Dow's Strategic Moves: Cost Savings and Long-Term Growth

Dow Inc. (NYSE: DOW) has outlined a series of targeted actions to deliver $1 billion in cost savings in 2023, aiming to optimize its cost structure in response to near-term macroeconomic uncertainties while maintaining long-term competitiveness. The proactive measures, announced on January 26, 2023, are part of the company's commitment to capitalizing on long-term growth opportunities in a disciplined and balanced manner.

Dow expects to realize $1 billion in cost savings in 2023 through structural improvements and operating expense reductions. Structural improvements, totaling $500 million, will be achieved by maintaining a low cost-to-serve operating model. This includes optimizing labor and services costs through a global workforce reduction of approximately 2,000 roles, shutting down select assets to ensure long-term competitiveness and enhance cost efficiency, and increasing productivity via end-to-end process improvements.

Operating expense reductions, also amounting to $500 million, will focus on near-term cash flow. Dow plans to decrease turnaround spending while maintaining safety and reliability, reduce purchased raw materials, logistics, and utilities costs, and align spending levels to the macroeconomic environment.

Jim Fitterling, Dow's chairman and CEO, stated, "We are taking these actions to further optimize our cost structure and prioritize business operations toward our most competitive, cost-advantaged, and growth-oriented markets, while also navigating macro uncertainties and challenging energy markets, particularly in Europe. We remain committed to capitalizing on our long-term growth opportunities in a disciplined and balanced manner, and these actions further position us to advance our Decarbonize and Grow strategy and strengthen our competitive position."

Dow will record a charge of $550 million to $725 million in the first quarter of 2023 for costs associated with these activities, primarily including severance and related benefit costs, costs associated with exit and disposal activities, and asset write-downs and write-offs.

Longer-term, Dow remains on track to grow its underlying EBITDA by greater than $3 billion by 2030 while reducing its carbon emissions by 30 percent versus its 2005 baseline as it progresses on its path to carbon neutrality by 2050. These targeted actions align with Dow's disciplined and balanced approach to capital allocation, ensuring the company's long-term competitiveness and growth prospects.



As Dow implements these actions, it will engage local stakeholders in each region and in compliance with local regulations and consultation processes. By optimizing its cost structure and prioritizing business operations towards its most competitive, cost-advantaged, and growth-oriented markets, Dow is well-positioned to capture significant growth as market conditions improve.

In conclusion, Dow's targeted actions to deliver $1 billion in cost savings in 2023 demonstrate the company's commitment to optimizing its cost structure, prioritizing business operations, and maintaining a disciplined and balanced approach to capital allocation. These proactive measures further position Dow to advance its Decarbonize and Grow strategy and strengthen its competitive position in the long term.