Good day, and welcome to the Dow Chemical Company's Third Quarter 2012 Earnings Results Conference Call. [Operator Instructions] Also, today's call is being recorded. I would now like to turn the call over to Doug May, Vice President of Investor Relations. Please go ahead, sir.

Yes, thank you, Candace. Good morning, everyone, and welcome. Thank you for joining us on such short notice and being flexible with your schedules. As you know, we issued our earnings press release yesterday evening, October 23. This was earlier than usual due to an inadvertent and premature release of our restructuring announcement. Both the restructuring release and the earnings release went out on Business Wire and were posted on the Internet on dow.com. We are making this call available to investors and the media via webcast. This call is the property of The Dow Chemical Company. Any redistribution, retransmission or rebroadcast of this call in any form without Dow's express written consent is strictly prohibited. We have prepared slides to supplement our comments in this conference call. These slides are posted on our website on the Presentations page of the Investor Relations section and through the link to our webcast. On the call with me today are Andrew Liveris, Dow's Chairman and Chief Executive Officer; Bill Weideman, Executive Vice President and Chief Financial Officer; and Dale Winger, Associate Director in Investor Relations. Now some of our comments today include statements about expectations for the future. Those expectations involve risks and uncertainties. We cannot guarantee the accuracy of any forecast or estimates, and we don't plan to update any forward-looking statements during the quarter. If you'd like more information on the risks involved in forward-looking statements, please see our SEC filings. In addition, some of our comments reference non-GAAP financial measures. A reconciliation to the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release and on our website. Unless otherwise specified, all comparisons presented today will be on a year-over-year basis. EBITDA, EBITDA margins and earnings comparisons exclude certain items. The agenda for today's call is on Slide 3, and I'll now hand the call over to Andrew.

Thank you, Doug. Good morning, everyone, and thank you for joining us. If you turn to Slide 4, market dynamics in the third quarter played out in line with what we expected and outlined during the second quarter earnings call, and Dow's focus remained where we said it would. We controlled the controllable, and we accelerated cost and cash interventions to preserve our earnings targets and to stay on our strategic course. Our results were we delivered earnings per share of $0.42. Price was a large negative driver in our results, with broad-based declines driven by weak market conditions, significant downward movements in raw material costs and currency headwinds, particularly in Europe. On the positive side, our low-cost flexible feedstock advantage enabled us to drive volume growth across every geographic region, and we had volume gains in both Agricultural Sciences, up 7%, and Performance Plastics, up 5%. EBITDA was $1.8 billion, with equity earnings down nearly $115 million versus the year-ago period. Both Performance Plastics and Performance Materials expanded EBITDA margins this quarter. We also continued to drive cash from operations, delivering $1.1 billion during the quarter and a more-than-$650 million improvement year-to-date. Benefits from our previously announced cost and cash interventions also began to take hold, with operational expenses down more than $200 million sequentially. Lastly, our net debt to capitalization declined to 39.7%, in line with our previously announced target. As we enter the fourth quarter and then 2013, our interventions continue to gain momentum. And yesterday, you saw us take further action, expanding our efficiency improvements and cost-reduction actions by shutting down additional non-core assets both in Europe and in the United States; tightly prioritizing new business growth investments, curtailing both CapEx and growth spending; and reducing other general expenses. Our team is moving forward, unabated, with a renewed emphasis on execution, a revitalized focus on operational excellence and a commitment to delivering increasing cash flow, enhancing return on capital and driving earnings growth. These, and these alone, will be our focus for the next 12 months. I'll have much more to say on this in a moment. But first, let me turn it over to Bill for more detail on our financial and operating results.

Thank you, Andrew. I'd like to remind you that my comments today will be on a year-over-year basis unless otherwise noted. Sales volume and price comparisons are adjusted to exclude divestitures, and earnings comparisons are adjusted to exclude certain items. Now turning to Slide 6. Sales decreased 10% or 7% on an adjusted basis to $13.6 billion. EBITDA was $1.8 billion and earnings were $0.42 per share. This compares with earnings of $0.69 per share in the same quarter last year or adjusted earnings of $0.62 per share. The key drivers of our operating performance are listed on Slide 7. As Andrew noted, we saw significant pricing pressure during the quarter, down 9%, with declines in all geographies and most operating segments. Recessionary conditions persisted in Europe, where Dow faced ongoing currency headwinds totaling more than $520 million. These dynamics offset the benefit of decreasing hydrocarbon energy costs during the quarter. The declining equity income was driven largely by Dow Corning. And finally, our tax rate in the quarter was 28%, reflecting a shift in our geographic mix of earnings due to stronger profitability from our U.S. footprint. We expect a similar mix of earnings in the fourth quarter, so our effective tax rate should remain in this range. Now let me turn to volume trends on Slide 8. Overall, volume rose 2% on an adjusted basis. Volume was up in all geographic regions and most operating segments. Within Performance Plastics, Dow Elastomers reported double-digit volume growth due to strong customer demand in NORDEL. Performance Packaging recorded gains in all geographic areas, led by Asia-Pacific and North America. And Agricultural Sciences continued to show demand strength even in the seasonally slow quarter due to solid industry fundamentals. And now let me turn to price trends on Slide 9. Price declined…

Thank you, Bill. I would actually like to address now Dow's earnings growth trajectory and the targets we've been tracking against over these last several years, if you look at Slide 15. At last year's Investors Day, we reiterated our earnings roadmap, showing how we plan to achieve our near-term EBITDA targets. And we said that if we encountered a down cycle that could take us off our trajectory, we would respond. The new reality is that the down cycle we are all seeing and experiencing means further interventions and prioritization is required in our cost and cash spending trajectory. Simply put, we have to ramp up our interventions and stop future growth projects that are no longer affordable in this environment. Turn to Slide 16. In addition, we now have an opportunity with our new operating model, which allows us to leverage Dow's traditional operating discipline into all parts of the Dow enterprise, thus yielding new efficiencies and savings. The entirety of this cost-savings program and details including further interventions in Europe were, indeed, announced yesterday. And if you turn to Slide 17, you can see our total program. They began one year ago with our efforts to ramp up our efficiencies and productivity in a then down market through an intense focus on our work processes and our procurement activities that then gained momentum in April, when we took focused actions to reduce our structural footprint, particularly in Western Europe. And in July, we announced plans to expand our cost-reduction targets. And now with our latest significant restructuring action, we're further expanding this drive, with new interventions totaling $1 billion. Collectively, this brings our actions in total to $2.5 billion. Let me be clear. All of these interventions have been deployed. They're all fully in motion, so let…

Thank you, Andrew. Now we'll move on to your questions. First, however, I'd like to remind you that our comments regarding forward-looking statements and non-GAAP financial measures apply both to our prepared remarks and the following Q&A. Candace, would you please explain the Q&A procedure?

[Operator Instructions] And we'll take our first question from David Begleiter with Deutsche Bank.

Andrew, given the recent news on MLPs, can you discuss how Dow is looking at the opportunity to drop certain [indiscernible] ethylene assets into an MLP structure?

Yes. Lots of publicity on this, and obviously, a very narrow-focused application, David, to the one that's been announced and the IRS commented on. We are looking at ways to generate higher value from our assets using these structures, have been doing so for a while. On existing assets, it's a little more difficult because of our integration. These are best done when their pure play cracker slash 1 or 2 downstreams. And it's not clear that they applied or anything other than, right now, the olefin world. In other words, the step forward down the value chain beyond oil and gas to olefins is what you are now all seeing. Look, it could be quite favorable to do it on some of our newer projects. We're open, and clearly, we want to generate more value. And if this is a genuine mechanism that can apply to us, we will deploy.

And lastly, Andrew, on the $10 billion longer-term EBITDA target, do these interventions increase that potential long term or just maintain that?

Well, there's a couple of things I'd say there. Firstly, as we said last year, the trajectory to get to $10 billion had a view towards the minimum of $8 billion in a reasonable, normalized world. We are far from a reasonable, normalized world. We are a slow-growth world, and so the protection of the $8 billion going to the $10 billion is what you're just seeing from these interventions. But remember, the way to the $10 billion includes what you saw in the quarter. We have low feedstock cost locations. We are bringing St. Charles on. We are doing more work to de-bottleneck next year some of our other crackers. We are increasingly moving more ethane and propane into our cracking slate. That will go long for the next several years as we lock in some contract positions of these shale gas plays and ultimately, when we build the new cracker. So the road to $10 billion and beyond has a substantial component built in based on the low-cost feedstock cost position we now have. And inclusive of late next year, probably early the following year, in a slow-growth world, you'll start to see the ethylene cycle.

We'll take our next question from P.J. Juvekar with Citibank.

You talked a lot about cost cutting and restructuring, and are you -- you didn't talk much about divestitures of any non-core holdings. Do you have any plans to divest anything? Because I think that could really shore up your balance sheet quickly.

Well, look, as you know, in the '08, '09 time frame, we divested over $5 billion of assets, and we did it at very good prices and cleaned up the commodity part of our portfolio very well in so doing. And as we did all that, we had a strong, hard look at businesses that A, don't fit strategy, and B, don't fit returns. There's no question, P.J., that we are continuing that work. On December 3, you'll hear us say a little more about that. The focus on return on capital is acute. The lens we'll put on a lot of these businesses will be acute. You'll see us have a few things to say about divestments. It won't be as big as the numbers that I used for the '08, '09 period. And most importantly, remember, we're very integrated. So a propylene chain and a chlorine chain and an ethylene chain is very hard to divest as strategic plays. So what you're going to see is not integrated businesses that may not fit the return on capital criteria, and we have a few of those. And we'll talk more about that on December 3. We chose not to announce it in this particular restructuring because we're, frankly, not ready.

Okay. And then just sticking to that, the restructuring, you're cutting back on growth spending and R&D, which may not be such a bad thing, but Dow typically hasn't done that. So sort of can you tell us what led you to that decision?

Yes. Very clearly, we looked at what the world is bringing us in terms of not just demand drivers but also policy drivers, and we believe that the world of alternative energy is going to dial down and will dial down because the world can't afford alternative energy and subsidies right now. So we're trimming back extensive reviews of our growth playbook against demand drivers, growth in those demand drivers or absence of them. And then clearly, what I said in the script, backloaded NPVs, where the EBITDA, positive EBITDA is far in the future and the burn rate is too high in the next 5 years, we believe we can save that for another day and another time. We have plenty of growth to fund. I've said it; we don't need M&A. We have lots of internal things to fund. Our sharper focus on prioritization in a slow-growth world is prudent portfolio management. For your first question, which is to put some money back into the balance sheet, to reduce debt, to really return to our shareholders cash that we'll generate, and we can still fund prioritized growth without funding all growth.

And we'll take our next question from Hassan Ahmed with Alembic Global.

I was taking a quick look at your Performance Plastics numbers, and despite the sort of naphtha-based cracker headwinds, I would imagine out in Asia and Europe, the EBITDA seems to be relatively flat, be it on a year-over-year or quarter-over-quarter basis. I just wanted to get a sense of how much, be it year-on-year or quarter-on-quarter, was Asia and Europe a drag to this quarter's results?

Well, clearly, our naphtha-based crackers in Europe, we have 3 very large ones there, and the feedstock flex in some of them is only as good as LPG coming from North Africa, which is oil equivalent pricing, so you really don't get a benefit in terms of what you can get now here in the United States with propane, for example. Tarragona, Terneuzen to and Dow Central Germany crackers ran hard, but these were barely positive cash margins. So with 1/3 of the cracker base in that position, P.J., that gives you a sense. We're not alone. Some of our competitors have the same issues. Some of our competitors are announcing moving some ethane across the ocean, which is a very technically challenging thing to do. I do think what -- the shutdown of Tessenderlo is a good example of our review of the value chains there and we're not done. I think what's going to happen here is Europe is recalibrating to new demand drivers. As Sadara comes online, we'll have cost-advantaged feedstocks that will import into Europe, and that will give us cause to continue to evaluate whether we keep some of those crackers running. But remember this, these are crackers of scale. We do have LPG flex. We are the lowest cost of the highest cost positions in Europe. So therefore, we should be the last to shut down. But frankly, what we're going to see in the next 5 years in Europe is in, my belief, more shutdowns and more idlings because you can't keep running at these slim margins. And so it is a drag, but frankly, the work we're doing to improve our position in the United States and Canada and Argentina will continually show up in the bottom line, as I mentioned with the St. Charles cracker. So a drag a little bit for now, but we are an ethylene play despite what others are writing. We can be a strong ethylene play because we have the scale that the others do not.

Very good. And a slightly sort of different topic, it seems that for the second time this year, the parliament in Kuwait has been dissolved. So I just wanted an update in light of all these political goings-on on the settlement, the payment of the settlement.

Look, things are moving very much in a methodical, professional, legal jurisdiction as they should. You'd expect an award of this size to be appealed; it was. We're very pleased with the high court’s decision to reject the appeal. This confirms the sanctity of the ICC arbitration process, and the tribunal's unanimous decision in favor of Dow. This basically says that its unanimous decision protects the $2.16 billion award plus interest, plus fees. The interest clock is ticking every single day. We believe Kuwait will honor the decision. It's a country that belongs to the nations of the world. It is not a rogue nation. This award is final and binding and finally, at its last step, non-appealable, even on the process. And we believe there will be payment no matter what happens in Kuwait. And frankly, if Kuwait doesn't pay this, it'll look very bad with respect to any other foreign investment it ever wants to attract into the country and they know that.

[Operator Instructions] And we'll take our next question from Frank Mitsch, Wells Fargo Securities.

I noticed your comments this morning on CNBC regarding when you were back in China in March and you had seen some turbulence ahead, and obviously, we're seeing that play out now. So given your -- given the crystal ball on that, obviously, I've got to ask you about your crystal ball for Q3 and beyond. What are you seeing -- well, first off, we're towards the end of the month here. What are you seeing in the third quarter to date -- I'm sorry, in the fourth quarter to date in terms of demand, particularly in Europe and Asia? Are we seeing Europe continuing to slide? Can you offer some more commentary on that?

Yes. As I said on CNBC, the China downturn was fairly dramatic. I was actually watching some other results today and the last few days and the last week, and now everyone is talking about it. So I think we were quite prescient in talking about was going on in China. And given the fact that I do get there a lot, we all get there a lot, we listen very carefully to our customer base. And the one troubling statistic out of China in the last many months has been the lack of liquidity of the small mediums, which has really hurt the manufacturing base of China. What's happening in this current day and these next many months, we believe, Frank, is we're starting to see liquidity come back to the small mediums, so that is, in essence, the stimulus that’s starting to take hold again. So you're seeing some stabilization of the manufacturing base, and frankly, that's also the big ticket items that they're spending on. Big infrastructure items are coming back into play. We don't directly sell into that, so we're not seeing that in our supply chain yet. But we are seeing the uptick in small mediums, and frankly, we've got a couple of signals there, Frank. One of them is price. We're starting to get price increases, and Bill mentioned that in his script. And when you flip over to Europe, Europe is, of course, a very troubled region, but there are pockets where we are starting to see some light, and Germany is leading this, and frankly, that's also price. We're starting to see some price take hold in some businesses, in particular, in Germany. So right now, I would say the trajectory of the last many quarters seems to have been arrested because China seems to be, let's call it, stabilizing, which is a word I really believe is what's happening. I don't think we're going to see much of it by year end because of what happens with destocking and the Chinese New Year, but it does speak to a first half where China is back and maybe Europe is still weak. And if the U.S. plays out the post-November hand well, we should see the first half beginning to be better and maybe 2013, by the second half, being a better finish than what we currently would have said maybe a quarter ago.

That's very helpful. And Andrew, you mentioned pockets of opportunity in Europe, and I noticed, obviously, your volumes were up 3% in the third quarter. Where would you ascribe most of that taking place? Because that, obviously, was somewhat of a surprise.

Well, I'll let Bill get into the mix here. Bill, why don't you start off, and if I have to round off anything, I will.

Yes. We actually saw volume growth in Performance Materials in Europe, also Performance Plastics and actually, Coatings and Infrastructure, but that was all primarily Eastern Europe. Western Europe still remains very strong. If you look at -- I mean, Western Europe, very weak. If you look at Eastern Europe, so we did see reasonable volume, as you mentioned. It was primarily in Performance Materials, Coatings and Infrastructure and Performance Plastics. But unfortunately, that was offset by a significant decline in price.

And I would just add that the U.S. low-cost position can't be understated or overstated [indiscernible], which is we have an ability to run the machines flat out here in the U.S. and export, and that's because of the low-cost position. And that helps volume gains in Latin America and, for that matter, even in Asia-Pacific.

And we'll take our next question from Jeff Zekauskas with JPMorgan.

In your restructuring effort, where you plan to restructure 20 plants, in rough terms, what are the revenues of those 20 plants and the EBITDA? And what percentage is Europe?

Bill?

Yes, I don't -- we have to follow up that offline. I don't have the exact sales and EBITDA. But I will tell you, it would not be -- it's not going to be significant because these are -- these assets were particularly identified because they were lower-return assets, and we're not going to -- I can just tell you, we're not going to lose any sales because we have enough other capacity to handle that. So actually, these will have very little impact on both the top line and the bottom line as far as our existing revenue base.

And several of them, Jeff, were MBD projects, which means they were negative EBITDA margins because of high front-end investment burn rates. So that actually will be quite accretive by taking them out of the mix.

I might add, and if you look at the breakdown, I think you have the [indiscernible], a big portion of that is Europe, in particular, and the people-side also. It's highly focused on the dynamics we're currently facing in Europe.

And so for my follow-up, is it fair to say that Europe is less of a strategic priority for Dow over a longer period of time? I think your revenues are maybe 34% European. Five years from now, do you think it will be 30% or 25% or some number like that?

Really, from the mid-'90s, Jeff, I think Dow's management back then was prescient in taking over the boomer [ph] sites [indiscernible] and creating Dow Central Germany. If you look at the growth in Dow Europe in the last many years, it's all been Eastern Europe and exports from those facilities to Russia, et cetera. Those are advantaged location facilities, not necessarily advantaged feedstock. But also, over time, they're more commodity-like than the specialty mix that we have. So I think you're partly right. I think over time, Europe will start to look more like the U.S. and China do to us right now, which is in China, 85% of our revenues are from our downstream businesses. In the United States, 70% are from our downstream businesses. Europe will recalibrate to that. So it might go down before it goes up, but it will stay on strategy. And most of it will be because of high-end downstream markets, whether it be energy efficiency in buildings, whether it be work we're doing in some of the downstream Electronic Materials businesses. It'll be that sort of growth. It'll be margin growth, not revenue growth.

And we'll take our next question from Vincent Andrews with Morgan Stanley.

A question on working capital. Presumably, we'll see this when your Q comes out and the cash flow statements in it, but can you kind of give us a high-level view of what you're doing to improve the cash generation and just give us a sense of why this is sustainable for the long term?

Yes, this is Bill. I can answer that. So we are continuing to focus very much on working capital. If you actually look at our working capital, actually, you see the Q versus same quarter last year, our working capital is an improvement of $200 million. And as you know, working capital is a use of funds for Dow in the first half of the year just given the seasonality of our businesses, and it's a source of cash flow in the second half of the year. So you should see a strong cash flow generation from working capital in the fourth quarter. But we look at all that, efficiencies on payables, keeping our inventories at the minimum levels that we need in receivables. So we have actions across all those fronts, and you'll continue to see us make improvements in working capital.

Okay. And just as a follow-up to that, I notice on Slide 22, you've got the GDP multipliers there, and I'm just wondering if -- well, clearly, as we all know, in slower-growth mode. So to what extent do those normalized multipliers maybe need to be adjusted lower? And maybe we can circle that back to working capital. You're obviously trying to manage your working capital. We've all seen de-stocking and so forth through the chain globally over the last year. So how do we have to think about multipliers and customer inventory levels and whether we ever get back to what was once considered normalized?

Yes. I mean, the multipliers, I don't think -- we don't believe are challengeable right now. It's really the GDP numbers themselves. That's what we mean by slow growth. Lots of evidence out there in our emerging world countries. For example, our growth in China or Brazil, or pick your favorite emerging country where those multipliers are holding true at the high end, and really, it's the developed world -- I think the developed world will be 1x its GDP or a little bit less, which is what's built into these assumptions. So we don't believe the multipliers are challengeable on these businesses right now. I mean, take a look at agriculture, for example, which is definitely exhibiting a 1.5 multiple based on developed world drivers. So I'm -- we're confident that, that will hold true.

And we'll take our next question from Duffy Fischer with Barclays.

You talked about the Taft 2 restart being accretive about $150 million of EBITDA next year, and if you just do the math, that looks like it calculates out to about $0.175 a pound. I'm assuming that plant is smaller scale, probably not as profitable as your average pound in the U.S. So $0.20 or so, is that a fair estimate for kind of what you guys are baking in for next year for cracker economics?

Yes, that's pretty close, your analysis on Taft. St. Charles restarted. It’s a smaller cracker, but clearly, that $0.17 is low side and $0.20, $0.20-something, make versus buy, is clearly that sort of delta.

Okay, great. And then you had mentioned a little bit the ethane potentially going to Europe off the Mariner East. I'm sure you guys have looked at that as well. Can you kind of talk about the probability of doing shipments of ethane to Europe, what the cost economics look like from a buyer's perspective? And then do you think that will at all alter the ethane balances in the U.S.?

On the last one first, we don't believe this is way too small and way too much of a capital barrier for most, and the reason for that is if you don't have ethane cracking capability already there which the company that's doing it does in U.K. crackers, then you have to convert, and converting furnaces makes less sense. The furnace capital cost alone, let alone the dedicated vessel, the terminals, the pipelines, et cetera, just is such too huge a capital barrier to overcome on dedicated ethane shipping. I mean, there's been ethane available around the world for a long time. It hasn't moved for a reason, and so this is it basically. Our own cracker base in Europe, I mentioned Terneuzen earlier, we have LPG cracking there, but for us to do it versus do the crack here and ship the finished product, it makes much better sense if there had been better infrastructure over here. I think it's a dislocated stranded situation that we're seeing and more one-off than systemic.

And we'll take our next question from Mark Connelly with CLSA. Mark W. Connelly - Credit Agricole Securities (USA) Inc., Research Division A different question on the multipliers, Andrew. It looks like your Advanced Materials business's multipliers are in the 1.5% to 2% GDP range. But the volatility in Electronics and Coatings is obviously much higher than that, with 8% to 9% decline. So my question isn’t whether the multipliers are right, but whether your plans are going to address the kind of volatility that we're seeing. Second question is, of course, we didn't get the very popular heat map, and I wondered if you could give us a sense of what that might have looked like.

Yes. Well, not on the phone call. We'll follow up with you on specifics, but clearly, on your first point, the volatility in Electronics is all the reasons you know. And long before we were in the business, it was well understood by anyone in this business, which is the, if you like, the short-cycle industry that it is. Short cycle not only in terms of consumption pattern: Christmas buys, holiday buys, all the things that go with the sorts of goods that consumer electronics are but also cannibalization. You have to -- there's an invent cycle and a commercialization cycle much different to many of the product lines that we're in. Because of that, you have to be there with your customer, growing with the winning customers and growing in the winning markets, and frankly, we have that sort of business. I mean, now our exposure to semiconductors versus our exposure, if you like, to Interconnect Technologies versus our exposure to OLED versus our exposure to solid-state drivers versus tablets and smartphones, and if you look at the mix of things we have, we're growing in the growth product, in other words, the downstream product. And tablets and smartphones are what are growing, and they'll continue to grow. But it is a portfolio management that you have to get used to because we're going to see a downside on the semiconductor side, and the upside in smartphones and tablets are going to have to mitigate against the downside in the semiconductors that fuel them, and that's basically being part of winning customers. We keep winning with our investment in R&D here, and I've said that in the script. We are going to continue to fund Electronic Materials in winning technologies. Heat map, look, one thing we want to articulate to all of our owners, we're very focused on execution and delivering against these macros. You may say we are the economy. Many people think we are. That's why the heat map's popular because we see the economy. I do believe we called it earlier than most. Some of you didn't like us calling it earlier than most, but we did, and we acted against it. That's the key point. We're executing. I already answered Frank Mitsch in terms of outlook. We'll give you some more granularity offline if that's okay.

We'll take our next question from John McNulty from Crédit Suisse.

This is actually Alina Khaykin sitting in for John. Andrew, a question. We know that you don't give explicit EPS guidance for any of the years, but can you give us a sense of how to think about earnings growth for next year given all the moving parts, whether it's macro, cost cutting and some secular growth in there as well?

Yes, we -- as you quite rightly said, we don't give guidance, and we give velocity of EBITDA, and we give it in a sense of what can you expect near term versus what can you expect for the engine to produce under normalized growth conditions, normalized GDP growth conditions. And we have a $15 billion EBITDA medium-term target and a $10 billion way stop. What we've said a year ago is that we'll protect $8 billion as foundational. Coming off that trajectory in the last quarter or 2 is something that we've intervened on. You can rest assured that we are driven to intervene and get us to the $8 billion minimum, get us to $10 billion through the 2 mechanisms I've articulated on this call, which is the interventions, which is substantial EBITDA generators and cash generators next year and the year after, 2013, 2014, and the low cost drivers embedded in the ethane, propane feedstock advantage we have in the United States. Those 2 things alone will get us to the $10 billion in the next several years. Which year? That's guidance; I can't give you that.

Andrew, if I may just add a comment, so that's -- if you look at -- I'd point you also to Slide 19 because that was specifically to try to answer a bit of that question. So when you look at the EBITDA impact to the $500 million additional, that is '13 versus '12, so that is incremental EBITDA improvement. So that might also help you a little bit, too.

Yes. We'll take our next question from Kevin McCarthy from Bank of America Merrill Lynch.

I just wanted to ask about Performance Materials. You had a nice sequential profit rebound there after a lower second quarter. [Technical Difficulty]

Andrew, maybe I'll turn it back over to you to make some comments, and we'll close the call.

And Kevin McCarthy is back now into the queue.

I promise I didn't have my mute on. I just wanted to ask you about Performance Materials. You had a nice rebound sequentially after a softer second quarter, obviously, very diverse segment. And it seems to me you've got a lot of moving parts lately with TDI, plant shutdown in Brazil, PO coming up in Thailand, some raw material volatility. So if we boil all that down, I was wondering if you could just share some thoughts about the outlook for 4Q and general expectations for that business in 2013.

So I think the portfolio moves in Performance Materials are very deliberate and very surgical. You mentioned TDI as a clear example. One thing you've got to keep remembering about Performance Materials is the remedy of Performance Materials is embedded in Sadara and propane dehydrogenation in the U.S. So back-integrating into propane gave us propylene competitiveness for a lot of that mix, as well as, of course, the Sadara back-integration not just in PO but also in isocyanates. These businesses which are fundamentally U.S.-based have been competitively disadvantaged for some time in terms of export. And so the margin generation going from a steady state of currently 12%, 13% EBITDA margin, there's a 500 basis point improvement in those 2 investments alone in 2 years from now, 2, 2.5 years from now when they all start up. So in essence, portfolio management between now and then will give us a few percentage points of margin. What's that? Shutting down some epoxy assets, shutting down some of these PU assets you referenced, consolidation of our PU systems footprint, which was part of this restructuring. These are all very positive actions to improve EBITDA margin. The other thing is Joe Harlan and his team are leading price-volume optimization and maximization, and this is where the return on capital driver will be key. We'll start shedding low-end business over time and getting out of some other sites over time in an orderly way. But between now and the realized margins on Slide 22, which is 15% to 18%, the biggest bridge is this backward integration in raw materials. You can expect to see sequential improvement in these next many quarters because of the short-term actions Joe and his team are taking.

It's very helpful. If I may, I wanted to add one clarification, Andrew, on your earlier comments related to the revised capital budget. If I look at Slide 20, it was my general impression that you're still quite committed to U.S. Gulf Coast projects in general.

Yes.

I heard the comments about St. Charles and PDH. I apologize if I missed it, but are you still also committed to the worldscale ethane-based ethylene cracker in Texas, or has there been any change there?

No change. We are still committed. We are working very closely with the state of Texas on permitting. We believe we are second in line in terms of when that will start up. We are working with others to help base-load it with some commodities that we don't need.

Thanks, Kevin. Andrew, do you want to close with a few comments?

I want to close with the way the quarter played out. We saw the market volatility. We saw the market going down, and we promise we would control the controllable and that we would intervene. The EBITDA adds that we now have put in place through the restructuring, the cost and cash interventions, CapEx, of course, on cash, the restructuring in terms of cost interventions gives us $0.5 billion of new EBITDA on top of the EBITDA that we were talking about in the last round of the drivers we've put in place. That starts to add up on the trajectory to get to $8 billion and to get to $10 billion, as well as the low-cost position, especially here in the United States. The new streamlined operating model that we've put in place enables us to harvest these synergies without sacrificing growth, which is another key part of the conversation. You can expect continual prioritized growth from us when we talk with you on Investor Day. In the meantime, think of us as a strong cash flow story. The strong cash flow generate that we're very committed to will go directly to the balance sheet, as I said on one of the answers to the questions. On top of that, we have the Kuwait add. You can expect again that to go to the balance sheet and to continue to reward our shareholders. We're going to intervene on costs. We're going to manage cash for positive cash flow, and we're going to put it onto the balance sheet. That's the company that we are today, and we have what we need to do to grow in the next 5 years. Thanks for listening. We look forward to talking to all of you in the future.

Great. Thank you, everyone, for your questions and for joining us this morning. We appreciate your interest in The Dow Chemical Company. For your reference, a copy of the prepared comments will be posted on Dow's website later today. This concludes our call for today, and we look forward to speaking to you again soon. Thank you.

That does conclude today's conference. Thank you for your participation.