Good day, and welcome to the Dow Chemical Company's Fourth Quarter 2015 Earnings Results Call. [Operator Instructions] Also today's call is being recorded. I would now like to turn the call over to Neal Sheorey, Vice President of Investor Relations. Please go ahead, sir.

Thank you. Good morning and welcome. I'm Neal Sheorey, Vice President of Investor Relations. As usual, we are making this call available to investors and the media via webcast. This call is the property of the Dow Chemical Company and any redistribution, retransmission or rebroadcast of this call in any form without Dow's express written consent is strictly prohibited. On the call with me today are Andrew Liveris, Dow's Chairman and Chief Executive Officer; and Howard Ungerleider, Vice Chairman and Chief Financial Officer. Jim Fitterling, President and Chief Operating Officer is in the room and will be available for Q&A. Jack Broodo, outgoing Vice President of Investor Relations and recently named President of Dow's Feedstocks and Energy business is also with us. Just before 7:00 AM this morning, February 02, our earnings release went out on Business Wire and was posted on the internet to dow.com. We have prepared slides to supplement our comments in this conference call. These slides are posted on our investor relations financial reporting page. You can also access the slides through the link to our webcast. Some of our comments today include statements about our 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 would 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. Sales comparisons exclude divestitures and acquisitions. EBITDA, EBITDA margins, return on capital and earnings comparisons exclude certain items. Some of our comments may also contain statements about our announced agreement to complete our merger of equals with DuPont and the intention to subsequently spin into three independent publicly traded companies. In connection with this intended transaction, Dow and DuPont have filed and will file materials with the SEC that contain important information and we advise you to read them. These filings are available free of charge from the SEC or Dow or DuPont as applicable. The agenda for today's call is on slide five. I will now turn the call over to Howard.

Thank you Neal and welcome back to investor relations. Good morning everyone. Turning to slide six, our results this quarter and in 2015 reflected the benefits of our continued disciplined approach to execute on our priorities. Dow delivered its 13th consecutive quarter of operating EPS and EBITDA margin growth. Operating earnings per share increased 9% to $0.93 per share. Volume increased 4% which represents the ninth consecutive quarter of year-over-year growth. This includes 5% growth in our emerging regions led by greater China which was up 10%. Operating EBITDA was $2.4 billion. Excluding the impact of divestitures operating EBITDA rose more than $100 million versus the same quarter last year. Operating EBITDA margins expanded across all segments to 20.9%, the highest quarterly results since the first quarter of 2005. During the quarter we also returned $2.7 billion to shareholders through dividends and share repurchases with the closing of our Dow Chlorine Products transaction serving as a significant driver of improvement to capital. We've included a full look back on the greater than $4.8 billion in consideration for the transaction in the appendix. And finally, at the very end of December Dow received $1.5 billion in pretax proceeds through the sale of its direct ownership interest in MEGlobal to EQUATE. Moving to our full year results, Dow reported operating EPS of $3.47 a share a 12% increase year-over-year. We achieved operating EBITDA of $9.6 billion a new high. Operating EBITDA margins expanded more than 360 basis points to 19.7% representing the highest level in more than a decade with gains reported in all operating segments reflecting our continued discipline and price volume management. Operating return on capital increased to 12.1%. Marking three consecutive years of expansion we delivered $7.5 billion of cash flow from operations in a year, $1 billion dollar…

Thank you, Howard. If you look at slide 16, you'll see that 2015 in every regard was a transformative year for Dow. We delivered record results amid some ever challenging macroenvironment with 13 consecutive quarters of earnings growth and margin expansion. In addition to the financial highlights that Howard we made further progress on our productivity goals through harmonizing our work processes, streamlining functional business support and optimizing our asset footprint. We committed to achieve $300 million in 2015 and in fact we have delivered on this goal with $345 million realized. We completed the first full year operating on Dow's new one instance IT platform. This world-class system represented the single largest implementation of SAP and that is already delivering significant streamlining benefits while also enabling sharper business and geographic insights. We're delivering on our significant growth project milestones, celebrating first polyethylene product shipped from our Sadara joint venture and starting up the worlds largest on purpose propylene facility which is making smooth and steady progress towards full rates. And importantly, in a year with these significant operational projects coming online we delivered our best ever EH&S performance. And last, but certainly not least, 2015 was a truly transformative year on the strategic front. We drove major actions on our joint ventures with the sale of our direct ownership into MEGlobal to EQUATE, the step acquisition of Univation Technologies, and the announced restructuring of the ownership of Dow Corning Silicones business. We split up Dow Chlorine Products and released further value through our transactions of the AgroFresh, Sodium Borohydride and ANGUS businesses. And of course in December we announced the signing of a historic transaction with DuPont and we intend to crease three focused industry leaders in agriculture, material science and specialty products releasing tremendous value for our owners.…

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

Thank you. [Operator Instructions] And we’ll take our first question from Frank Mitsch with Wells Fargo Securities.

Congratulations to go around, of course Mr. Fitterling, congrats Mr. Broodo, congrats Neal, I don’t think I should congratulate you because IR in this day and age is kind of a thankless position [ph], but welcome back into the role. Hey Andrew, obviously…

Nothing for Howard?

And of course Howard, congratulations on you being you.

Okay, good.

Andrew obviously very impressive results, volumes really jumping off the page here and especially in Asia and China, can you expand upon that and I know that your commentary was rather upbeat on China as well, what exactly is going on for you guys there?

Well look I’ll give you – thank you Frank for the, all kinds of congratulations commentary. I think this is an exciting time at Dow and the question you’re asking is an indicator of it. We’ve positioned our product mix now for about a decade to be technology driven waiting for China to move to quality products, not quantity products. So rather than selling commodities and they reprocessing them for exports which is the China engine of yester year, the China engine of today and tomorrow suits our product profile, but we’ve been working a decade to put in place the Shanghai R&D center that you visited is a good example of that. So we have the right products for China’s current needs. Jim, did you want to add anything?

I would say in plastics obviously the higher end of the market for food packaging, what we’re doing in polyurethanes was structures going into automotive and appliances has been big. Electronic materials, we’ve seen a shift to more production into China, so that benefited us as well. And we continue to focus on all of our value added products moving into the market. So double-digit growth in China and even though automotive is a little bit slower in China, we are still very, very strong in automotive. Our elastomers business as well as our automotive bonding business has been quite exceptional.

And we'll take our next question from David Begleiter with Deutsche Bank.

Thank you, good morning.

Good morning.

Andrew, Howard and Jim lots of moving parts for 2016, can you grow EBITDA in 2016?

Howard?

Yes David, good morning. I mean, you know we don’t give earnings guidance. What we try to do with the modeling guidance is talk you through some of the moving parts. I mean we certainly have the potential to grow our EBITDA, when you look at all the tailwinds whether it’s the volume growth that we expect to continue, whether it’s the productivity self-help which is another $300 million on top of the $345 million that we delivered. Lower pension expense between $200 million and $300 million, but I would just caution you to look at all the headwinds as well. We’ve got some headwinds, but clearly PDH is well coming on as a tailwind and Sadara will be a tailwind in Performance Plastics, but it will be a headwind in Performance Materials and Chemicals through the year as both units in PMC continue to get closer to startup in 2016.

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

Hi, good morning.

Good morning.

Hi, in your previous corporate filings, you said that your Texas nine cracker would come on in the first half of 2017 and suddenly the chatter in Houston is that that cracker is running a year late in coming on-stream, is it still on schedule or is it running late?

Jeff, I’ll give it to Jim to answer.

Jeff that cracker is on schedule to start up in the second quarter of 2017 and when you take a look at the progress that we’ve made vis-à-vis the other competitors or we call it the first wave of production, it’s right on time.

And we’ll go to our next question from Hassan Ahmed with Alembic Global.

Good morning, Andrew.

Good morning.

I just wanted to sort of follow on from the earlier question, you guys are saying that your crackers on stream coming online on time and the like, if I take a look at the 15 or so cracker announcements that have happened in the U.S. it seems that only three have started construction right? But yet there seems to be this perception that there is going to be this flood of capacity coming on stream in 2017. Could you broadly give us your view of supply/demand and more specifically of what we should expect ex-Dow in terms of cracker delays?

Yes, I’ll get Jim to handle that one as well, Hassan.

Yes, Hassan what I would say, we have said since the beginning of this and our long-term experience in the ethylene business is this, half of what’s announced is in play and half of that might come on, on the timeframe that was committed to. So when you look at what’s in the first wave today, the things that we know, we know that Braskem [ph] has started up experiencing a few problems but have started up. You’ve got three big players ourselves, CPChem and Exxon that are coming in a small cracker with OxyChem. That is our view as of the first wave of capacity that’s coming on. That is quite a bit I had of anybody else and those were the first ones out of the ground and are going to continue to be the ones you see in the first wave. When the second wave comes is anybody’s guess at this point. Some people are saying 2018, I think it might even slide into 2019 or 2020 and given the financial conditions there and given things are going on with construction labor, I think that would be a realistic expectation. I don’t expect a tidal wave of new capacity coming on. We’re well positioned as a first mover in this and in fact I think we’re going to be up before the rest.

And we’ll go to our next question from Vincent Andrews with Morgan Stanley.

Thanks and good morning everyone. Just wondering if you can give us an update on the list approval from China and I’m also kind of wondering whether you think the delay has anything to do with ChemChina’s interest in acquiring Western assets?

Yes, just the back end of that, look there is no question China has been very much after GMO technology for a long time, Vincent and it’s not surprising that ChemChina is interested in Syngenta. That is a long held rumor and if indeed the announcement this morning that they are close, there is no shocker there. I don’t think it’s a correlation, but go ahead Howard on the investor group [ph].

No, I don’t really have anything new there. I mean we’re continuing to try to work with the Chinese Authorities and the Ministry of Agriculture. We are giving them as much technical information as they’re asking for and we’re very confident in the chemistry and the efficacy for the farming value chain.

Operator, do we have another question?

Yes, we’ll go next to Steve Byrne with Bank of America.

Yes, thank you. How much of that double-digit volume growth in Performance Plastics was a reflection of perhaps inventory destocking in the year ago quarter when you had falling oil or conversely did you have more inventory destocking in the fourth quarter with another leg down of oil, just curious about your outlook for operating rates in these next couple of quarters?

Hi Steve thanks for the question. I don’t think there was any massive destocking that happened in the quarter. We saw strong demand through the quarter and we saw a strong December. We moved product in almost every region of the country. I'd say a little bit soft maybe in Latin America for the fourth quarter and we see January is starting at a solid pace. So I don’t think it’s a destocking. On our own particular situation we ended up with record low inventories at the end of the year, but last December was also a strong December.

And we’ll go next to Peter Butler with Glen Hill Investments.

Yes, good morning, good morning.

Good morning.

Wall Street analysts are again talking backend loaded year, loaded years for their favorite economy sensitive stocks and wondering how much visibility does Dow have, that you have on the second half in next year, how much confidence do you have in your internal projections?

Well let’s start with the market side of that question and then we’ll get to our own Peter. Look I think every industrial company, every company out there up is not giving any sort of firmness on any of these years in front of us, that’s not new news. I think 2016, 2017 even with an election year here in front of us in the United States the macros are very difficult to predict. What we are seeing though is very strong trend lines which we said in our call, which I think gives us strong views towards our ability to grow earnings, is this notion that the consumer is active in the United States and the consumer is becoming increasingly active in China and then actually this is the beginnings of good spending in Europe. We do believe low energy price, low oil prices are seeping into the economy and that’s creating a stimulus that actually is of the right kind and I think if that stimulus continues to be what it is short of major tectonic events geopolitically, I think the confidence in the real economy will emerge continually from the consumer. And frankly that is what we’re seeing in our results, we're seeing it in our product mix which we've been working hard to position to be B2B to C and I think when Jim talked about packaging and plastics and I could say the same about anything, elastomers, our water business, our automotive business. We’re seeing strong demand in construction chemicals in Western Europe. I think it takes away this notion of back loading. It takes this notion of 13 quarters in a row continuing that trend and that then speaks to the other side of it. Most of our scenario plan this – does these days, we don’t actually say this is the condition. It's going to be 2.5% GDP and then got from there, none of us do that. We bracket it and then we pivot self-help appropriately and if we have to go down further in cost based on productivity actions because markets don’t manifest themselves, we take out more costs and having an IT platform that is leveraged, we can do that pretty quick. We can move the cost structure with demand and price volume managed and that’s what you've seen from us. So look, I think we have confidence in our machine continuing to deliver and generate the stats.

And we’ll go next to Aleksey Yefremov with Nomura Securities

Good morning. Thank you. I was wondering if you could elaborate on Dow Corning's performance and the outlook for silicones and poly silicon business given that you are about to buyout your partner there?

Yes, sure Aleksey good morning. Overall when you look at our equity earnings for Dow Corning in the quarter on a reported basis they are actually up year-on-year. If you strip out some of the certain items there was a one-time gain that they had in the fourth quarter of last year they didn’t recur and then there was some lumpiness in polycrystalline silicon side of the house. But the silicon’s platform has historically grown at 1.5 to 2 times GDP. They are in attractive, high growth markets that are clearly aligned with the markets that we have said we want to go narrower and deeper in, whether that’s construction, whether that’s automotive, whether that’s packaging, home and personal care or even electronics. And so, we're very excited about the silicone’s platform and the intent with the transaction on the poly silicon side is to have no economic change in ownership. That will remain a JV between Dow, Corning and Shin-Etsu.

[Operator Instructions] We will take our next question from Arun Viswanathan with RBC Capital markets.

Good morning. Thank you.

Thanks.

I had a couple questions, I guess, I could ask them as one question. It looks like you guys really hit an inflection point on volume growth in many of your businesses, should we expect that to continue? And similarly on the margin side, you've now had a level, new level of margin, so just to Andrews point that you are able to adjust the cost structure going forward is all of this kind of Dow specific or dependent on the market or again are we going to expect that these levels should continue on the volume and margin side? Thank you.

Jim, you'd like to take that?

Yes, I’d say Arun, the team has been very, very focused and aligned in all of the businesses and I think you are starting to see that come through in the consecutive quarters of results. If I went through every one of these segments, the teams knows what markets we're going after. They are well armed with new innovative products from our pipeline that are helping them to pick up market share and so it’s not just moving products with the commodity part of the cycle. They are very targeted on which geographies we want to grow in. If we had started the quarter we would have thought may be fourth quarter would have been more dominated by emerging markets and more by developed market instead of emerging markets and what we’ve saw - was we saw a strong performance in both. And so, I think what you’re seeing here is the culmination of just a lot of intense focus since about the middle of 2012 around our top line growth and when you think top line growth for us you should really focus on the volume right now because what’s happened with the oil prices is the thing that shows through in revenue, oil price and currency. What do you see on volume is sustainable.

We’ll take our next question from Don Carson with Susquehanna Financial.

I just have a couple of questions on Ag what was the underlying performance in Ag? You talked about an asset sale and I know you had an asset sale last year and with the headwinds in South America and 3% to 4% declines, can you grow EBITDA in Ag next year with the cost cuts that you are making.

Howard?

Yes Don, good morning. So the first question on the operating, underlying operating earnings, so look on average the Ag or Ag business Dow Agro sciences sells between 3 and 5 molecules a year on the crop protection side of the house. This is in line with the strategic intent where if we see products that are on the tail end of their lifecycle we can add significant value from our science and technology platform. So we did sell a couple of molecules in the fourth quarter. They were in the range of $50 million to $75 million of EBITDA contribution, so you need to back that out of the segment, but otherwise that was real productivity that really drove that. You remember we were one of the first if not the first Ag player to do a restructuring and that was part of our announcement earlier in 2015. To your question of whether we can grow EBITDA in 2016 that’s going to be a very tough slog on an operating basis even with productivity considering that, high channel inventories, low crop prices and just lower overall demand. Remember we’re forecasting when we see the market to decline between 3% and 5%. So it’s going to be tough. Our focus is to continue to deliver the innovations, they'll continued to deliver the growth on the crop protection side and the new products on the seed side and continue to drive productivity to outpace the competition and that’s our focus.

And we’ll go to our next question from Jonas Oxgaard with Bernstein.

Good morning guys.

Good morning.

Good morning. I was also curious about that volume in Performance Plastics because which your cost position I kind of assume that you guys will be selling full out regardless of end market demand so, could you talk to me a little bit through where that volume is coming from, you talk about reliability improvements on end market demand. I’m assuming someone most also be selling ethylene to Olin, now that are a separate company?

I think, - it’s a good question I think I you look at our Performance Plastics segment, you also have to bear in mind that we have capacities that are coming there on the elastomers business which is a high value, high margin business which has much more resilience in pricing and also a lot of targeted towards automotive and other consumer goods and high end manufacturing. When you look at plastics business per se, a very large part of it is predominately food and specialty packaging and that business has continued to grow strong around the world. Obviously, we have some plastics to go into the commodity segments and they continue to be strong as well. You’ll see a little bit of sales that are going into ethylene to the Olin deal, but that isn’t going to be material to the numbers that are in front of you. And the other thing you see on the revenue line is revenue looks down pretty dramatically, but when you peel back the byproduct sales of the crackers which are hydrocarbon and energy type of byproducts that have moved with oil more and on a one-to-one relationship, plastics has held up really well based on volume demand in the end markets and we think that that’s going to continue.

And we’ll take our next question from James Sheehan with SunTrust Robinson Humphrey.

Thanks, could you talk about the impacts that you see on polyethylene prices for new capacity coming on in 2016?

Hi, Jim. Yes, so as I said we ended 2015 with record low inventories and very, very strong sales, record production out of our manufacturing assets and product continuing to shift to higher volumes. In 2016 most of the new capacity that’s talked about is scheduled to come on at the end of 2016 and our view is a lot of that’s going to slide may be into the next year. Also bear in mind that you have a big turnaround season in the Q2 here in the Gulf Coast which we think will have an impact and we have Sadara coming up in the first quarter. So I think net-net, we’re poised to take advantage of that situation and when the new capacity does come in, in the second half we think the market will be geared to absorb it at a 2.5% GDP rate supply and demand is imbalanced for 2016.

And we’ll go to our next question from Bob Koort with Goldman Sachs.

Hey good morning, it’s Brian Maguire on for Bob.

Hi Brian.

It’s been a while since I got I guess an update on the earnings contribution from Sadara. I’m just wondering with all the changes in feedstocks and product prices and global supply/demand balances if you care to make a guess of what the ultimate earnings contribution from Sadara will be and what you would kind of expect to get to that point?

Howard?

Yes, hey Brian. Good morning. So I mean, I mentioned earlier I think in the Q&A that when you look at 2016 specifically on the Performance Plastics side, you’re looking at 50 plus or minus million dollar tailwind because those assets have already started. So we got first product out in December. The mixed feed cracker is going to be coming up and another couple of polyethylene units throughout 2016. But in PMC, performance materials and chemicals, you’re looking at about $100 million, $200 million headwind because they’re in the really steep part of the S-curve as their assets are being built and finalized in 2016, we’ve got some capacity for PMC not coming on until really the back half of the year. We still have a view that our long-term average is $500 million split between equity earnings and the commission structure that we’re going to get as we are marketing the product for Sadara outside of the Middle East zone. That is a long-term average and that is after the whole complex has started up. So that would start to hit those numbers in the post 2018, 2019 timeframe. We still feel really good about the project overall.

And our next question comes from Christopher Parkinson with Credit Suisse.

Perfect, thank you very much. In credit it is still in the early stages, but on a preliminary basis what do you believe your largest long-term opportunities are for your Ag business post merging with Pioneer is it more product focused within either chemicals or seed or are there more themes within our specific geographies? And also have you heard any preliminary feedback from your R&D team and/or field associates which you particularly find interesting or incremental from your original analysis?

Thank you for that great question. All I can say Chris is that the last several weeks of team discussions have just amplified and magnified the original pre-announcement of the merger work that was done by the teams. We had over 4000 man hours of combination work and the Ag teams, the two Ag teams were on fire in terms of complementarity. I mean the absolute hand in glove combination of what we have now seen Jim and Howard and I have done trip out to the [indiscernible] Johnson and seeing the Pioneer capability up close and personnel, it’s first class. It has incredible technology not just of course in traits delivery mechanisms but it is automated, it is technology rich, it’s got capabilities on the climatic side. And what the Dow Chemistry brings and the Dow traits bring, especially the combination of traits. So we can bring on herbicides and insecticides it is winning hand. As you know we are the next series of traits coming out in the marketplace. So everyone has always said that this is the greatest combination you could put in the sector and everything we’ve seen since the announcement and the work we’ve done has just doubled down and tripled down. We cannot be more excited and Indianapolis and there are signs we were down there and the people they were excited because the property has always been a property we talked about in terms of where its destination might be. It is no secret that Dow never saw itself as the natural owner long-term, but the combination waiting for it to come the way it did was a winning hand and so we will have a lot more to say. You know stemming our holes in the repertoire that we’ll have to address. But I can’t wait till the merger occurs and this company is set up for them to identify how they’re going to grow with this complementarity.

And we have time for one more question, that question will come from PJ Juvekar with Citi.

Thank you and good morning. Andrew, in your price declines of 19% overall, how much was FX and how much was local price declines? And then across your product chains where are you seeing some most price declines and where do you think you have pricing power? Thank you.

I’ll let Jim take that PJ.

Yes PJ, good question. In the fourth quarter specifically, you know we had a gain over hydrocarbons and energy costs of about $240 million and then we had some currency headwinds which were the local price declines that you talked about, but net we were up $65 million in the quarter and for the year we had gains of $1.1 billion and net out about $800 million of currency or $300 million of margin expansion. So I hope that gives you a rough idea. Howard?

Yes, PJ just to give you some specific data, at the enterprise level local price versus the same quarter last year was down 14%. If you look at that on an EBITDA or an EPS impact it was between, well it was $0.11 roughly on the EPS line and just north of $160 million on the EBITDA line versus same quarter last year in terms of impact on currency.

And that concludes today's question-and-answer session. Mr. Sheorey, at this time I will turn the conference back to you for any additional or closing remarks.

Thanks Levi. Andrew, before we close the call would you like to make any final comments?

Yes, I think I said it in my opening script, I can't be proud of the Dow team, 2015 was the year that we pivoted to our future. We've demonstrated 13 quarters in a row 9 quarters of earnings beat. We had revenue beat in the quarter. It was an exclamation mark. That's the result Howard and Jim and I working hand in glove with our team. Our business leaders have put in place the enterprise of the future. Yet, if you look at the transformative deals that we put in place for that future, whether it be the Kuwait pivot, whether it be the Chlorine close, whether it be the AgroFresh sale, whether it be of course the Dow Corning restructuring and ultimately the Dow-DuPont merger that created history, great companies, you can't put a quarter like that together or a year like that together unless you have a gun team aligned to shareholder value focused on margins, focused on cost, focused on productivity and growing that top line based on quality share. I'm very proud of Jim and Howard working closely with me. Jim congratulations on your next step here. Howard and Jim and I are very committed to keep delivering for you as shareholders. Just keep watching this space. Our headlines will only be about performance and we can't wait till we get to the merger and then the three spins that we will create. Thank you, Neal.

Thank you, Andrew and thank you everyone for your questions. As always we appreciate your interest in the Dow Chemical Company. For your reference a copy of our prepared remarks will be posted on Dow's website later today. This concludes our call for today. We look forward to speaking with you again soon. Thank you.