Dupont De Nemours Inc

NYSE:DD

Earnings Call Transcript 2007-Q1

[Christopher Parkinson, Credit Suisse Securities]

Our next presenter is the one you've all been waiting for. Jim Fitterling will be the next CEO of Dow Chemical, the Materials Science fin of DowDuPont. With him as always is Neal Sheorey, lead IR, who I've had the pleasure of dealing with several years, and Neal, thanks again for the commitment for taking your team here.

For those of you that don't know the story yet, I've just been notified that originally it was 140 pages but now are up to 290 in the Form 10, so make sure to hit that up tonight. So, it's growing at a rapid clip. When we get over 300, I'll be a little scared, but as long as you keep it under that, I'll be good. But from whatever I read thus far, it's a lot more interesting than the bland sell-side reports that people like myself put out.

As I think most of the people in the room know Jim, he's been integral to Dow's progress for some time. He's been intimately involved in extracting deal synergies and I'm sure is well-known to everyone as somebody that they want in this leadership role.

As one of his first public speaking events, once again, thank you Neal, in quite some time, so I really want to dive in as I'm sure we have a lot to talk about, and we'll kick off some questions but I'm hoping we have an interactive audience for this one.

[Jim Fitterling, COO, Materials Science Division, DowDuPont]

Thanks, Chris, for the great introduction. Thanks everybody for being here today and I'll make a few comments and then Chris and I will do some Q&A. We'll have plenty of time for questions today. Before I begin, I just want to remind you about the disclosure rules and those will apply to my comments today as well as the Q&A.

The new Dow is advancing quickly toward the intended separation, which is going to occur in just over six months. Nearly three years ago I was tasked with leading us through this merge-and-spin phase of the Company and to ensure that the Dow team had continued to fulfill the commitments that we made as part of the transaction, while also continuing to deliver our financial and our operating plan. And we've done just that, delivering nearly six consecutive years of earnings growth for Dow. I'm proud of that team and I know that when we separate again and stand as a publicly traded company, we're going to do so from a position of strength.

Last week, as Chris mentioned, we reached an important milestone toward that end goal with the initial filing of the Form 10 for the new Dow, and I also encourage you to read it. It contains detailed information on our strategy, our priorities, and our historical pro forma financials. As we continue to update the Form 10 over the coming months, you're going to get even more visibility into the new Dow.

Today I'll give you an overview of the new company and our mindset and our priorities that will guide our actions leading into and beyond the separation, and let me just start with the portfolio on Slide 2. We will emerge as an independent company with a streamlined and a more focused portfolio with a very deep set of materials platforms, leading capabilities and cost positions, and a strong alignment to some very attractive growth markets. We will grow our leadership position where our unique material science expertise, our scale, our global reach, our customer centricity and value chain knowledge, give us a source of differentiation.

In addition to our innovations within each of those product technology platforms, our best and our most unique innovation opportunity lie between our core technology platforms. We're placing a heavier emphasis on process and engineering development and we will continue to create value through application development, high throughput discovery, rapid prototyping, and scale-up. No moon-shots but you should expect us to focus on differentiation in those core markets and at the intersection of ethylene, propylene, and silicones. And when we combine these proven capabilities together, we can bring some new unique solutions to our customers.

We will also be a more streamlined, focused, and agile company, and our primary goal will be on creating more value for shareholders through best-in-class performance and profitable growth. Bringing those strengths together will drive us toward our ambition, which you'll see on Slide 3, to become the most innovative, customer-centric, inclusive, and sustainable, materials science company in the world. And underpinning that ambition are our three core values which have not changed, respect for people, our integrity, and protecting the planet.

As we emerge as an independent company, we'll be executing from a position of strength, supported by a strategic and operating mindset that will drive our performance going forward, and let me touch on each of these on Slide 4. We will focus on profitable growth, disciplined capital allocation, and driving a low-cost operating model with a best owner mindset. Our ability to differentiate will continue to be a defining advantage of the new Dow. Our businesses have been capturing above-market and above-GDP growth for the past several years and we're well-positioned to continue this trend given our leadership in core markets, Dow's proprietary technology and R&D capabilities, and our deep customer relationships, and we'll accomplish this while maintaining research and development spend at 2% of sales or less.

Additionally, advancements in digitalization have and will continue to be another source of growth and differentiation. I'm very proud that even as our Dow team has taken on a massive task of integrating Dow Corning, carving out several remedy divestitures, setting up three independent companies from Dow and DuPont, we have also continued to build out the digital Dow that will help make us best-in-class. We're already utilizing numerous digital technologies across our Company, from advanced analytics to artificial intelligence, to provide better market insights into customer trends and to enable Dow to better serve our customers. And the value of digitalization extends well beyond the commercial benefits as Dow applies these capabilities throughout our operations to enhance our reliability, our productivity, and even improve our safety as well.

The new Dow will be more financially disciplined. Our near-term investment focus will be on lower risk, faster payback, brownfield projects that will drive organic growth, enhance our asset flexibility and reliability, and reduce our cost position. And we'll fuel that growth while holding CapEx at depreciation and amortization levels. This approach will allow us to maximize value for shareholders, while still driving profitable growth, higher returns on invested capital, and increasing our free cash flow.

Operational excellence and continuous productivity improvements will remain central to our low-cost operating model, and in our manufacturing operations we see efficiency gains as enabler to unlock additional throughput. For example, asset debottlenecks and process R&D advancements that deliver step-changes in manufacturing performance.

And we'll also continue to drive a best owner mindset. You've seen our track record on this front and I've invested a great deal of my own time and energy toward building this discipline and financial acumen with the divestitures of our styrenics and chlor-alkali envelopes and the restructuring of our Dow Corning's silicones ownership.

Please allow me to take a minute to dive a little bit deeper into each of these pillars, starting with the profitable growth on Slide 5. The new Dow is going to be more focused with just six global businesses aligned to three core market verticals. The first market vertical is consumer care. We have the most distinctive set of chemistry solutions from silicones to cellulosics to acrylic for skin, hair, personal and homecare applications, and we have the global reach to tailor those offerings to regional preferences.

The second is infrastructure where we are the global leader in the formulation of differentiated polyols and systems, delivering a broad range of foams and sealants, coatings and binders. Our capabilities here enable us to address growing middle-class consumer demands and urbanization through better durables, better construction techniques, and better industrial materials.

And the third is packaging, where we are the world leader in food and specialty packaging, industrial and consumer packaging, hygiene and medical applications, and caps, closures and pipe applications. We have the deepest and most differentiated plastics portfolio, further strengthened by the addition of DuPont's world-leading ethylene copolymers franchise.

We're well-positioned for growth in each of these market verticals and each is growing at or above GDP, and we see the total addressable opportunities of more than $300 billion in that space today. And within each vertical, we are further aligned to some of the fastest-growing opportunities. Just one example, within the global packaging market, the fastest-growing application today is flexible plastic packaging, the segment where Dow is a leader today.

Moving to resource and capital allocation on Slide 6, as most of you know, we're close to finishing our first wave of investments on the U.S. Gulf Coast and we have completed our Sadara joint venture in the Middle East. Going forward, our focus now turns to brownfield projects that are low-risk, lower capital intensity, and deliver faster paybacks. We began announcing the next wave of investments last year with a series of ethylene, plastics, and polyurethane investments, comprising facility debottlenecks, forward integration investments, growth of our polyurethane systems franchise, and the expansion of our new Texas-9 ethylene cracker. When complete, the upgraded Texas-9 cracker will be the world's largest ethylene asset with one of the lowest operating costs. It will also be among the least capital intensive ethylene investments among all those that are currently announced along the U.S. Gulf Coast.

Then over the summer, we announced some incremental investments in our Industrial Solutions business, including expanding production in our alkoxylates and our glycol ethers lines. And this morning we unveiled the next round of opportunities, a series of debottleneck and incremental capacity investments in our world-leading silicones franchise. This silicones business is a business with compelling reasons for growth capital.

You may recall that prior to the silicones ownership restructure, Dow Corning revenue and earnings had plateaued. Under full Dow ownership, we broadened the addressable market for silicones, expanded the customer base, reduced the cost base, and brought Dow's sell-out/sell-up discipline into the operating discipline. And now just two years after taking full ownership of Dow Corning's silicones business, we have far exceeded the original cost synergy commitments, captured above-market growth, and doubled the EBITDA. With silicones' demand trajectory being robust, our teams have identified several high-return incremental growth opportunities that we will implement over the next few years to increase reliability and efficiency and expand capacity to meet that demand around the world, particularly in emerging regions.

Moving to the next pillar, a low operating cost model, on Slide 7, we remain focused to driving a best-in-class cost structure. We're committing to running our assets efficiently, and when coupled with our synergy and productivity efforts, we will drive to the low end of the cost curve in our industry. We see the next wave of productivity to be driven by digitalization and automation, which will improve our operations and reliability, and further lower our cost position and enhance our safety performance, and will drive our administrative costs lower and maintain a lean corporate structure.

In order for you to evaluate our performance, we'll also provide greater insight into our operations. Here are four key things that you can expect to see from us; more details into our key capacities, shifting to market-based transfer pricing, more details on the financial performance of our most significant joint ventures, and we will return to using EBIT as our primary profit metric, while continuing to drive the EVA focus that I helped bring back into Dow a few years ago. And to ensure that we're holding ourselves accountable to best-in-class performance, we'll drive a culture of benchmarking and continuous improvement, not just at the enterprise level but also in our businesses and functions. At our upcoming Investor Day in November, we will provide more details on all of this.

Before I close, I want to share some near-term priorities on Slide 8, which are aligned with Dow's financial and operating mindset. First, Dow will deliver profitable growth through maintaining and expanding our market-leading positions, more focused value creating innovation and customer collaboration, and by extracting the value from our organic growth investments. Second, we'll be disciplined allocators of capital, with a focus on lower risk, higher return investments that are close to our core market verticals, and deliver increased free cash flow and greater returns to you. And third, we'll drive toward the low end of the cost curve by delivering on our cost synergy commitments, capturing further productivity, efficiency gains, and addressing competitive gaps. And fourth, we'll employ an unbiased best owner mindset, drive that culture of benchmarking, and provide greater disclosure so that investors can judge our performance.

I hope this has given you some more insight to what you can expect from me and the new Dow, and this in many ways is just the beginning of what's to come. In the weeks and months ahead, we will announce our leadership team, our new Board of Directors, and we will continue to provide greater financial and operating details of the new Dow both through additional filings of the Form 10 and also at our Investor Day event this fall.

In fact, on November 7 and 8, DowDuPont will host two days of investor events to give you a better view into each intended company, and on Slide 9 you can see the high level details. The Dow event will kick things off on the afternoon of November 7, where we will share more information on our intended capital structure, our leadership, our governance, and our approach to benchmarking, and you'll get to hear from our businesses. I encourage you to join us in person, if you can. And if you need more information, please reach out to Neal and our Investor Relations team. These activities culminate with the separation of the new Dow, the world's leading material science company, by April 1.

Thank you again for the opportunity to join you today. I look forward to building the world's leading material science company together with you, our investors. Thank you.

[Christopher Parkinson, Credit Suisse Securities]

So, just to start, just to kick it off, I think a lot of people in this room are curious on your leadership style, but you've also been a leader at Dow for quite some time. Just how would you assess your performance over the last three to five years and are there any key differentiating factors between yourself and your predecessor in terms of management style that you feel are worth highlighting?

[Jim Fitterling, COO, Materials Science Division, DowDuPont]

So, make no mistake about it, I'm an operator-style manager. So I understand these businesses very well and very deeply, not just in the U.S. but I've had a lot of experience overseas. Performance over the last several years, we just completed the two largest investments ever in the history of Dow ever. We did the Dow Corning integration. We did DowDuPont. We did three carve-out divestitures, we stood up three companies and we're getting ready to spin them out. And we delivered six consecutive years, 23 consecutive quarters, of year-over-year top and bottom line growth, 17% top line so far this year, 22% bottom line. We did that and still invested in digital capabilities to take us to the next level, and we still have gas in the tank to do more.

So, I don't know of another company or team or group of individuals in our industry that has that kind of capability to do that. And when we get that focused on six businesses in three core market verticals, I think there are a lot of good things to come.

I worked with Andrew for a lot of years, 20 years. In fact, when I worked with Andrew, I first got the opportunity to go to Asia, which I think is a big part of my development. And so, he gave me that chance to do that. We're different styles and I think we worked together well because we complemented each other. And so, I think you're going to see that with power to me. We're different styles and we're going to complement each other, but we're going to be focused and we're going to be driven on these businesses and making them successful.

[Christopher Parkinson, Credit Suisse Securities]

Any questions from the audience?

[Christopher Parkinson, Credit Suisse Securities]

So just diving into investor perception of your asset base now that you have come together before you launch on your own in terms of the asset base, there is always a lot of focus traditionally on the U.S. assets, but you are much broader and much more diverse than that. Can you just hit on how you are perceiving your own asset base from a geographic perspective and are there any investor perceptions which you prefer to change over your tenure as CEO?

[Jim Fitterling, COO, Materials Science Division, DowDuPont]

So the asset base is very important for us. We're a big global company and we sell in 150 countries. We manufacture in close to 40 countries. And so, we make those decisions for a lot of different reasons. Sometimes you need to be in market, sometimes you go in because you need access to low-cost feedstocks to be able to supply the global market, many different reasons. It's been an advantage for us. Part of Dow's growth since I've been with Dow, which is about 35 years, has always been geographic expansion. It's difficult to do it, but if you do it well and you capture first mover advantage and you can build up a franchise in a country for 60, 70, 80 years, it gives you a lot of opportunities for the future.

Now, when you're geographically expanding, there are a lot of challenges, and not everything can deliver the same kind of returns. So we have to sometimes pick and choose what we work on. I think as we move forward, we need to demonstrate higher return on invested capital out of these businesses, and we've got to demonstrate that we can increase the free cash flow so that we can reward shareholders and still have some money to spend.

The biggest knock on Dow was, whenever we got some cash in our pockets, we had to spend it. And so, we've got to be more disciplined. We are generating good cash right now but we have to be disciplined about where the next investments are going to be, and that's why you see most of these announcements are brownfield incremental debottlenecks that had existing facilities. They are in markets where we've sold out and quite frankly our customers need us to keep pace with them. Those are going to be higher-return projects for our shareholders and for our Company.

[Christopher Parkinson, Credit Suisse Securities]

In terms of the holistic company, every investor has his or her own view of how do you look at the multiples and that business is probably [indiscernible] versus its comps, et cetera, et cetera. Some of your competitors have already presented today, some of them will present after you. What are the key in your own eyes the differentiating factors in terms of product mix, geographic mix, leadership technology, anything that you believe will reward investors over time, what are the key things which you feel the most enthusiastic about your new platform [indiscernible]?

[Jim Fitterling, COO, Materials Science Division, DowDuPont]

So I think people sometimes approach this from a couple of angles, and I look at it this way. We have to make money in this business to ways. You have to be low-cost to be able to compete. So, when we make investments and we look at expansions geographically, we have to look at it from a perspective of, will I be able to be low-cost long-term in that space. But it is a dynamic and changing world out there. So, most of our customers – we have more than 23,000 customers around the globe. A lot of them are big brand owners. They end up making products that end up in the consumers' hands. They have lots of demands on them to change features and functionality. You heard one of my customers on stage here a minute ago. They are always working on better performing materials.

You have to innovate. Innovation is not a question. If I don't innovate, I'm not low-cost. If I don't innovate, I don't have the market share, I don't have the product mix for the future. If I don't innovate, I'm not developing the next sustainable product that they demand, the consumer demands from them. So, people act like innovation is a choice. It isn't a choice. If you don't innovate in this business, you die.

And now, you have to do it smartly. If you take our plastics business, which I think everybody would argue is the franchise of the Company, we have invested steadily a similar amount of money every year into that business every year. The business would love to have more R&D investment. But keeping those budgets tight forces prioritization to happen within the businesses, and that means the best projects get through and the best developments get to market. And I don't mind a little bit of that dynamic tension in the organization to keep us moving down the right path. That will create more value for shareholders.

[Christopher Parkinson, Credit Suisse Securities]

Questions from the audience? All right, I'll keep going. Just looking at the S-10, and I know you're going to talk about capital at the Investor Day, but looking at what's in the S-10 and maybe what agencies have commented about wanting your leverage to come down and you've got a big unfunded pension liability and it sort of look like a company that's just made a big acquisition. Do you have a different view on the amount of leverage Dow would have on an ongoing basis than the predecessors?

[Jim Fitterling, COO, Materials Science Division, DowDuPont]

The old Dow was a strong BBB company and I think that's what we're going to try to create out of the new Dow as we get through it. We're obviously not through all the capital structure in the ratings yet. So you're seeing some really early numbers. We're going through the ratings process right now and then by October I expect the DowDuPont Board to take a look at all that ratings information and we'll start to bring the debt into the parent company structure and down to the three divisions. So, I think I'd be able to answer in probably more precise detail toward the end of the year when we have that all well-defined.

The other thing that we have to do obviously is deliver on our synergy targets. And in addition to our synergies, we also have to get the corporate cost structure right. So in that S-10 there are about $430 million of stranded costs that we have to eliminate by the time we spin out, and that shows up in the corporate cost center, and that's on top of the 1.2 billion of synergies that we have to deliver as a company.

[Christopher Parkinson, Credit Suisse Securities]

Two or three years ago there was a lot of rhetoric and concern about the various cycles in which Dow participates in. It seems as though there were scenarios certainly taken off the table probably two years ago, and things have gone progressively tighter just because things have been kind of coming on a much more levelled pace. Can you just give us at least your updated expectations in terms of the cycle or how do you want to characterize it, where you fit in, and then once all the dust is settled, how do you view your own leadership team as far as a market participant?

[Jim Fitterling, COO, Materials Science Division, DowDuPont]

I think it might have been two or three years ago with your predecessor when the presentation that I gave at the time, and everybody was calling for the end of the earth, was, it's all about demand, and demand for the last three years in our business has been exceptionally strong. So, we think about – we have started up world-scale plant in U.S. Gulf Coast, we started up Sadara 26 plants in a supply-chain to the Middle East and Africa. We have sold it all out, we've increased Dow's EBITDA margins, we've got our trailing 12-month's return on invested capital up to 12.5%. I mean, we are in a good economy right now.

So, you always are going to go through – when you get waves of expansion like we've had in the Gulf Coast, you're going to go through some periods where things get out of balance. There's nothing in the three-year look on ethylene for example that shows us going much below a 90% operating rate. Demand for plastics is good. Demand for other ethylene derivatives is good. I don't see that we're in a kind of a cycle. I think we're all attuned to geopolitical risk, and so we have to keep an eye on that. But in the absence of that, the economies look like we are growing well.

[Christopher Parkinson, Credit Suisse Securities]

And I have to ask, feedstock costs, something you addressed fairly substantively on the 2Q call, recently there's obviously been a little bit more volatility. I apologize for asking to the CEO just in terms of just feedstock costs, but can you just give just everyone in this room, because I think it's probably on their minds, can you just give your initial assessment, how long do you believe it's going to last, and where you think you believe things will settle out, especially after the new capacity is fully come online?

[Jim Fitterling, COO, Materials Science Division, DowDuPont]

So I would say, this is my plug for November Investor Day since I've been seeing some of the materials that we are working on. You should come to that day because Jack will give you a very comprehensive review of the outlook for all the energy markets, and I think that's important to us.

A couple of things; oil is one that everybody goes to for a stand. So I think right now when you have oil in this $70 to $80 window, that's a healthy window. It's healthy because people can continue to explore and bring product to market. It's healthy because the pricing is not too high that it dampens consumer demand. And it allows people to grow and invest and we keep moving.

So, I don't foresee any huge spikes in oil. Everybody is concerned obviously about the Saudi's balancing the capacity and the last incremental capacity. And the other thing on the gas markets is, as you head into wintertime, everybody gets concerned about inventory levels going in. The good news is, at these prices, you can swing in and you can drill and you can produce more. So, I think we're in a good position.

The way we always play this is, we try to have flexibility around those feedstock cost. Oil typically helps set the selling price for our products. I mean it's not a direct one-to-one relationship but there is a correlation between oil moving up and some of our product prices moving up. But most of our feedstock exposure is on gas. And so, when you look at the gas inputs, that's natural gas as our energy, ethane and propane are feedstocks for cracking. And most of those dynamics look good and it looks like we'll continue to have plenty of supply available. So, I think three years out is still a pretty long way to forecast that out. I don't see any big pinch points in that time.

[Christopher Parkinson, Credit Suisse Securities]

Any questions from the audience? I think I imagine the vast majority of your meetings, whether it's today or tomorrow, is going to focus a lot on the plastic side of it. But from a strategic sense or a business mix sense, you have a lot of other products, some of which some of your customers have been discussing about today and basically driving for performance, as you so eloquently put it. Are there any other key verticals which you'd like to invest in over time and gain more exposure, and if so, what and why?

[Jim Fitterling, COO, Materials Science Division, DowDuPont]

We've made huge improvements in our polyurethanes business. I think if you go back three or four years when we were doing portfolio transformation, we decided to keep polyurethanes in. And we've made a step-change improvement in the results of that business. The systems business in polyurethane is growing double-digits. So we've been running in 11% to 15% per year growth rate. And we can continue to grow that with organic investments. And those are really regional, on the ground investments that are close to customers to help them formulate and deliver a formulated product. It could be an automotive seat manufacturer. It could be somebody that's making parts for the automotive industry. There is a lot of growing demand there. In the food value chain, refrigerated trucks, cold storage units, all those kinds of things, more efficient housing is a big driver of polyurethane demand. So we've got to keep up with that.

In silicones, the announcements we've made to date are going to help us in a couple of areas. One is, one of the silicones that we are debottlenecking to expand for goes into membrane roofing and membrane coatings for large buildings. So, as urbanization happens, you get less single-family homes and you get more people living in large multi-units in big cities, the demand for that product is going up.

And the other area is that hydroxyl functional siloxane, is a product that can be used with polyethylene to go into making things like architectural decking, so decking plastic wood which is a growing area because of the way it holds up to weather in different conditions. So, that helps us also at the intersections of polyethylene and silicones to continue to grow.

And then consumer care, we've grown so rapidly here the last few years that all of our customers on the consumer care side, especially the health and beauty side, are looking for more growth. So we've got to debottleneck to expand with them.

[Christopher Parkinson, Credit Suisse Securities]

You made an interesting comment earlier in your response to one of my questions, and you essentially said, just because we make money or have a certain amount of cash, we don't have to spend it. When you look at your preliminary numbers, and not to [indiscernible] your Analyst Day, but when you look at your preliminary long-term numbers of where you think you could be on a roughly normalized basis, can you just offer us a little more detail on how you will assess M&A, how you will assess buybacks, and just your style and your own thought process as you are approaching those? And I imagine you're going to have more dialog with your shareholders at this conference and others.

[Jim Fitterling, COO, Materials Science Division, DowDuPont]

Yes. No, we will continue to do that. So I'll leave it to Howard in November to talk about dividend policy and make sure I don't get into that trap. But let's just say on share buybacks, from a value standpoint we have to always cover dilution, right. So, our view is that nobody comes into the stock to be diluted out. So we got to make sure that we always do that. And then we have to balance based on what our opportunities are. We got to put a hard screen on those investment projects on the return on invested capital.

If you go back to where this Company was running before all of the transformational changes, we were not returning our cost of capital, and we've marched that up to 12.5% trailing 12-months return on invested capital. Our target has always been 10% our weighted average cost of capital plus a 3% spread. We can do that. And I think if we're smart, I think we can move it north of that. That gives us the flexibility to continue to invest in these kind of incremental projects, to do the shareholder buybacks, and to keep growing the size of the machine so that we can wheel more cash off of it. And that's the way we're trying to look at it.

And obviously, we have debt that we need to pay attention to and we have leverage that we need to pay attention to, but we're going to have an opportunity through this capital structure, we're going to have an opportunity to kind of reset the financial costs of the Company going forward. We get that lean corporate center costs down, you should be thinking, our lean corporate center costs should be something in the $200 million to $300 million range when we get those stranded costs out and we get our financial expense down. And I think all of those are moving in that right direction.

[Christopher Parkinson, Credit Suisse Securities]

Please tell Howard I was not trying to step on his toes.

[Jim Fitterling, COO, Materials Science Division, DowDuPont]

I know. He'll be okay.

[Christopher Parkinson, Credit Suisse Securities]

I'm sure he will be. So, just the last question from my end, and I wanted to leave this time for you at the end of your presentation, in terms of [indiscernible] today, but I think it's especially unique for your story, when I look at the rhetoric of the Dow story, I know what it was before 2015, and then 2015 through 2018 it's been all about essentially what you've been doing, it's synergies, getting the Form 10s out, leadership, a lot of things you'll address in November. From your own perspective and your own just let's say new Dow so to speak, how deeply the rhetoric will evolve in 2019 and 2020? And as I said, where should investors be leading their own thought processes as they think for the longer-term?

[Jim Fitterling, COO, Materials Science Division, DowDuPont]

So I talked a little bit in the speech about digitalization. Digitalization and customer centricity are tied together. We have great relationships with customers but we're not always the easiest to do business with from a transactional standpoint. And a lot of the digital investment allows us to move into a different realm of conducting our business with customers.

So, today our businesses have the capability to look at customer experience, net promoter scores, on how we work with our customers in all of our business lines. So, I have that dashboard on all six of those business units. We measure it quarterly, we know where the gaps are, we know what we have to fix. We are digitalizing the Company to be able to provide them better service, better visibility of service, anticipate their demand, and do a lot of things better.

Silicones is a great example. That business has one of the most advanced B2B Web-sites in the industry. They will sell 50% of their volume this year through that Web-site. It's very much like an Amazon looking Web-site, go on, pick your product, pick a ship date, get the product, have it delivered, pay by credit card, do all that. We get an awful lot of great information there to help understand demand trends. We can use it to do pricing algorithms to test supply/demand sensitivities and price elasticity. It's been a real eye-opener for the business, but it also is the enabler to a lot better customer relationships and a lot deeper customer relationships.

My people spend less time working on fire-fighting and more time working on value add, the next innovation, how do I get into another formulation with the customer. That's a big part of the change at Dow. And we always get high marks on good product, good product quality, good technical service. We close that gap on customer centricity. I think you've got a company here that can really go to a next level in terms of performance.

[Christopher Parkinson, Credit Suisse Securities]

I think that's good to end it. Thank you very much.

[Jim Fitterling, COO, Materials Science Division, DowDuPont]

Thank you.