Dow Inc. (DOW) Earnings Call Transcript & Summary

Good morning and welcome. Thank you all for attending Dow's 2024 Investor Day. We're very pleased to have you here. My name is Andrew Riker, Dow's Vice President of Investor Relations and I'm very excited to be back in this space working with so many friends in this room, for now at least. Getting into the day, there's one thing I want to touch on before we go into the agenda. We've got a very unique product and innovation gallery walk set up in the room here. We also have a virtual gallery walk set up online. Please find some time to make your way and look at the products we've brought. These products will be featured prominently in the materials today. And we think it really highlights the growth we have ahead of ourselves and what makes Dow very unique. Now getting to the agenda. We're going to cover 4 main topics today. We're going to start with our strategy and path forward. We'll then go through a series of leadership presentations and spotlight videos covering our business operating segments and we'll do a little bit deeper dive into our cross-business, go-to-market approach in MobilityScience. We'll then give you a thorough update on our Path2Zero strategy and we'll wrap things up with our consistent, clear and disciplined financial priorities. We'll also leave ample time for your questions. So please jot anything down throughout the day because we will be here for a while. Three housekeeping items before we get the meat of the agenda going. #1, safety, and I truly mean this. This is priority #1 for Dow. If we should unexpectedly need to exit the room, please make your way to the back. We have exits on both sides. Please make your way into the hall and there'll be someone from the stock exchange staff that will get us to an appropriate location. Secondly, there's a lot of material we put out today. Please go to our investor website. Everything will be housed there. We'll also have updated capacities, consistent with what we did in 2018 and 2021. And we'll also have a lot of the press releases you saw this morning. So please take some time and take a look at all that. The last item and I think it's something everyone in this room hears frequently is regarding the forward-looking statement disclaimer. Please familiarize yourself with this in the slides we've posted and to make sure we're all on the same page, this applies to both the presentations and the Q&A. And with that, I'd now like to turn it over to our Chair and Chief Executive Officer, Jim Fitterling.

Thanks, Andrew. Welcome, everyone and thank you for taking time to be here with us today. I'd like to welcome some of our Board of Directors who are here and all of our leadership team who are in the room with you today for all that they do to steward our strategy, performance and help us manage risk and govern your company. Today, we're going to reflect briefly on the 5 years since we spun out and our path forward and we're going to talk about the value that we intend to create for shareholders. It's been 3 years since we last had an Investor Day and 5 years since spin. And in that time, we've delivered a stronger, more resilient and more innovative Dow. We accomplished this by operating with discipline and focusing on value creation and cash generation, significantly reducing our debt levels, derisking our pension plans and returning cash to shareholders. Strengthening that financial foundation has allowed us to invest in higher return projects that will deliver more than $3 billion in underlying annual earnings by 2030, capitalizing on Dow's distinct competitive advantages. In doing so, we're also committed to maintaining that strong foundation of financial discipline. Importantly, we will only put projects onto our balance sheet that we're confident will deliver our -- to our shareholders in line with our capital return targets. As you listen to Team Dow today, there are 4 things that I hope you'll walk away with. We're a stronger Dow, competitively advantaged, financially resilient, committed to value-creating ESG opportunities and we have a winning culture. We're poised to grow our earnings as we take advantage of the cycle and capitalize on these growth investments. Our operating systems and disciplines are underpinned by a strong digital foundation that is helped by more than 2 decades of traditional AI deployment and the addition of generative AI and there's a lot of upside from here for higher shareholder returns. Let's start with the progress that we made since spin. Team Dow has generated more than $20 billion of cumulative free cash flow. We've added capacity that will deliver $800 million per year of mid-cycle EBITDA and we've achieved an average return on invested capital of 12% since spin, all while keeping CapEx within depreciation and amortization. We also returned approximately 90% of our operating net income, about $15 billion to shareholders. That's well above our 65% target, while reducing our net debt and underfunded pension liabilities by $9 billion. This performance is the result of a proven playbook, which has enabled consistent, resilient cash generation through the economic cycle. In periods of strong demand, we leverage our material science expertise, our low-cost positions, our global reach and growth in attractive end markets. In periods of slower demand, we adapt quickly, adjusting operating rates, reducing costs and maximizing cash flow. Two clear examples of how we've done this are by lowering our cash commitments since spin by $1 billion and the $1 billion of targeted cost reductions that we took in 2023 in a very slow macro environment. Today, our balance sheet is in the best shape it's ever been at this point in the economic cycle. We have the financial flexibility to cover capital allocation priorities at the bottom of the cycle. And we're investing countercyclically in lower risk, higher return projects to position ourselves for organic growth as the cycle improve. Our industry typically leads into an economic slowdown but we also lead out into a recovery. And given our current financial position and the in-flight investments, we're in even stronger position to capture that advantage as the global economic recovery takes hold. Now let's look forward. I want to emphasize the differentiation in Dow's portfolio that underpins our industry-leading performance and allows us to grow businesses across the economic cycle. First, we're focused on attractive market verticals where the underlying demand trends are compelling. Together, these trends represent large addressable markets that will be more than $800 billion by mid-decade. We have leading market positions to innovate with our customers, to capture this demand across 4 broad market verticals, packaging, infrastructure, mobility and consumer. The strength of Dow's portfolio is defined by our world-class manufacturing and engineering capabilities and our material science expertise as well as our advantaged feedstocks and site integration positions, which anchors our low-cost position in every part of the world. In Dow's Packaging & Specialty Plastics business, we're well positioned to benefit from the shift towards circular and low-emission solutions. In our Industrial Intermediates & Infrastructure segment, we're poised to take full advantage of the shift to the energy transition with more sustainable and efficient products across the end markets. And in Performance Materials & Coatings segment, they are driving the future of mobility, electronics and personal care. With leading low-cost positions and the best feedstock flexibility in the industry, we're positioned to capture growth and optimize margins through the cycle. Today, about 2/3 of our capacity is in the cost advantaged Americas, where our access to growing U.S. natural gas and natural gas liquids production and large oil to gas spreads allows us to capture margin momentum. Our assets in Canada and Argentina also provide highly competitive feedstock and energy positions, which will further expand with the addition of another first-quartile world-class asset in Fort Saskatchewan by 2027. And in Europe, we have the widest feedstock flexibility in the industry, a distinct advantage over naphtha-based assets. Globally, 85% of our capacity worldwide has light cracking capability and we have cost positions that are leading or low cost in every region. By 2030, with the additions of our Path2Zero project and the growth investments that you'll hear about today, approximately 70% of our capacity will be in the cost advantaged Americas. As we invest in profitable growth, I want to stress that we will maintain our disciplined and balanced approach to delivering on these financial goals. More pointedly, our capital allocation priorities remain consistent. They've served us well since spin and they'll serve us equally well moving forward. As a result of our action, the balance sheet strength gives us the flexibility to strategically invest while returning cash to shareholders. Let me give you an example. Our strategic early cycle investments are primarily focused on high-value areas with greater market attractiveness and demand resiliency. Since 2021, we've invested in capacity that will generate an additional $800 million of mid-cycle earnings by advancing growth in areas like Packaging & Specialty Plastics, Industrial Solutions & Consumer Solutions. By mid-decade, we expect the remaining near-term growth investments to add another $1.2 billion to that. These investments will add approximately 1.4 million metric tons of capacity to Dow's global footprint, about 5% of our total output. Our Fort Saskatchewan Path2Zero project is expected to add another $1 billion to underlying EBITDA earnings by 2030. This will add approximately 2 million metric tons of capacity, an increase of about 10% of our total output. In total, our organic growth investments will deliver more than $3 billion in incremental earnings by 2030 and more than 15% to our total output. Decarbonization and circularity are good for our business. They will enable us to have a clear path to deliver shareholder returns and profitable growth over the next economic cycle. Our Path2Zero project will enable Dow to capture sustainable growth, deliver on our 2030 emissions reduction targets and keep us on track to be net zero by 2050. We'll implement these in a phased approach with disciplined project and CapEx management, to keep CapEx within depreciation and amortization across the economic cycle, targeting returns greater than 13%. To date, we've already increased our use of clean energy to 1 gigawatt of power, renewable power. That's approximately 40% of our total purchased electricity demand. And we have developed emissions reduction plans for our top 25 sites globally. In addition, we're continuing to pilot and develop next-generation technologies that you're going to hear later -- about later today. Looking at our Fort Saskatchewan Path2Zero project. This is the largest hydrogen carbon capture project to ever reach final investment decision in the world and it will create the world's first net zero cracker and derivatives complex. We expect it to have a lower capital intensity and deliver similar returns to the world-leading Texas-9 project that we started up in 2017. Texas-9 is a leading asset in terms of reliability, cost and carbon emissions intensity with the best return on capital in our fleet at greater than 15% per year since startup. The success of Texas-9 gives us the confidence in our ability to deliver Path2Zero on time and on budget. In addition, I just want to emphasize the team, the team, the team. The same team that executed our Texas-9 project is on the ground in Fort Saskatchewan together with the next generation of our engineering and construction leaders to shepherd this project. We're also advancing our Transform the Waste strategy through a partnership approach, leveraging collaborations of different sizes and shapes across the value chain to develop and scale innovative technologies. Demand for our circular and renewable solutions is directly tied to top consumer brands' targets for recycled content and changing consumer preferences. Demand is expected to grow for these materials by greater than 2x GDP by 2030. We remain on track to commercialize 3 million metric tons of circular and renewable solutions annually by 2030 and generate over $500 million of additional underlying EBITDA through those investments. Altogether, our organic growth investments will raise underlying earnings by more than $3 billion per year by the end of the decade. This includes the approximately $2 billion from the near-term organic growth investments, another $1 billion from the Path2Zero project in Fort Saskatchewan and more than $500 million from our Transform the Waste strategy. We have very clear levers to capture attractive growth and 2 big advantages. First, our Dow management team has a strong track record of delivering on our commitments. And second, because we're investing countercyclically, we'll be ready to capture the up-cycle growth as the recovery takes hold. The guiding principle behind all of these actions is our goal of value creation and best-in-class performance. And it is bolstered by our ambition to be the most innovative, customer-centric, inclusive and sustainable materials science company in the world. Just to give a few examples. In 2023, we launched about 1,000 innovative new products, many of which are showcased in the gallery walk here today or on the website for those of you who are online today. Dow's new products command on average 800 basis points of margin differential based on product advantages, performance advantages, intellectual property protection. This shows up in our annual margin benchmarking, which we just released last month. Over 90% of our R&D innovation projects deliver sustainability benefits without sacrificing any element of performance. We also achieved our highest customer experience satisfaction scores since we started this journey in 2018. And we continue to be recognized as a leader for inclusion, diversity and equity by recently being named by Great Place to Work and FORTUNE as one of the 25 World's Best Workplaces. That makes Dow a very attractive destination for young people and the next generation of Dow leaders who want to join this great company. Together, this team has built a very compelling investment opportunity. It's no secret that our industry has faced some volatile market conditions over the past few years but Dow's continued to execute its playbook, deliver on our capital allocation priorities and advance our long-term strategy. We have significant financial flexibility to continue investing in areas that will raise underlying earnings, reduce emissions and drive circularity. And as the cycle dynamics improve and we unlock the full benefit of these growth investments, we see significant upside to generate higher shareholder returns. And we're committed as a team to doing all of that and being as disciplined in moving forward as we have been over the past 5 years. Today, you're going to hear directly from our team on Dow's distinct advantages on opportunities to capture value across the economic cycle and on how they're driving best-in-class performance. How we intend to deliver that top and bottom line growth as the economic recovery takes hold, while maintaining that operating and financial discipline that have become the hallmark of our company. But you don't have to take my word for it. Before I turn it over to Karen Carter, President for our Packaging & Specialty Plastics segment, I'd like for you to hear from a few of our customers from around the world. [Presentation]

Good morning. I'm Karen S. Carter, Dow's President of Packaging & Specialty Plastics and it's a real honor to be here with you this morning. I recently celebrated 30 years with Dow and have served in a variety of roles globally as well as across the enterprise. But I began my career right here in P&SP. So it's a particular honor to be leading this business at this exciting time. And what you just heard from key players across the value chain demonstrates why this business and the solutions we provide are essential to meeting the evolving needs of consumers and the entire market. So during the time that I have with you today, I'm going to cover 3 main points: first, that P&SP is a formidable franchise that has consistently delivered strong financial results. And since our last Investor Day in 2021, we've implemented growth investments across the portfolio to add $400 million of incremental EBITDA and an ROIC of 20%. Second, the markets where we play as well as the overall polyethylene market continue to grow above GDP. However -- and this is important, that demand is shifting towards circular and low emission solutions, which has created a significant opportunity for us to lead and capture value. And then finally, I'm going to walk you through the strategic actions we're taking to further strengthen the franchise, grow our top and bottom line and deliver more than $2 billion of incremental EBITDA by 2030. So within P&SP, we have a broad portfolio that includes polyethylene and functional polymers that serve and add value in a variety of markets. For example, lightweighting in cars, extending the shelf life of food and even making baby diapers softer. And our downstream solutions are made even more competitive by our upstream integration in hydrocarbons and energy. And then importantly, there are a number of market drivers, some that you see here on the slide that are leading to above GDP growth, which is creating opportunities. And to capture these opportunities, we will leverage our competitive advantage which includes 3 key elements. First, we have a low-cost position, which is based on our scale, our asset integration and our strong commitment to reliability and safety. And this cost advantage is further enhanced by the fact that more than 70% of our ethylene production is located in the Americas, utilizing low-cost ethane. And in all regions where we operate, Dow is advantaged versus the industry as illustrated in the chart. Our cost advantage is driven by our investments in flexibility, which further sets us apart. So the ability to capitalize on preferred feedstocks as well as our breadth of process technologies enables us to optimize the what, where and how we produce our products to best serve our customers around the world. Dow's proprietary solution process technology is a unique example of this in action where we make a wide range of products from high-density polyethylene to plastomers or elastomers on one asset and we do it affordably, which means we avoid unnecessary downtime and minimize off-grade production. No one else and I mean no one else in the industry has demonstrated this capability. Our low-cost position and flexibility lend to our differentiation. Our leadership in catalyst innovation and diverse product portfolio allows us to meet the increasing performance requirements of our customers and value chain partners. So this supports our go-to-market strategy, which extracts a premium and it enables us to continue to outperform our peers. And in 2023, we expanded this premium by $0.04 in operating EBITDA per pound of capacity versus one of our largest competitors as highlighted in the chart. And so the combination of these 3 elements has laid a really strong foundation of competitive advantage to position us to capture growth in our target end markets. So as I mentioned before, the market is growing above GDP and so are our key end markets where we are targeting high-value applications such as food packaging, pressure pipe, high-voltage cables, all that have really high performance requirements that our products deliver. And polyethylene, of course, plays a really key role across all of these, making it a good proxy for overall demand and it too is outpacing GDP. This growth, as I mentioned before, is shifting. So the world is demanding more sustainable solutions, particularly in the segments where we participate. And as you can see on the slide, these emerging trends are accelerating the shift towards circular and low emissions. This is creating new demand that is largely unmet, resulting in a really unique opportunity for both first movers as well as those that deliver differentiated solutions. And so given this reality and opportunity, we are taking 4 strategic actions to deliver more than $2 billion in incremental EBITDA by 2030 and I'm going to walk you through that. Starting with Invest to Grow. So we've talked about our feedstock flexibility being key to our overall competitive advantage and we are investing to take this to the next level. Example, in Terneuzen, where we are expanding our ability to crack more lower-cost propane to displace higher-cost naphtha. We're also upgrading assets and adding new capacity to capture higher value demand. So in Tarragona, we recently converted an asset to produce elastomers and that allowed us to expand in photovoltaic films where we have grown 50% and sold more than 1 billion pounds, 1 billion pounds since our last Investor Day. Between 2021 and the middle of the decade, we will have realized around 800,000 tons of additional capacity through a combination of expansions as well as operating efficiencies. And one way we are improving reliability is through digital and I'm really excited about this because piloting the use of predictive analytics to reduce unplanned outages as well as the duration of downtime in our crackers and that will unlock more capacity. And so these actions are focused on supporting near-term growth through low capital, high return, quick payback projects that will structurally improve our earnings across the cycle. Now in the back half of the decade, we will also grow through our Path2Zero project in Alberta, the world's first net zero emissions complex. All the top brands listed here have made bold commitments to reduce their emissions and our first-mover advantage can help accelerate their progress. So in addition to decarbonization, this investment will grow our ethylene and polyethylene capacity by 15%. And I'm excited to share that this will include our next-generation proprietary process technologies to deliver even better performing resins at lower capital intensity. And the technologies we are building are the world's largest solution and gas-based dual reactor trains and these assets will enable us to double down on targeted applications like pressure pipe, wire and cable and food packaging. Importantly, this project also extends our low-cost ethane feedstock advantage, allowing us to serve growing demand around the world. And we will do all of this at net zero Scope 1 and Scope 2 emissions and our 5- to 7-year head start puts us in a really good position to help the market and these and other brand owners meet their emission reduction commitments as well as capture additional value. So delivering low emission solutions is only one side of the coin. We know that circularity is also needed to address the shift the industry is facing. So the same top brands who have emission reduction targets also have aggressive recycle content commitments. And it's for this reason that we are focused on ramping mechanical and advanced recycling as well as bio-based and renewable feedstock through direct investment and partnerships. And we've already contracted or in active negotiations for almost half of our 3 million metric ton goal in terms of supply, which is slated to become available between now and 2030. Today, we announced our intent to expand our existing 37-year relationship with Siam Cement Group to include an end-to-end circularity partnership. Now what makes this unique is that SCG has access to plastic waste feedstock in Asia and then we bring deep application knowledge with access to high-value end markets. And then together, we will have the ability to transform more waste and maximize value through a combination of mechanical and advanced recycling technologies, which will improve overall efficiency as well as production yields. We also recently announced the formation of a joint development agreement with P&G to invent a new proprietary dissolution recycling technology for polyethylene. Now this innovation will target hard-to-recycle plastic packaging, transforming more waste and upgrading the post-consumer recycle or PCR quality beyond what mechanical recycling can deliver today. And we're going to do all of this with lower emissions. Now this will expand the playing field of applications PCR can be used in because of the near virgin resin quality. So we're investing in partnerships and opportunities that will change the game but also accelerate our progress towards our Transform the Waste goal. Last but not least, breakthrough innovation in catalyst, process and product technologies have been and will continue to be essential to our success. And as a matter of fact, since 2021, P&SP has delivered over 50% of the revenue derived from new products sold at Dow. One example of this is our recently commercialized INNATE resins. So traditionally, toothpaste tubes have been made with a multimaterial structure using an aluminum layer, which means they cannot be recycled. But INNATE has changed that by enabling a full plastic solution that retains the packaging performance and also enables it to be fully recyclable and we have an example of that over in the gallery walk. We're also advancing process technologies like EDH, designed to make-on-purpose ethylene with 20% lower capital cost and 40% lower emissions as compared to our best-in-class cracker, Texas-9. And then REVOLOOP, which is our family of mechanically recycled resins, where we can dial in the performance that customers need while increasing recycled content rates. And this family, product family, is expected to contribute 1/3 of our Transform the Waste goal or 1 million metric tons by 2030. So these types of breakthrough innovations are not only helping us capture value today but are also setting us up really well for the future. So successful delivery of all of these strategic actions will result in more than $2 billion of incremental EBITDA per year by 2030. And this includes near-term growth efforts that are estimated to deliver $600 million. Fort Saskatchewan Path2Zero, which will deliver about $1 billion towards the end of the decade. And our Transform the Waste efforts, which are planned to deliver more than $500 million as we scale our supply, accelerate our innovation and meet the pent-up demand. And the end result of all of this will be a business that is more profitable with higher earnings and market share and an even stronger competitive advantage as we deliver value growth for you. Now it is my pleasure to hand it over to Jane Palmieri, President of the Industrial Intermediates & Infrastructure segment.

I'm Jane Palmieri, President of Dow's Industrial Intermediates & Infrastructure segment. With over 30 years of experience in industries ranging from automotive, building and construction, renewable energy and consumer goods, I'm honored to be representing a portfolio as diverse as II&I. The 2 businesses we'll discuss today are leading franchises, where Dow's market position, global reach and customer intimacy continue to maximize earnings for Dow. When coupled with our extensive innovation capabilities and best-in-class integration, these businesses provide Dow with growth and flexibility to upgrade ethylene and propylene and capitalize on ever-changing market trends. For Dow Industrial Solutions, we'll share several growth opportunities that are the result of Dow's leading position and purified EO and alkoxylation coupled with strong fundamentals in markets such as cleaning and pharma as well as solutions that support the energy transition. for this business, we're excited to have Pankaj Gupta with us, a familiar face to many of you here today, in his new capacity of Vice President of Dow Industrial Solutions. For Dow polyurethanes, I'll highlight the efficiency and cost improvements and several sustainability innovations that have been our focus. Ultimately, you'll see how our allocation of resources across II&I provides Dow with near- and long-term growth opportunities in key markets. And we're taking intentional actions to improve Dow's competitive position, which allows us to capture additional value in the future as other markets begin to recover. And now I'll turn it over to Pankaj.

Yes. Thanks, Jane. Thanks for that kind introduction and it's great to be here. Great to see many of the familiar faces that I used to interact with not too long ago in my past immediate role as Investor Relations. So I'm very excited to join our DIS business, Dow Industrial Solutions business, which is what we'll be talking about here. It's a business that's very familiar to me. I've spent almost, I would say, a little over 4, maybe under 5 years in my past stints in this business with nearly about 2 decades or so that I have with Dow as well as the industry. So DIS represents the ethylene side of the II&I portfolio, something that Jane just covered. And it builds on the ethylene integration that we heard from Jim as well as from Karen in her remarks on the plastics segment. So on this next slide here, these are the messages we want to cover today in terms of what this business does. We have a cost advantaged portfolio that is tilted towards purified ethylene oxide derivatives and that participates in value chains which are very constructive from a supply and demand perspective. So something that we will also talk about in terms of looking at our cost positions versus our peers. We have a broad participation in many of the attractive markets where clean energy transition as well as sustainability are drivers for growth in the coming years. And we'll talk about a few applications as well as markets and how that is possible. And that puts us in a good position then to grow our earnings going forward in the next few years with the capacity expansions that we are doing and we'll talk about that as well. So let's take a look at the business in this next slide. Here's an overview of the business. DIS upgrades and further diversifies ethylene at scale as the world's leading producer of purified ethylene oxide as well as the derivatives. With a global participation, we have our assets in cost advantaged locations, primarily, I would say, North America, where we have the shale advantage, something that you heard from Jim earlier today. And in Western Europe, where we have the LPG advantage that both Jim and Karen talked about in their presentations as well. So we combine that very cost advantage because of the cost positions we have with our high-margin derivative chemistries in diverse markets that are growing faster than GDP. Together with the long-term market trends, as well as our growth investments, which we'll talk about here, DIS is very well positioned to grow earnings over the next several years. So let's talk about our playbook that will allow us to win in the marketplace. Our strategy is to produce more purified EO derivatives and limit our participation in the monoethylene glycol or MEG segment. Cash margins of purified EO derivatives are consistently advantaged over MEG, as you can see on the chart, on the left side of this slide and the combination of constructive supply and demand dynamics for purified EO derivatives, along with recent MEG capacity additions in the industry, especially in Asia, further amplifies this advantage that we have. And this is exactly what differentiates us from our peers. So in the chart in the middle, you will see the industry is definitely tilted more and more towards monoethylene glycol or MEG, whereas our participation is very, very limited. So we apply this competitive advantage to our delivered solutions across a broad portfolio of applications at scale. These include fast-growing, higher-margin consumer, mobility, energy, pharma, industrial and ag chemical markets. So let's take a look at a few of these applications on the next slide. Across all of these applications and there's a lot of opportunities here that we are very excited about. Across all of these applications, we see sustainability as well as clean energy transition as the drivers for growth. So let's take a look at the applications on the, let's say, top left, thermal management. This is where Dow is an industry leader and we see huge growth potential in the data center market especially as data center cooling market, I should say, especially as the world's push to advanced cloud computing and advanced AI technologies takes hold. Ethylene carbonates is another opportunity for us. That's in the top middle there, where we are looking at battery electrolytes. Ethylene carbonates is a component to make a battery electrolyte. That's an emerging opportunity for us, especially with the U.S. government's push into onshoring the battery value chain, here in North America. And more importantly, Dow's manufacturing process captures 90% of our Scope 1 and 2 emissions from the EO manufacturing process, combines that with the CO2 to make a usable product that will then enable the transition, I would say, EV transition in the automotive segment. We are also the industry leader in energy transition applications with our long-established amines technology in the natural gas treating where we take amines, combine them with CO2 and other acid gases. And we're going to combine that expertise and our product portfolio and enable blue hydrogen production. And that becomes very relevant as IRA incentives kick in here with all the hydrogen hubs that have been announced recently. And then on the consumer side, we have our polyethylene glycols. They continue to serve the consumer and the pharma markets and the growth there is backed by many of the household consumer brand names that you and I are very familiar with. And now we have trends in terms of looking at dioxane-free, which is where we have the regulations coming in, looking at PFAS-free as well as some of the APE-free, APE as in alkylphenol ethoxylates-free alternatives and surfactants in that space will allow us to grow our earnings and our business in that space in the -- especially in the consumer cleaning as well as the industrial cleaning segments. And then across our portfolio, we are applying new technologies as well as AI and digital solutions to run our plants more efficiently and more reliably. And many of these technologies are on display here in the product gallery to my right. And you can see that we have 1 R&D 100 Edison, CIO 100, as well as big AI awards that recognize our innovation, recognize our digital offerings that we have in this space. So for those joining on the webcast, please do check our website because we do have a virtual product gallery as well so that you can take advantage of looking at some of the offerings that we have in many of these markets. So between our technical expertise, the product mix as well as the growth that we see in these markets, we are very well positioned to grow our earnings here in the foreseeable future. So what are we doing in terms of enabling growth? We are adding capacity. And so since 2018, we have been investing to win by growing our capacity downstream in the purified EO derivative space, especially adding alkoxylation capacity. So by mid-decade, we will have added about 70% more alkoxylation capacity in Western Europe as well as in North America and that allows us to grow in these different spaces that we were talking about. And these are mostly faster payback brownfield investments, also very high return as well. For the growth project pipeline, we have already completed our first wave of capacity additions. That's about 125 KTA, as you see on this slide, that was in Europe and in U.S. Gulf Coast, taking advantage of those cost positions we talked about. And that serves many of those pharma and cleaning sectors. And the second wave is currently in flight, that's about 200 KTA of additional capacity that will be Seadrift, Texas down in U.S. Gulf Coast as well as in Terneuzen, Netherlands, our flagship site in Europe, that takes advantage of the LPG cost position that we have. And that will give us good runway to grow volume as well as earnings into 2025 and '26 and even beyond. So in all, these brownfield investments from here onwards will add another $175 million of mid-cycle EBITDA in the next 2 to 3 years. And then in the short term, we anticipate a safe return of our glycol 2 unit, down in Louisiana that if you remember, was due to an outage, was offline since last -- mid of last year, that will come online end of this quarter and that then gives us more volume growth in the second half and then beyond. So short term and medium and longer term, we are positioned to grow volume and earnings in this business. So let me summarize. 2023 was a tough year, as we know. We think that this was the bottom of the cycle. And as we climb out, DIS is definitely well positioned to capitalize in all the drivers we just talked about. We have our low-cost integrated positions. We have markets that are growing faster than GDP. We're looking at supply chains or I would say, supply and demand balance is fairly well balanced in the industry. We don't have any length in terms of what other players have. And lastly, I would say that with the growth investments, the 200 KTA that's on flight, we will continue to add earnings here going forward. So with that, let me turn it back to Jane.

Thank you, Pankaj. Dow's polyurethanes business is a globally integrated industry leader well positioned for near-term upside. Our short-term focus is to pursue efficiency and productivity in light of the current trough levels. Simultaneously, we're executing targeted investments to deliver growth and increased margin resiliency in the longer term. PU chemistry is also essential to the decarbonization efforts taking place around the world. So our third priority is innovation with an eye towards sustainability. Global consumer durable and construction demand are at cycle bottoms and there is considerable supply lag in the associated PU chemistry chains. These dynamics, coupled with headwinds from our JVs are reflected in the 2023 financials. We serve multiple markets that continue to grow above GDP as polyurethane technologies address global challenges from population growth and sustainability to energy consumption, to name just a few. Dow is the leader in propylene oxide and polyols globally, as well as the global leader in propylene glycol, where we see higher resiliency. With Dow's extensive R&D capabilities, deep application expertise and network of system houses, we have the ability to solve locally and commercialize globally. We win by consistently serving our customers' ever-intensifying needs. As I mentioned earlier, we are committed to continuous productivity improvements. We are optimizing our footprint and lowering our fixed plant costs with meaningful capacity reductions in both PO and our downstream derivatives. We're focusing our participation in the highest returning PO derivatives. And we've institutionalized an efficiency culture that runs throughout the cycle. Our working capital initiatives have yielded record low inventories over the past 2 years, relying on investments in new digital tools and capabilities. And our digital investments also enable growth. For example, our Edison award-winning predictive intelligence platform, which uses advanced analytics to accelerate the polyurethane R&D formulation process. This new technology enables Dow to turn what used to take months of the resource-intensive lab trials into seconds of data-enabled innovation, improving speed to market and yielding higher returns. We've also strengthened our portfolio through targeted investments in several key areas of growth. For example, our new MDI distillation in prepolymers facility in Freeport, Texas, provides 30% additional monomeric MDI, increasing both overall margins and margin resiliency. We also recently completed our Thailand propylene glycol expansion to serve profitable demand in food, personal care and pharmaceutical applications. This expansion represents 60% lower capital intensity compared to a greenfield build. Additionally, we completed several investments that will provide EBITDA uplift in the next cycle upturn including projects like our U.S. Gulf Coast [indiscernible] debottlenecking and our Latin America caustic business. These actions and many more set the business up well for the future, while maintaining CapEx below D&A levels in the coming years. Sustainability and circularity are increasingly important to our customers. And here, PU chemistry has a critical role to play, whether it's mobility, where Dow polyurethanes assist in the lightweighting of vehicles or provide unique performance profiles for EV battery assemblies; or consumer markets like furniture and bedding, where Dow is out in front with no circular business models, like our RENUVA mattress recycling innovation. In Food & Fragrance, we provide sustainable propylene glycol from circular and biocircular feedstocks verified by ISCC PLUS in the mass balance approach. And construction markets also benefit from Dow polyurethanes and construction chemicals, which are ideal for energy-efficient insulation and roofing solutions. What we know from previous downturns is that when indicators such as interest rates begin to meaningfully decrease, spending on consumer durable products picks up substantially and quite rapidly. Because inventory levels across the value chain have been heavily reduced, there is typically an added bullwhip surge in demand from restocking to more normalized levels. So we've been working diligently to prepare ourselves for the coming recovery, having sufficient market reach and headspace for growth to respond to the building coiled spring in demand. In closing, the near-term growth investments Pankaj highlighted in the DIS business and our improvement actions in polyurethanes give us confidence that we will deliver value for both our customers and shareholders. Our actions will deliver growth of over $250 million of EBITDA from current run rates and additional to the uplift we will see from cycle recovery. I'd like to thank you all for your time today. And up next, you'll hear more about our third and final operating segment, Performance Materials & Coatings.

Good morning. My name is Brendy Lange and I'm President of Dow's Performance Materials & Coatings segment, which includes 2 businesses, Dow Consumer Solutions and Dow Coatings & Performance Monomers. And I was honored to be named to this role in April after previously leading Dow's Industrial Solutions business. And in that capacity, I was passionate about the growth opportunities that you heard from Pankaj just a minute ago. And similarly, I'm equally excited about the growth potential that we see in Performance Materials & Coatings. So over the next few minutes, you'll see 2 businesses that are world leaders in their respective chemistries with cost advantaged upstream integration. You'll see a focus on attractive markets with secular drivers that as we look ahead, we see above GDP growth. And third, you'll see structural actions, including higher return, faster payback growth projects that will lift the earnings of this segment by more than $300 million over the next several years, resulting in a higher growth, more profitable segment as we look forward. So I' d like to start with some background on the PM&C segment. In 2023, the business has delivered EBITDA of $1 billion. And this was a level that, frankly, was reflective of a challenging macro and the impact of interest rates in some of our applications. But as we turn the page and look ahead, we see demand drivers like those that you see on this page, such as connectivity and green building that are increasingly requiring more advanced silicones and acrylics to achieve higher sustainability and performance requirements. And we are well positioned to respond to that demand with our broad portfolio of high-value solutions and a world scale footprint that gives us a platform to innovate and grow with our customers. And for those markets that are still impacted by a weak macro, we will maintain cost discipline to maximize what is our industry-leading footprint. And you'll hear all of this throughout the next few minutes. And I'd like to begin first by inviting Joanne Sekella, Business Vice President for our Coatings & Performance Monomers business to share some highlights of the business that she leads. Welcome, Joanne.

Thanks, Brendy. After more than 30 years with Dow, I was thrilled to take over leadership of this portfolio last year. Dow's Coatings & Performance Monomers business is the industry leader in acrylic coatings. We have broad global reach and hold leading positions in both acrylic binders and waterborne additives. We remain squarely focused on our hallmark commercial and operational excellence, focusing capital and resources on attractive end markets where we know we can win. And we are well positioned to grow the top and the bottom line as the housing market recovers. Here, you'll see that we have clear differentiators that strengthen our position as the go-to partner across high-growth markets. We're applying our material science capabilities and our deep market knowledge to grow our position in the paints and coatings value chain. And we're focused on areas where our innovation is valued such as pavement markings and paper barrier coatings. This affords us the opportunity to meet that increasing consumer demand for more circular and renewable solutions, improved health and safety and lower carbon emissions, all while enhancing or maintaining end product performance. Architectural coatings. These represent roughly 2/3 of our global sales. And with the industry's broadest product portfolio, we've been the go-to innovator for more than 60 years. Our footprint is focused on our highest return, most cost competitive and most versatile assets. We have strong partnerships and a seat at the design table with leading global brand owners. And we're working and driving across the organization to move the industry forward, creating growth opportunities where paint offers both enhanced performance and enables a more sustainable world. On the bottom right, you can see that this market has evolved significantly, particularly in the United States. The last 4 years have whiplashed from a demand peak in 2020, driven by an unprecedented spike in DIY during COVID to a supply-constrained trough in 2023 on interest rate-induced stagnation in existing home sales and new home builds. However, current industry projections forecast a steady climb towards prepandemic levels over the next several years. As macro conditions and interest rates improve, we see significant top and bottom line growth. We're also expanding our reach into new attractive end markets. Our pavement markings for parking lots, public roads, airports and other applications are enabling more durable, more sustainable solutions that improve road safety and support the transition to autonomous vehicles. Our FASTRACK resins have painted millions of miles of roads globally in every major geography. And as the regulatory environment continues to drive towards improvements in road safety and durability, this will create additional demand for our business. Our paper coatings for packaging is get another very attractive market opportunity. Barrier coatings allow paper packaging to resist oil, grease and other liquids for to-go, shelf-stable and frozen foods, all while enabling recyclability and repulpability, meaning that greater than 80% of the original wood fibers are able to be recovered during the recycling process so that new paper can be made with the same performance qualities. Demand for new barrier coatings is going to continue to grow at a rapid rate due to the global recyclability and circularity trends. And to capture this increasing demand, we will bring online new capacity next year. And so to recap, we have narrowed our focus on markets where we can win and we have taken actions to strengthen our cost position. We are expanding our reach into new market segments and we'll continue to deploy innovation and digitalization capabilities to further improve our customer experience. We will continue to grow with our key strategic partners while building new relationships and continuing to gain share. Collectively, this sets our path to sustainable earnings growth across the cycle. And with that, I'm going to turn it back to Brendy.

Okay. I'd like to turn now to the other business in the PM&C segment, Consumer Solutions. And there are 3 key messages that I'd like you to walk away from this in the next few minutes. And these are 3 things that have stood out to me since I joined the business. First, silicones is great chemistry and we are seeing demand for this technology increase as society transitions to a more connected and sustainable world. Second, as the world's leading silicone player -- and really Dow is in a class of its own, we are uniquely positioned to benefit from that growth. And third, we have a strategic playbook that was focused on attractive markets and high-return capital investments that will drive $300 million of earnings by the mid part of this decade. So I want to jump in and then I want to talk about the chemistry. We are seeing strong demand increases for silicones in fast-growing markets like electronics, mobility, building and construction, consumer products. These are markets that are going through transitions and those transitions are requiring more and more silicone. The result is an addressable market that's growing greater than GDP and in fact, greater than many of the market indices that you see within the silicone segment, think more silicone per vehicle, think more silicone per electronic device, think more silicone per building. And as the largest producer in terms of annual sales, we have the scale, relevance that we combine with a downstream portfolio and industry-leading digital capabilities to meet that demand and serve our customers. And I want to unpack the competitive advantages that set this franchise apart. And you can see on this page, on the left-hand side, our industry-leading footprint with back integration, all the way to silicon metal. This gives us both cost and sustainability advantages versus our peers. We are the only silicones player with a world-class integrated footprint in 3 major regions: North America, Europe and Asia. This is a strength and it enables us to be the most competitive producer in each of the regions we participate and importantly, it means that we have sufficient upstream capacity to support all of our downstream growth without any additional capital investment. And our low carbon silicon metal production in Brazil gives us carbon advantage downstream products, which is a value proposition that we are commercializing in the marketplace today. So the scale and the breadth that you see on the left-hand side of this page gives us relevance in the value chains and a seat at the design table that translates to a robust innovation pipeline that you see on the right-hand side of the page. This is an innovation powerhouse. On average, we launch approximately 2 new products per week based on customer pull and sustainability is the catalyst for new product development. So as we look ahead, our strategy is to translate these unique capabilities and focus them in targeted markets that are growing disproportionately fast. And I'd like to bring that to life with just a couple of examples of some market opportunities that are charting the future for this business. And I want to start with mobility. This industry is going through a well-documented transformation towards electrification and decarbonization. And whether it's electric vehicles, hybrids, internal combustion engines, all vehicles are requiring more silicone. And this translates into a demand for silicone materials into this application that's growing at 5x faster than overall light vehicle sales. And I think one example really brings us to life and that's airbag coatings and bonding materials where Dow is the industry leader. Today's vehicles have at least 3x more airbags than prior generation models. And so this results in more silicones per vehicle, more opportunities for Dow. Shifting to the electronics sector, which is another market that's growing at a multiple of GDP. And this is an area where Dow's end-to-end innovative silicone solutions are essential to enabling a more connected, automated and digital world. As this chart shows, the electronics sector did stall to some degree in 2023 but we are seeing the market recover. And importantly, the mix starting to shift. Personal devices were the main demand driver for silicones in the past. But as we look ahead, data centers and augmented and virtual reality will make up approximately 2/3 of the silicone demand in this segment moving forward. So this trend creates more opportunities for Dow as our silicones dissipate heat and ensure stable performance of data centers, chips, devices, so much better than competing materials. And last, Building & Infrastructure. This is a large $12 billion addressable market. And Dow today is the #1 provider of silicone, adhesives and sealants into high-performance building. And the stat that I love is that 70% of the top 20 iconic buildings in the world use Dow products. And they do so because architects trust Dow products to work for many decades. So as this industry transforms and transitions towards more sustainable green building and infrastructure, this will require more silicone through higher-performing and carbon-neutral sealants to enable lower greenhouse gas emissions. So as you think about all 3 of these market opportunities, markets are growing and Dow's depth, breadth and innovation position us well to capture this demand. And as we look ahead, our playbook is to invest in downstream capacity to supply the demand as well. The left-hand side of this page shows that between 2021 and 2026, we will have added 200,000 tons of high-value downstream capacity, half of which started up in the past 3 years and half of which will start up in the next few years. And this will deliver 2 critical outcomes for this business. One is it will update and upgrade our market participation into these faster-growing markets but also it will upgrade the returns on our upstream siloxane footprint into higher value downstream products by a factor of 3x. This will result in top line and bottom line growth as demand returns. So coming back to the PMC segment overall, I'd like to end where we started. And that's -- this segment has tremendous growth potential. We delivered $1 billion of EBITDA in 2023 and this was reflective of the challenging macro that we all felt. But as we look ahead, we see a combination of more cycle upside than downside but more importantly, our strategic actions and plans to innovate and grow in these targeted markets that will lift our earnings of the segment by about $325 million by the mid part of this decade, resulting in a higher growth and more profitable segment in the future. Next, I'd like to invite Jon Penrice to join us today to talk about MobilityScience, which is a key growth platform for Dow.

Thank you, Brendy. Hello. I'm Jon Penrice and I lead the Dow growth platform in mobility. And we're combining the material science capabilities across the Dow enterprise to focus on growth opportunities for an industry that's going through a once-in-a-lifetime change. At the heart of this, we're seeing customer demand for more sustainable solutions, such as electrification, reduced carbon footprint and increased circularity, particularly the end of vehicle life. This requires not just new materials but new ecosystem partnerships, including with OEMs, where we are securing a seat at the design table. Take the growth of EVs and hybrids as an example. New materials are needed to reduce the heat in electronics, for batteries, for lightweighting and for better acoustic solutions. When we bring solutions to these challenges, we can increase the amount of high-value, high-margin Dow materials per car by up to 3x. In addition, most OEMs have established progressive net zero carbon emissions targets and regulators are introducing circularity targets for polymers and plastics. Here, Dow is getting paid to help the industry decarbonize. So our portfolio is broad. We have deep innovation capabilities across Dow businesses and vehicle types. And we have the local know-how to meet the highly demanding quality and just-in-time needs. Check out this video to see examples of Dow MobilityScience in action. [Presentation]

You've heard from the business leaders today on several ways in which our Decarbonize & Grow and Transform the Waste strategies really position Dow uniquely to capitalize on this demand for more sustainable and circular solution across all of these market verticals. Altogether, by 2030, the strategies enable us to deliver more than $3 billion to our underlying earnings, reduce our Scope 1 and 2 emissions by 5 million metric tons and commercialize 3 million metric tons of new circular and renewable solutions annually. In November, we reached a key milestone on our Path2Zero project in Fort Saskatchewan, where our Board gave final investment decision for us to move ahead. So to unpack the details a little bit more, I brought Dan Futter, who's our Chief Commercial Officer; and John Sampson, who's our Senior Vice President for Operations, Manufacturing and Engineering. And we're going to talk a little bit about Path2Zero project. So John, let's start with that. We've talked a little bit about enabling sustainable growth opportunities while also reducing emissions targets. And I think the audit -- with respect to fighting climate change and emissions the general public has already voted, there's a problem and they want to see it addressed. So the question becomes, how do we do it in the most economical way possible?

Sure. Yes. Thanks, Jim. We've got a strong track record of building highly efficient assets and we certainly learned a lot from our newest cracker, Texas-9. Third-party studies have confirmed that Texas-9 is a first quarter -- first quartile cracker when compared to assets across the industry, relative to the efficiency and overall performance. Some of the numbers that kind of back that up, we've enjoyed a 15% return on invested capital since starting up in 2017. And then relative to installed efficiency, our installed capital cost was 20% lower in terms of cost per ton of ethylene installed. Once you build it, the big question is, will it run? And in the case of Texas-9, we're enjoying more than 65% lower conversion cost to convert ethane into ethylene than the average across the Dow fleet. And we're also being very efficient and that 60% less CO2 per metric ton of ethylene is produced by the Texas-9 cracker compared to the average across the Dow fleet. And that's without any decarbonization assets. And so we plan to leverage all of that know-how into our Fort Saskatchewan project and build upon that strong foundation of know-how. We certainly expect to deliver an asset that will deliver the $1 billion that you spoke about earlier of EBITDA per year, all while eliminating for the first time ever across the entire site Scope 1 and 2 emissions.

So John mentioned the consumer demand, Dan and you've got a view towards what's happening there. Tell us what you're seeing in terms of the demand pull and how we're going to address that with the consumer.

Yes. I think, Jim, we're starting to see the first signs of the market emerging. If you recall, Karen Carter earlier presented the brands and the emission reduction targets that they're declaring. And we've been doing the same study for our direct customers. And what we've seen is that the majority of our largest customers have made declarations on their Scope 1 and Scope 2 emission reduction goals. And of those, half have already established a Scope 3 target as well and that includes the products that we supply to them and their footprint. So now it's fascinating because if you start to add up all those declarations of all of our direct customers, recognizing this is just the top ones today, so this number will increase and change. What we're seeing is a market for something like 200 million tons of [indiscernible] side equivalent by 2030. If you compare that with what we would estimate the supply side to be, it is much smaller. Now will this market supply-demand dynamic stand? Well, they are bound to be some puts and takes on both of those sides but that is the largest dislocation in supply and demand that I've seen in my 36-year career. So this is going to be a fascinating period for us as this rolls forward. One of the key outcomes, I think, has to be the emergence of new markets with their own supply-demand market -- supply-demand dynamics for our products that are analogs of the existing ones that we sell. That's analogs with a low emission footprint. And so that's the bit that's going to be interesting, is what type of value positioning will we see for those low emission products, Jim.

And so on the demand side, it's there, obviously. I mean we've got the biggest project in the world going and it's a fraction, like a small fraction...

Less than 2%. Yes.

But people also wonder how we're going to capture value for it. And we've said before, we're not putting in the $1 billion of returns, we don't have anything in there for CO2 emissions. But we do think there is a value and we do think there is a premium to be had for that. How do you see it developing in the marketplace?

If you take a market view rather than the sort of customer view that I just talked about, what we're seeing -- we've done a lot of work with McKinsey in this space to estimate what we think each of these markets is likely to pay as it stands now for emission reductions. This will obviously evolve over time. But we're seeing a range of values, in fact, probably from the top end in the consumer goods markets down to the industrial markets. And the reason they vary is that each market has its own ways to abate emissions, right? They vary. And so therefore, the values vary as well. What we're interested in seeing, obviously, is how does this evolve into us being able to bring products to market. One of our single biggest challenges is this and Fort Saskatchewan is a great example. As Jim said, it's the single largest net zero announcement being made in the industry to date. But as you then take that reduction in emissions and you cascade it down through the many products that we derive from that asset, what you see is a dilution, right, the diluted effect. And if you talk to our customers, that contrasts to what they're looking for. So what they want to see is, please concentrate the emission reduction that you deliver into specific products, the ones that we value the most and by association, that's because we, as consumers, value those products the most as well. So we're working with the standard setters, with third-party verification agencies and with our customers to discuss how do those standards have to evolve so that it enables us to concentrate those emission reduction benefits in those products that those customers most want. And those conversations are going pretty well, Jim.

So John, Dan made, I think, a very clear case on the markets. One of the next most common questions I get a lot, when I go out and talk to investors is, why did we decide to go to Canada first? Maybe you can give some color to that.

Sure, a lot of reasons to go to Canada. I think location would be one, location advantage, feedstock advantage and then really just the way Canada is approaching the decarbonization journey. We have a very large operating hydrocarbon cracker and derivatives complex already working there in Canada and it's low cost and very efficient. And so we'll be able to leverage utilities, infrastructure and most importantly, workforce that's already there, understands how to work and run these assets. And so we're very excited about that. From a feedstock perspective, Canada, of course, has very low ethane available. And so we've been able to contract and make sure we have ample supply of low-cost ethane to feed the cracker once we get it built. And then lastly, Canada has got a price on carbon and they've got emissions trading system in place. And you and other industry leaders have said, we really need that to advance the journey towards decarbonization. They then pair that up with tax incentives and subsidies. And so that makes it very attractive for us and we expect to garner about $1.5 billion of benefit from those tax incentives and subsidies as we build the project out.

And on the project, the other question that people ask a lot is, how do you derisk a project like this? And the start of this project is not just last year, the start of this goes back several years to working on the feedstock supply, the government support. But give everybody an update on where we are with the project and all the steps that have been taken to derisk it and our confidence in delivering it on time and on budget.

Sure. We're absolutely laser-focused on delivering the project safely, on time and on budget and risk management is a big part of that. I'd say overall, risk is understood and under control when it comes to this project. And in fact, on currency risk, we've already hedged 100% of the currency risk associated with the project. Another big risk that you have to manage is procurement risk. And there, long-lead equipment, we've already locked that in. So we've got favorable metal pricing, we got [indiscernible] time secured, we've got delivery dates secured, all that we need and so that our vessels, our reactors, our turbo machinery, all critical components of our furnaces are going to be here when we need them so that we can get the project up on time and get it running. Back to feedstock, again, as you know this -- everything hinges on getting advantaged feedstock. And we've got several long-term contracts, multiple-decade contracts to get that cost advantaged ethane into our cracker with staggered end dates so we're not leveraged on the back end when it's time to recontract and we're very proud of that. And then lastly, I'd say, third-party ownership. We don't have to invest and own everything here and we partner with folks like Linde to provide our circular hydrogen and our autothermal reformer. They'll build, own and operate that for us. We've also partnered with Ravago, on the back end. They'll build, own and operate logistics supply for us. And then we've got, as you talked about earlier, the team is very important. And we've got Fluor who's with us and they were with us on Texas-9 when we built that project, some of the same people that were on Texas-9 with Fluor are with us from a EPC perspective to make sure we get the project built right the first time.

Our whole approach to labor contracting has been done. The government has been supportive on expanding the Port of Prince Rupert. CN Railways is onboard to transport the materials. So this is execution mode and this is what we do extremely, extremely well. Both of you, thank you for your leadership and thank you for joining us today. At the end of last year, I was proud to bring back Jeff Tate as Dow's CFO. And Jeff is going to come up and walk us through how this all ties together in financial performance. But prior to leaving Dow to go be CFO at Leggett & Platt, which is a customer in the automotive industry, Jeff had 27 years of career experience with Dow. So he knows the place inside out and backwards and glad to have him back with us today.

Thanks, Jim. We really appreciate each of you here joining us today. As CFO, I'm here to bring together everything you've heard from Team Dow throughout the morning. I really want to build on the key themes you've heard from each and every one of the team members here that really helps to solidify why we're going to create additional value for you, our shareholders. As Jim mentioned, I recently returned to Dow after serving as CFO in another industry. And with nearly 3 decades of experience at Dow in a number of different finance roles, I'm truly confident in saying Dow has never ever been in a stronger position. And it really comes down to 3 key points. First, Team Dow will continue to demonstrate the operational and the financial discipline that you know us for. We're going to maintain those efficiencies that we've delivered in recent years. Second, we've created the financial flexibility to invest countercyclically and grow underlying earnings. And third, we're well positioned to create both top and bottom line growth and create shareholder returns into the next cycle. So let's start with the ways in which we're consistently delivering on our commitments while maintaining our operational as well as our financial discipline. Now if this framework looks familiar to you, that's great because the pillars of our disciplined and balanced capital allocation framework remained consistent with what you may have seen during our 2021 Investor Day. And as always, our #1 priority is safety and reliability and we're making the necessary investments to uphold this. In addition, we target a strong investment-grade credit profile, with a 2 to 2.5x net debt to adjusted EBITDA basis across the cycle because doing so affords us the opportunity to invest in projects that we know will extend our market leadership and increase our earnings. And last but certainly not least, we'll deliver shareholder returns of at least 65% of operating net income over the cycle. Now let me briefly remind you of the 4 priorities that we outlined during 2021's Investor Day. First, disciplined capital allocation; followed by profitable growth; then higher returns; and finally, industry-leading cash flow generation. And the work we've done in each of these areas is pretty evident. We generated more than $14 billion in cumulative free cash flow and returned approximately 83% of operating net income to shareholders. In addition, we delivered approximately $800 million of incremental mid-cycle EBITDA and a 3-year average return of invested capital of 14%, which is more than 300 basis points above our peer average. And finally, we improved our cash flow conversion cycle by 8 days from pre-COVID levels. So as we enter a new chapter where we're seeing improving market conditions, the work we've already done, will really help us to focus on even more value creation and shareholder returns. Now earlier you heard Jim talk about the importance of the last 5 years and our intentional actions over that period have resulted in a very strong credit profile. For example, today, we have ample liquidity of approximately $13 billion. In addition to that, our debt, 99% of that is at a fixed rate, minimizing the impact that rate fluctuations may have on us. And then we've reduced our net debt and pension liabilities by $9 billion since then. And last year, we took actions on the annuitization and the risk transfer of approximately $1.7 billion in pension liabilities. And this February, we issued $1.25 billion of green bonds at a very low spread, further demonstrating the markets' interest in our sustainability focused growth investments. So this isn't just about Dow and our ability to deliver at the bottom of the cycle. With the impactful work that we've done on the balance sheet, we're truly ready for Dow's next chapter. And this starts with our flexibility from a financial standpoint and how it positions us well for future growth. Now the team has worked to run a fundamentally better, more efficient company even at the bottom of the cycle. And as you can see, Dow is a leader among peers in terms of SG&A and R&D costs as a percentage of sales. In fact, in 2023, our combined SG&A and R&D spend as a percent of revenue were 700 basis points lower than our peer average. And the $1 billion in cost savings that we delivered in 2023 shows our commitment to a continued focus on cash generation. And with the goal of further improving our operations, we're scaling several of our digital solutions. In fact, at the end of 2023, almost 40% of our sales occurred through digital channels, which is nearly double where we were during the last time of our Investor Day in 2021. And with this, we've reduced our order touches by over 20%. So importantly, everything you see here are examples of structural improvements. They're intended to be sustainable, long-term benefits that give us the flexibility to invest for the future. Now this slide shows that, as expected, we're entering an elevated period of investment over the next 3 years, including the startup of construction at Fort Saskatchewan. But it's important to be really, really clear about this next point. We expect to return to more normalized levels of investment at or below depreciation and amortization after we complete the first phase of the project in 2027. And critical to our foundation of working safely and reliably, you can expect to see our maintenance CapEx consistent with Dow's historical averages. So with all the puts and takes, please remember that our strong financial position allows us to invest countercyclically, especially in projects that we're confident will grow both earnings and shareholder returns. And our confidence comes from our ability and our track record of delivering on our commitments. And let me just share a few examples in that regard. On cash flow conversion. We achieved more than 80% since 2019. And as you can see through the cycle, this represents top quartile performance when compared to our peers. We also reduced our cash commitments by approximately $1 billion since then while delivering underlying earnings growth. And consistent with recent years, we currently have over $1.5 billion in unique to Dow levers that will further enhance our cash flow. And notably, with our best owner mindset approach, we're currently evaluating strategic actions for our nonproduct producing infrastructure assets. And we hope to have more to share with you about that soon. So up next, I'll review our growth levers and how we'll deliver increased shareholder returns. Now the near-term investments shown here represent lower risk, higher return projects in each of our 3 operating segments. To date, we've added approximately $800 million per year of incremental mid-cycle EBITDA and more than 450 kilotons of capacity. And we're well on our way to achieving the remaining $1.2 billion by mid-decade. So taken together, we expect these projects to deliver approximately $2 billion per year in incremental underlying EBITDA by the middle of the decade. Now I mentioned lower risk. And what you see here are technologies that give us an opportunity to meet customer demand in fast-growing markets that we've been serving for decades. And to further derisk the investments and ensure higher returns, they're all brownfield projects built on our integrated manufacturing sites. And the benefit to building on our existing sites is that these projects have lower infrastructure needs, at less than 15% of the total capital cost. In comparison, new stand-alone sites often have approximately 30% of invested capital into infrastructure costs. So with lower technology risk and lower execution risk, these are great projects and we're confident they will deliver higher returns. And speaking of lower-risk projects at our existing sites, you've heard a lot today about our Path2Zero project in Fort Saskatchewan, Alberta. Team Dow is firmly, firmly focused on completing this project safely, efficiently, on time and on budget. And we're partnering with industry-leading companies that are well known for their operational excellence. And as John Sampson outlined, this is not a greenfield project. We're building this asset on an existing Dow site in a significantly cost advantaged region. And from a financial perspective, this project is expected to deliver $1 billion per year of EBITDA growth at full run rates with similar returns to our Texas-9 cracker. And with that, the project's capital intensity that we shared is expected to be lower than Texas-9. And with our expected government funding of more than $1.5 billion, we brought Dow's net capital outlay for the project to $5 billion. And importantly, not included in the project financials is the potential upside we see from commercializing low to zero emissions products. So the bottom line is this. Given the lower capital intensity of this investment and further upside from low to zero emissions products, this project is a clear opportunity for Dow to grow long-term underlying earnings and deliver strong returns. Now next up, our partnership approach to Transform the Waste is an effective and capital-efficient model that allows Dow to drive both profitable growth and circular solutions. And with sustainability commitments from brand owners as well as consumers, we expect demand for these innovations to significantly outpace industry supply and production through the end of the decade. So when you take Dow's strong operating discipline and our financial position and you add in the growth levers, you can see the path to capturing profitable growth through the cycle. So to summarize, we're on track to deliver the remaining $1.2 billion per year in underlying EBITDA from our organic growth investments. Our Path2Zero project is expected to deliver $1 billion of EBITDA growth at full run rates with expected returns in line with our Texas-9 project. And as you saw in the previous slide, our approach to transforming waste through direct investments and strategic partnerships is expected to generate more than $500 million of incremental underlying EBITDA by 2030. And importantly, we'll do all this while reducing Scope 1 and scope 2 emissions by 15% compared to 2020. So the proof points are here. They bring together so much of what you've heard today from Team Dow. When you look at our uses of cash from 2019 to 2023, so over the past 5 years, you'll see, we took deliberate actions to strengthen our credit profile as well as our financial position. We also returned more than our target to shareholders, nearly 90% of our net operating income, which enabled us to reduce over 45 million shares during that period. So looking ahead, we see solid earnings growth as we realize the near-term growth investments, the completion of our Path2Zero project in Fort Saskatchewan and our circularity investments. And coming from a relatively low point in the cycle, we expect a double-digit percentage growth in earnings over the next few years in a scenario where we return to mid-cycle earnings and even more as we approach peak earnings. So with everything you see here, Dow's next phase of growth will deliver even more cash to remunerate our shareholders. So if you think about where we've been and where we are today and even more importantly, where we're going, we ended 2023 in what we believe to be the trough of the cycle. And now we're seeing early signs of the next up-cycle. We believe Dow is a compelling near-term investment opportunity. And why do we believe this? First, we're committed to operational and financial discipline. We've delivered returns in cash generation better than our peer benchmark and we'll maintain our low cost to serve mindset. Second, we've created the financial flexibility to invest right now. Our capital allocation framework remains consistent and unchanged and we have a strong balance sheet. And lastly, we're positioned to create both top and bottom line growth and increase total shareholder returns. So remember this about Dow. Our standards are high, our team is strong and we are absolutely ready for growth. So with that, thank you again for your interest in Dow. Now I'd like to invite Jim back to the stage for our Q&A session.

Tiago [indiscernible] will be running the mic on that side. I'll be on this side. We'll get going. So maybe, Kevin, if you don't mind, give your name and firm as you start.

Kevin McCarthy with Vertical Research Partners. Jim, a few questions on your transform the waste initiative, that's $500 million in targeted EBITDA by 2030, I believe. Can you speak to the price premium assumptions embedded therein or your outlook for premium pricing for both advanced recycled and bio-based product versus mechanical? That would be the first question. And then secondly, 2030 is creeping up on us, and I kind of feel like we're at the thin end of the wedge for this whole industry really, what kind of line of sight do you have to those 3 million tons that you target? And how much does Dow plan to do internally versus external M&A or partnerships to march toward that goal?

I'm going to have Karen Carter answer this question because she is the expert in this space. But I believe she mentioned in the presentation that we've got line of sight to 1.7 million of the 3 million tons, but you can speak better, Karen, to the premiums and relative market prices and what you see and how you see things developing in that space?

Yes, sir. Yes, certainly. So to your point, thank you, in the presentation, we have line of sight to about half of thhhe 3 million metric tons, we either have already contracted it or we are in active negotiations to achieve that. But beyond that, we have a pipeline that gets us pretty close to the 3 million metric tons. And it's a combination of mechanical recycling and advanced recycling as well as bio and renewable feedstocks. There is a range just like on the carbon side, there's a range of profitability. And it not only depends on the technology, but it depends on the application. And that is why we are focused primarily in the linear low space. So food packaging, of course, is a bit of a holy grail, which is where technologies like -- and particularly in advanced recycling, pyrolysis oil but also that's where the P&G partnership that we have really comes into play, dissolution because we absolutely believe that we can get to near virgin resin quality then ultimately, that's going to be FDA approved. So I would say that there is a range of profitability anywhere from 200 metric tons, we've seen also $500 per metric ton as well.

So, ballpark and depends on customer and application. Very similar to what we saw with the carbon emissions kind of range of different drivers of demand.

Vincent Andrews from Morgan Stanley. Jim, I'd be curious to hear, as plastic production becomes more sustainable both in terms of recycling and carbon, what is the opportunity to actually grow the pie to take demand from other substrates or from other parts of the plastic chains or from nonplastic materials. I know there was a great example of innate in the presentation. But wondering sort of are we going to shift away from just sort of solving a problem to actually creating a new opportunity? Or is this always going to be about solving the problem?

Yes. I think it's a good question. I mean, we showed in the presentations today, a change in mix, but there could be inflection in growth as well that comes in the future. I think the growth will come from these new solutions that are out there. I don't think that the world is going to walk away from plastics. I mean, if they've been moving to anything, it's been to paper, but then the people that move into paper packaging immediately get attacked for deforestation. And so when they look at the full life cycle impact, they say, wait a second, I was better off from a life cycle impact with plastics and if they're recyclable and have 0 CO2 emissions from production, that's going to be the best answer long term. It doesn't matter what material it is, you're moving from a linear economy to a circular economy. That has to happen. That's going to happen for all forms, glass, plastic, paper, aluminum, and we see that. And then I think as that happens, the real virtues of plastics, what went out lighter weight, stronger, it has more functionality. You can do more with the package. If we can work on these technologies like with P&G, to be able to have the marketing aesthetics that you have with plastic packaging, but then be able to recycle it and get it back to virgin quality. That's a huge win-win. And we have to crack the code on all of recycling, on getting waste back into a central structure. And in the plastics treaty negotiations, the big thing we're trying to drive there is programs like enhanced producer responsibility, recycled content mandates and targets. These are the things that are going to drive the demand for this faster. And with that demand signal, more investments are going to come like the ones that we just talked about today. So I think it is a possibility like Kevin said, we're at the thin end of the wedge right now. So I don't think anybody is out predicting it. But I think if we solve these problems, there's no reason the growth can't come that way.

John Roberts, Mizuho. Could you talk about the need for the European industry to restructure and if there are any opportunities for Dow that might come out of that? And then secondly, in the Fort, you're actually converting the existing complex to Zero Carbon as well as adding. Is that the case in the future that you'll have to add capacity to convert other facilities to Zero Carbon? Or can you convert other facilities to Zero Carbon without adding new capacity to those complexes.