Dow Inc’s Q1 2026 Call: Supply Chain Timelines, Sadara Losses, and Recovery Outlooks Don’t Match

Date of Call: Apr 23, 2026

Financials Results

• Revenue: $9.8B for Q1 2026, with 3% sequential volume growth
• Operating Margin: $873M in operating EBITDA for Q1 2026, with $193M in period cost savings

Guidance:

• Q2 2026 revenue expected to be approximately $12B.
• Q2 2026 EBITDA expected to be $2B.
• Expects more potential upside than downside to these projections.

Business Commentary:

First Quarter Performance and Market Dynamics:

• Dow Inc. reported net sales of $9.8 billion and operating EBITDA of $873 million for Q1 2026, with a 3% sequential volume growth.
• The performance was influenced by strong order books in January and February, followed by a sharp positive inflection in March due to the conflict in the Middle East.

Supply Chain Disruption and Pricing Strategy:

• The conflict in the Middle East led to a disruption where roughly 20% of global oil capacity is offline, affecting supply chains significantly.
• In response, Dow anticipates that pricing momentum will continue across all businesses and regions, supported by resilient packaging demand and increased asset utilization.

Cost Savings and Self-Help Actions:

• Dow achieved approximately $193 million in period cost savings in Q1 2026, with plans to deliver the remaining cost savings from a $1 billion program by the end of the year.
• These actions are part of Dow's strategy to improve earnings and enhance agility and resilience amidst volatile market conditions.

Regional and Segment Performance Variations:

• The Packaging and Specialty Plastics segment reported net sales of $4.9 billion, with polyethylene volumes increasing across all regions, but offset by lower merchant olefins sales.
• The Industrial Intermediates & Infrastructure segment saw net sales decline by 8% year-over-year due to lower prices and volumes, impacted by the shutdown of higher-cost upstream assets.

Outlook and Strategic Positioning:

• For Q2 2026, Dow expects revenue of approximately $12 billion and EBITDA of $2 billion, driven by pricing gains and expanding margins.
• The company is focused on leveraging its advantaged manufacturing footprint and activating pricing levers to navigate market volatility and capture value.

Sentiment Analysis:

Overall Tone: Positive

• Management cites 'solid results,' 'sharp positive inflection' in March, 'positive momentum' from pricing actions, and 'strong demand and really tight supply' positioning for pricing upside. They state Dow is 'well positioned to navigate market dynamics' and 'remain a compelling investment opportunity.'

Q&A:

• Question from Hassan Ahmed (Alembic Global Advisors): Concerns about the timeline for supply chain normalization and sustainability of polyethylene pricing initiatives post-conflict.
  Response: CEO estimates supply chain unwind could take 275+ days due to Strait of Hormuz closure and damage; pricing momentum remains strong with recent increases, and more upside expected.

• Question from Michael Sison (Wells Fargo Securities): Asks about Q2 PSP EBITDA sustainability and integrated margins into 2027 post-supply chain recovery.
  Response: CFO states Q2 integrated margin improvement is mid-cycle moving to peak levels, with price increases faster than 2021 due to severe supply shock; expects environment to persist 6-18 months.

• Question from Vincent Andrews (Morgan Stanley): Asks about potential sustainable cost curve changes post-conflict, specifically Europe's position, and near-term profitability of European assets.
  Response: CEO notes Europe's tight naphtha supply and byproduct credits improving margins short-term, but long-term cost position unchanged; expects Q2 European margins to increase.

• Question from Jeffrey Zekauskas (JPMorgan Chase & Co): Asks about pricing discrepancy between Houston export and Asia delivered polyethylene, and expected 2026 cash flow to EBITDA relationship and Sadara cash commitments.
  Response: CFO states global prices are rising, including in China; expects cash conversion to improve with pricing momentum; Sadara cash commitments are ~$100M per year for 2026-2038.

• Question from Kevin McCarthy (Vertical Research Partners): Asks about durable supply-side impacts from conflict, including physical damage and potential rationalization.
  Response: CEO cites most asset damage repairable within 275-day logistics recovery estimate; significant LNG plant damage (Qatar) is a longer-term concern but less impactful on petrochemicals.

• Question from Patrick Cunningham (Citigroup): Asks about impact of conflict on non-polyolefin derivatives and potential export opportunities from advantaged footprint.
  Response: CEO highlights ethylene glycol and polyethylene as most impacted; other derivatives like MDI and silicones also seeing price increases, with footprint advantages enabling value capture.

• Question from Frank Mitsch (Fermium Research): Asks about Sadara's future, damage to facility, and GAAP equity earnings impact.
  Response: CEO states damage to Sadara is manageable, focus is on restructuring; CFO notes Q1 equity loss was $115M, full-year expected ~$400M.

• Question from David Begleiter (Deutsche Bank): Asks if Q2 guidance includes the announced April and May polyethylene price increases.
  Response: CFO confirms Q2 guide includes April price increase but not May, implying upside from May pricing.