Dow Inc. DOW laid out a series of actions that will help the company achieve its earlier announced structural cost-improvement targets and boost its long-term competitiveness.
In July, the company stated that it is implementing a restructuring program that will rationalize certain manufacturing assets and lower global workforce costs by nearly 6%. The company expects these actions to generate total annualized EBITDA savings of more than $300 million by the end of 2021.
In the Industrial Intermediates & Infrastructure business, the company will rationalize its asset footprint by closing selected small-scale downstream polyurethanes manufacturing facilities as well as some solvents and amines plants in the United States and Europe. In the Performance Materials & Coatings, the company will close mainly small-scale coatings reactors. It will also rationalize its upstream asset footprint in the United States, Europe and Canada by adjusting the supply of siloxane and silicon metal.
In regards to these restructuring actions, the company will record a charge of $500-$600 million in the third quarter related to severance and related benefit costs, asset write-downs and write-offs as well as costs associated with exit and disposal activities.
Notably, the restructuring program is in addition to the operating expense savings worth $500 million that the company expects to achieve by the end of 2020. Dow also expects to achieve its capital expenditures target of $1.25 billion for 2020.
Further, the company confirmed that the sale of its rail infrastructure assets at six North American sites to Watco is expected to close three months ahead of schedule. The company will receive cash proceeds of more than $310 million from this transaction. Additionally, the company’s plan to divest some marine and terminal operations and assets to Vopak Industrial Infrastructure Americas for cash proceeds of $620 million is also underway and is expected to close by year-end.
Dow’s shares have lost 14% year to date compared with 6.5% decline recorded by the industry.
Zacks Rank & Other Key Picks
Dow currently sports a Zacks Rank #1 (Strong Buy).
Some better-ranked stocks in the basic materials space are Brenntag AG BNTGY, Pretium Resources, Inc. PVG and Yamana Gold Inc. AUY, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Brenntag has an expected earnings growth rate of 2.9% for 2020. The company’s shares have surged 33% in the past year.
Pretium Resources has an expected earnings growth rate of 20% for 2020. Its shares have returned 10.5% in the past year.
Yamana has an expected earnings growth rate of 84.6% for 2020. The company’s shares have gained 74.1% in the past year.
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