacity. I would say the biggest help on margins right now has been the tightness in byproducts. You are starting to see positive byproduct credits in the crackers. As you know, a naphtha cracker makes one-third ethylene and two-thirds byproducts, so byproduct credits can be a big contribution to improved margins there. I think it will hold, obviously, through second quarter and third quarter. Longer term, a lot is going to depend on decisions that countries and people make. I talked about 40% of Asian naphtha and 90% of Japan’s LNG coming through the straits. I think it is logical to expect that countries are going to step in and make some changes like we saw after Russia–Ukraine when the Germans worked hard to diversify and get five LNG facilities going to diversify their natural gas supplies. You are going to see some things like that. Those will obviously take time to shake out. You cannot get any of that in place in a one- to two-year period, but there will be decisions that will be made that will have a longer-lasting impact. On Europe, we will return to profitability. Karen, maybe a little bit on margins and demand there. Karen S. Carter: Demand for our assets definitely has moved up. The pro-nap spread has widened. We have more flexibility from a cracking perspective than any of our peers in the region. So we have increased our operating rate, and we are helping to fill the gap from a supply perspective that you just referenced, James. We anticipate that margins in the second quarter are also going to go up in Europe for us. James R. Fitterling: I think Europe will be under pressure when Middle East supply comes back because with that being shut in now, it has to be supplied from domestic Europe. When that comes back, the cost position in Europe will move back. So I do not think it changes our long-term outlook on Europe. I think it gives us a little breathing room in the short term and some time to do things wisely and get it shut down in a really smooth fashion. Thanks, Vince. Operator: Your next question comes from the line of Jeffrey John Zekauskas from JPMorgan. Your line is live. Jeffrey John Zekauskas: Thanks very much. A two-part question. The export price of polyethylene from Houston today is about $1,775 a ton FOB, but the delivered price to Asia for polyethylene is less than $1,300 a ton. Can you describe what is going on in terms of why our general export price is so high but Asia seems to be a weaker region for pricing in the scheme of things? And for Jeff, could you let us know what the relationship that you expect between operating cash flow and EBITDA is in 2026, and what the real cash commitments are to Sadara? James R. Fitterling: Karen, do you want to touch on what is going on with Asian prices of polyethylene? Karen S. Carter: Yes, thanks for the question. What I can say is that our prices around the world are going up. The export price is the indication of real demand, not local price, and as James just indicated, in China in particular they are starting to restrict the feedstock that is going to petchem production. So we continue to expect prices there to go up as well. Jeffrey L. Tate: On the cash side of things in terms of operating cash flow and EBITDA, we entered and exited first quarter with a very strong cash position at slightly over $4 billion. As we look at our outlook for not only second quarter but for the full year, we continue to see not only the self-help actions but also all of the activities related to our pricing momentum building as we work our way through the year and through the quarter. With that, we would expect our cash conversion rate to steadily improve as we go from one quarter to the next. We are in a really good position to see that operating cash flow and free cash flow increase from a cash conversion perspective. In terms of your question around the Sadara cash commitments, I would like to make a couple of comments. You will notice that in first quarter, Dow Inc.’s cumulative equity losses for Sadara reached $1.4 billion. This matches our existing relevant obligations and commitments. Accordingly, under U.S. GAAP, we are in a position to suspend further recognition of the Sadara equity losses. The $1.4 billion of commitment that we have from a relevant obligation perspective is comprised of $1.2 billion of debt, approximately $100 million related to our revolving credit facility, and approximately another $100 million related to our letter of credit. Specific to your question around the cash commitments for 2026 through 2038, that would be approximately $100 million per year. Operator: Your next question comes from the line of Kevin William McCarthy from Vertical Partners. Your line is live. Kevin William McCarthy: Thank you, and good morning. James, one of the most common questions that we field from investors is along the lines of assessing the durable supply-side impacts from the conflict. Would love your thoughts on that subject in terms of physical damage to assets in the Middle East, new plants that we thought might be starting up that are in fact unable to do so, and you also made a comment that you would expect increased rationalization of assets because of the conflict. How would you frame out the lasting impact as opposed to the impacts related to feedstock and traffic through the strait? James R. Fitterling: Yes, Kevin. I do not have all of the insight to what has happened there, but I can go based on the incidents that I am aware of and things that have been shared that are public. I think most of the attacks were relatively limited. We saw information about, for example, the East–West pipeline in Saudi where a pump station was attacked. We saw some situations in Kuwait where some upstream assets were attacked. In most of those cases, they have the capabilities, the people, and the wherewithal to get that repaired and back up. So if you look at what I said about 275 days plus to reopen the straits and get things back to normal, I think a lot of that is going to be able to be repaired within that time frame. You had the situation in Qatar with the LNG plant. What got hit there was a very critical piece of equipment that takes two and a half to three years to rebuild, and then, of course, it has to get installed. That is the most significant attack that I have heard of, and there is not a lot that I think they are going to be able to do to fix that quickly, but that does not have as much impact on the petrochemical side of things. Talking with our partners, I think they are actively working on repairs, and I do not hear anything from them that leads me to believe it is going to extend longer than the duration of this logistics constraint. Operator: Your next question comes from the line of Patrick David Cunningham from Citi. Your line is live. Patrick David Cunningham: Hi, good morning. Thanks for taking my question. Could you perhaps walk through any impacts of the conflict on maybe the 10% to 15% of non-polyolefin derivatives that are exposed to some of these tightening market dynamics, and where you might see the biggest potential for additional export opportunities or advantaged footprint taking advantage of some of the higher margins? James R. Fitterling: Ethylene glycol has probably been the biggest impact of all of it. You see that already showing up in the response and what is happening, and those should be able to repair quickly. It is also one of the things you see in the results with Kuwait’s earnings in the first quarter—remember Equate has operations in Canada and Texas, so they have a global footprint on MEG. They are able to supply their customers and also take advantage of the price increases, and that more than offsets the situation that they have to deal with locally. They will be able to get that back out and moving once the roadblock clears. On propylene derivatives, there are some—obviously, we have some in the polyurethanes business that will be impacted. There is some polypropylene that will be impacted. In polypropylene, you had different downstream demand dynamics—autos being slow, appliances slow—which takes a little demand pressure off polypropylene. So we have not seen the same kind of dynamics there. Karen S. Carter: On the EO side and MDI, we are working to get those prices up above the cost increases. MEG prices are moving up as well. On the silicones and siloxanes side, there is less impact from the conflict. There, I would just highlight that prices are moving up as an early indication of what we are seeing on anti-involution in China, which we believe is a positive sign. We are working to move prices up across the board. Most of it is because of the Middle East crisis; within silicones and siloxanes, it is a bit of a different story, but prices are moving up as well. Operator: Your next question comes from the line of Frank Joseph Mitsch from Fermium Research. Your line is live. Frank Joseph Mitsch: Thank you, and let me offer my congratulations to James and Karen. Coming back to Sadara, could you speak to the future of what your expectations are for Sadara over the next couple of years? Can you speak to whatever damage may have been sustained so far to that facility? And also, Jeff, when you were speaking to the changes on a GAAP basis for Sadara—that unit had been running at a negative $120 million or so per quarter in equity earnings to Dow Inc.—I would imagine that might have been higher had you not made the adjustment to GAAP. Can you comment on that? Thank you. James R. Fitterling: I will take the first part. One of the things I will continue to do as Karen takes over the CEO role is finish up these negotiations with Saudi Aramco on the restructuring of Sadara and trying to address some of the challenges that we have faced there. I think the asset itself has sustained a little bit of damage. Most of it is pretty straightforward, and we are able to manage it. A lot of what was fired at that coast was intercepted and protected very well. A few stray things got through, but we have a good team on the ground, and they have gone through all the damage assessments, and they will be able to get things back up and running. Our focus is going to be on getting the restructuring right, getting the participation of Sadara right. It is not really an operating problem; it is more of a leverage issue and a balance sheet issue that we have to get right, and that is what we are working through with Aramco. As I promised, I will have more of an update for you midyear when we come back for earnings then. Jeff, do you want to comment on that last part? Jeffrey L. Tate: Yes, Frank. In terms of looking at first quarter specifically, you are spot on—the equity loss impact was $115 million. On a full-year basis, we would estimate that to be in the approximately $400 million range from a Sadara impact perspective for Dow Inc. Operator: Your next question comes from the line of David L. Begleiter from Deutsche Bank. Your line is live. David L. Begleiter: Thank you. Good morning, and again to James and Karen, congrats on the new roles. Karen, back to 2Q guidance: what does that $0.26 of global margin expansion imply for the $0.30 you have announced for April and the $0.20 for May? Does that include a portion of those or all of those? Karen S. Carter: It includes our April price increase that is on the table, but it does not include May. So May would present upside to the guide that we have in second quarter. Operator: This concludes our question-and-answer session. I will now turn the conference back over to Andrew Riker for closing remarks. Andrew Riker: Thank you, everyone, for joining our call, and we appreciate your interest in Dow Inc. For your reference, a copy of our transcript will be posted on Dow Inc.’s website within 48 hours. This concludes our call. Operator: You may now disconnect.