Dow Posts Surprise Profit As Volumes Rise In Q1, But Cash Flow And CapEx Outlook Signal Market Caution

Dow Inc. DOW shares are trading lower on Thursday after the company reported better-than-expected first-quarter 2025 results. Sales declined 3% year over year to $10.431 billion, beating the consensus of $10.24 billion, reflecting decreases across all business segments.

Sales remained steady compared to the previous quarter, with seasonal gains in Performance Materials & Coatings offset by price drops in Industrial Intermediates & Infrastructure.

Volume rose 2% year over year and quarter over quarter, while local prices fell 3% annually and 1% sequentially, as increases in Packaging & Specialty Plastics were outweighed by declines in other segments.

Adjusted EPS came in at $0.02, beating the consensus estimate of a $0.01 loss. This figure excludes significant items totaling $0.46 per share, mainly related to restructuring and efficiency initiatives.

Operating cash flow from continuing operations dropped to $104 million, down $356 million year-over-year and $707 million sequentially. This was impacted by soft demand and seasonal working capital needs. The company returned $494 million to shareholders through dividends.

Operating EBIT declined to $230 million from $674 million a year ago, while the margin contracted by 406 bps to 2.2% for the quarter.

Packaging & Specialty Plastics sales fell 2% YoY to $5.31 billion, and the operating EBIT margin of 6.4% was down by 470 bps.

Industrial intermediates and infrastructure sales were down 5% year over year to $2.85 billion. Operating EBIT fell by $215 million year over year to negative $128 million, impacted by lower prices, higher energy costs and reduced equity earnings, partially offset by volume gains in Industrial Solutions.

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Performance Materials & Coatings sales fell 4% Y/Y to $2.07 billion, and the operating EBIT margin was 2.4%, up 46 bps from the prior-year quarter.

“We are on track to close Dow’s sale of a minority stake in select U.S. Gulf Coast infrastructure assets by May 1. This strategic move to create a new infrastructure-focused entity has been several years in the making, and is expected to generate proceeds of up to $3 billion in 2025,” said Jim Fitterling, Dow chair and CEO.         

“Markets worldwide are awaiting additional clarity into how the tariff and global trade negotiations will land. In the meantime, we remain focused on managing a disciplined and balanced capital allocation approach over the cycle. These collective actions help to ensure Dow’s financial flexibility and our long-term competitiveness,” added Fitterling.

Dow is postponing construction of its Fort Saskatchewan Path2Zero project in response to soft market conditions, lowering its 2025 capital expenditure outlook to $2.5 billion from the originally planned $3.5 billion.

In addition, Dow is expanding its previously announced European asset review to address persistent demand challenges and regulatory headwinds. The review, expected to conclude by mid-2025, now includes three additional upstream assets across all operating segments identified for potential strategic action.

These new and ongoing initiatives are expected to generate approximately $6 billion in near-term cash support to help navigate the prolonged downcycle. This includes up to $3 billion from the sale of a minority stake in select Gulf Coast infrastructure assets through the newly formed Diamond Infrastructure Solutions. The first $2.4 billion tranche is anticipated to close on May 1. The company expects over $1 billion from the NOVA judgment in 2025.

Price Action: DOW shares are trading lower by 0.31% at $28.91 premarket at the last check Thursday.

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