Dive Brief:
- Chemical manufacturer Dow announced plans Thursday to reduce its global workforce by 1,500 people in a bid to save $1 billion. Dow did not respond to a request for comment about whether the layoffs will hit its packaging and specialty plastics business.
- The company’s strategy includes cutting $500 million to $700 million in direct costs, largely focused on purchased services and third-party contract labor, according to the press release.
- Dow intends to spend $20 million to $30 million to carry out the plan. It expects to generate $300 million in savings this year and fully implement the cost-saving strategy by 2026, according to a Q4 2024 presentation.
Dive Insight:
Dow’s plan addresses an uneasy macroeconomic environment that includes high inflation and geopolitical uncertainty, as well as weather and supply chain disruptions, according to the presentation.
The actions also aim to bolster the company’s competitiveness across the business cycle, the release stated.
Dow delivered $43 billion in net sales in 2024, a nearly 4% decline from $44.6 billion in 2023, according to a Jan. 30 earnings release. However, the company’s net income rose approximately 82% to $1.2 billion.
During a Q4 earnings call, Dow CFO Jeff Tate cited a weak global manufacturing industry as a factor in the company’s middling performance.
“Ongoing affordability challenges also continue to pressure spending in housing and durable goods sectors,” Tate said. “These dynamics have created a two-speed economy and we continue to monitor key indicators for signs of positive inflection in more challenged end-markets.”
Other challenges include the pace of interest rate cuts in the U.S. and Europe as well as China’s stimulus policies, which could impact inflation and end-market demand, Tate added.
For the quarter, net sales were $10.4 billion, down 2% year-over-year, according to Dow’s Q4 2024 earnings release. The decline was driven by a 6% drop YOY in the company’s packaging and specialty plastics segment, its largest unit by revenue.
“Segment results reflected a decrease in local price both year-over-year and sequentially,” COO Karen Carter said in Thursday’s earnings call. “This was primarily driven by lower functional polymers and polyethylene prices as a result of the October price decline reflected in the market indices and other competitive price pressures throughout the quarter.”
In Q1, the company expects heightened feedstock and energy costs to outpace price increases for the segment. The company also expects a $50 million headwind from higher planned maintenance activity.
Dow’s last underwent major layoffs in January 2023, when the company cut approximately 2,000 jobs as part of a $1 billion savings plan.
The company is also working to shore up its finances through a deal with infrastructure investor firm Macquarie Asset Management. The firm bought sell 40% equity stake in five Dow facility locations in Texas and Louisiana in December, which is expected generate $3 billion for Dow, Chair and CEO Jim Fitterling said in the earnings call.
The $1 billion savings plan adds to Dow’s global optimization goal, Fitterling said on the call. Elsewhere, Dow is reviewing select assets in Europe, primarily certain polyurethane assets under its industrial intermediates and infrastructure segment due to increasing challenges in the continent’s regulatory environment.
