● Operating EBITDA in the Dow DuPont industrial intermediates and infrastructure segment increased by 36.4% in 2017.
● The polyurethane market is a $53 billion global market and is expected to grow by 7% annually for the next 10 years.
● Dow DuPont is one of the three major players in the PU market, and Sadara’s recent production may further consolidate their position.
The rise in raw material and energy prices has hit everyone's expectations for Dow's DuPont industrial intermediates and infrastructure business. Although not as good as packaging and specialty plastics, the business is leading the global and domestic polyurethane markets. In the future it is expected to achieve high-expected growth by 2025.
Industrial Intermediates and Infrastructure Division (II&I) had net sales of US$12.6 billion in 2017, a 17% increase from 2016. Operating EBITDA for 2017 was US$2.82 billion, an increase of 36.4% compared to 2016. Industrial intermediates and infrastructure The sector’s EBITDA currently accounts for 14.1% of the company’s operating EBITDA and 20.2% of the company’s net sales. As II&I’s operating profit margins increase significantly from 2016 to 2017, the increase in operating EBITDA proves this and believes that they can It's not too much to narrow the gap between the current proportion of net sales and the percentage of contribution to EBITDA.
II&I's net sales growth mainly comes from two parts, namely 7% sales growth and 10% local price growth. 7% sales growth is obviously a good direction for II&I because it represents more demand parties for the company. There will also be less risk from local and global markets. The rising raw material and energy prices have led to higher production costs and are less than desirable from a profit perspective, but this also affects Dow's industrial intermediates and infrastructure sector. It includes all of the top four global business competitors, not just Dow DuPont. These four global businesses include construction chemicals, energy solutions, industrial solutions, and polyurethane and automotive.
The polyurethane (PU) market is a $53 billion global market and is expected to grow by 7% annually for the next 10 years. High demand for commercial construction projects has fueled this expected growth, especially as polyurethane spray foams have begun to become applicable insulating materials. Rear.
Carlisle (CSL) report said that the new paving roof cycle is approaching, which will greatly increase the demand for its CCM (including polyurethane) field, and may increase the demand for polyurethane. CSL expects to spray polyurethane foam by 2020 The compound annual growth rate reached 10%.
The revenue of industrial intermediates and infrastructure consisting of Dow DuPont’s PU and CAV units is not yet known in its annual report. However, observing Dow DuPont’s competitors in the polyurethane market, it can be seen that Dow DuPont is in this area. Competitive advantage.
The polyurethane industry is relatively centralized and oligopolistic, with large manufacturers accounting for more than 60% of the total. Product pricing and other strategies are highly dependent on large players such as Covestro, BASF and Dow Chemical, and large multinational companies. A strategic alliance is being formed with smaller regional players to expand their business activities in emerging economies.
We studied the company's annual report data, including Covestro, BASF and Dow DuPont, and other competitors, trying to make some estimates of each company's position in market share. We converted Coventry's Euro data into U.S. Dollars, and convert Wanhua Chemical’s renminbi into U.S. dollars. These figures are in millions of U.S. dollars as follows:
It is still unclear whether or not the $12,647 million of Dow's II&I all came directly from the polyurethane business, but the polyurethane business revenue of the 'Big Three' is close to the 60% polyurethane market share quoted above.
From these data points, we can reasonably say that Dow DuPont has a strong position in the growing polyurethane market. Higher market share usually corresponds to higher profitability, and 2017 is no exception. Although production costs increase However, operating EBITDA still has an increase of more than 35%.
'Due to the strong downstream demand, Sadara Chemical's products have entered the market and increased demand for caustic soda and vinyl chloride monomer in EMEA due to more stringent supply and demand fundamentals has caused the sales of polyurethane and CAV in all regions. Volume increased. '
Sadara Chemical Company is a joint venture between Saudi Aramco and Dow DuPont. Dow DuPont sells Sadara products outside the Middle East. Sadara's high production clearly contributes to profitability and can continue to drive profitability growth and EBITDA growth. .
With the development of other requirements, there has been a considerable market share in terms of geographical location and in caustic soda and vinyl chloride monomer. Dow will have a bright future in the healthy and growing polyurethane market. Regardless of the progress of the dismantling plan, Dow's industrial intermediates and infrastructure division is still a bright spot, and investors who focus on packaging and specialty plastics with 2017 EBITDA of US$469.8 million may overlook this point. .