What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-01-31 compared with 2023-02-01 · 309 added, 363 removed, 598 unchanged (53% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

On April 1, 2019, DowDuPont Inc.

(“DowDuPont” and effective June 3, 2019, n/k/a DuPont de Nemours, Inc.

or "DuPont") completed the separation of its materials science business and Dow Inc.

became the direct parent company of The Dow Chemical Company and its consolidated subsidiaries (“TDCC” and together with Dow Inc., “Dow” or the “Company”), owning all of the outstanding common shares of TDCC.

As a result of the parent/subsidiary relationship between Dow Inc.

and TDCC, and considering that the financial statements and disclosures of each company are substantially similar, the companies are filing a combined report for this Annual Report on Form 10-K.

The information reflected in this report is equally applicable to both Dow Inc.

and TDCC, except where otherwise noted.

In connection with the separation from DowDuPont, the Company entered into various manufacturing, supply and service related agreements with DuPont and Corteva, Inc.

Except as otherwise indicated by the context, the term "Union Carbide" means Union Carbide Corporation and the term "Dow Silicones" means Dow Silicones Corporation, both wholly owned subsidiaries of the Company.

STATEMENT ON RUSSIA AND UKRAINE CONFLICT

In February 2022, Russia invaded Ukraine resulting in the United States, Canada, the European Union and other countries imposing economic sanctions on Russia.

Dow continues to monitor and evaluate the broader economic impact, including sanctions imposed, the potential for additional sanctions and any responses from Russia that could directly affect the Company’s supply chain, business partners or customers.

At the time of this filing, the conflict between Russia and Ukraine has not had and is not expected to have a material impact on the Company's financial condition or results of operations.

In the first quarter of 2022, the Company recorded pretax asset related charges of $186 million due to the Russia and Ukraine conflict and the expectation that certain assets will not be recoverable.

The Company's remaining net asset exposure is not significant.

In the fourth quarter of 2022, the Company reversed certain asset related charges pertaining to the collectability of accounts receivables and inventory due to the Company's ability to recover a portion of the value of these assets.

The pretax gain recorded by the Company in the fourth quarter of 2022 was $68 million.

STATEMENT ON CURRENCY EXCHANGE RATES

The Company's global business operations give rise to market risk exposure related to changes in foreign currency exchange rates and international capital flows that may be affected by extensive regulations and controls, especially in developing or highly inflationary countries such as Argentina.

In December 2023, the Argentina government devalued the Argentine peso, which resulted in pretax charges for foreign currency exchange losses and inventory valuation impacts of $177 million ($52 million related to Packaging & Specialty Plastics, $16 million related to Industrial Intermediates & Infrastructure and $109 million related to Corporate).

The Company continues to monitor these situations and take appropriate actions as necessary to manage the financial impact pursuant to established guidelines and policies.

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Asbestos-Related Matters of Union Carbide Corporation

Dow combines global breadth;

asset integration and scale;

focused innovation and materials science expertise;

leading business positions;

and environmental, social and governance ("ESG") leadership to achieve profitable growth and deliver a sustainable future.

The Company’s ambition is to become the most innovative, customer-centric, inclusive and sustainable materials science company in the world.

Dow’s portfolio of plastics, industrial intermediates, coatings and silicones businesses delivers a broad range of differentiated, science-based products and solutions for its customers in high-growth market segments, such as packaging, infrastructure, mobility and consumer applications.

Dow is one of the world’s leading materials science companies, serving customers in high-growth markets such as packaging, infrastructure, mobility and consumer applications.

The Company's global breadth, asset integration and scale, focused innovation, leading business positions and commitment to sustainability enables the Company to achieve profitable growth and help deliver a sustainable future.

Dow operates manufacturing sites in 31 countries and employs approximately 35,900 people.

In 2022, the Company had annual sales of $57 billion, of which 37 percent of the Company’s sales were to customers in the U.S.

In 2023, the Company had annual sales of $45 billion, of which 37 percent were to customers in the U.S.

33 percent were in Europe, Middle East, Africa and India ("EMEAI");

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State Department or in countries designated by the U.S.

State Department as state sponsors of terrorism, including Cuba, Iran, the Democratic People's Republic of Korea (North Korea), Sudan and Syria.

State Department as state sponsors of terrorism, including Cuba, Iran, the Democratic People's Republic of Korea (North Korea) and Syria.

The Company has policies and procedures in place designed to ensure that it and its consolidated subsidiaries remain in compliance with applicable U.S.

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The following is a summary of the results for the Company for the year ended December 31, 2023:

The Company reported net sales in 2022 of $57 billion, up 4 percent from $55 billion in 2021, with increases across all geographic regions, except EMEAI, and operating segments, except Industrial Intermediates & Infrastructure, driven by an increase in local price of 11 percent, which was partially offset by a volume decrease of 3 percent and an unfavorable currency impact of 4 percent.

Local price increased 11 percent compared with 2021, with increases in all operating segments and geographic regions, primarily reflecting price gains due to tight supply and demand dynamics in the first half of the year.

Local price increased in Packaging & Specialty Plastics (up 7 percent), Industrial Intermediates & Infrastructure (up 11 percent) and Performance Materials & Coatings (up 21 percent).

Volume decreased 3 percent compared with 2021, with decreases in Industrial Intermediates & Infrastructure (down 7 percent) and Performance Materials & Coatings (down 6 percent).

Volume was flat in Packaging & Specialty Plastics.

Volume decreased in EMEAI (down 10 percent), partially offset by increases in the U.S.

& Canada (up 1 percent) and Latin America (up 1 percent).

Volume was flat in Asia Pacific.

Currency had an unfavorable impact of 4 percent on net sales compared with 2021, driven by EMEAI (down 9 percent) and Asia Pacific (down 3 percent).

Restructuring and asset related charges - net were $118 million in 2022, compared with $6 million in 2021, reflecting actions taken related to the Russia and Ukraine conflict in the current year.

Equity in earnings of nonconsolidated affiliates was $268 million in 2022, compared with $975 million in 2021, with lower equity earnings at all principal joint ventures, primarily driven by margin compression at Sadara Chemical Company ("Sadara") and the Kuwait joint ventures.

The Company reported net sales in 2023 of $45 billion, down 22 percent from $57 billion in 2022, with decreases across all geographic regions and operating segments, and driven by a decrease in local price of 16 percent and a volume decrease of 6 percent.

Local price decreased 16 percent compared with 2022, with decreases in all operating segments and geographic regions, driven by slower global macroeconomic activity creating unfavorable supply and demand dynamics, industry supply additions and lower global energy and feedstocks costs.

Local price decreased in Packaging & Specialty Plastics (down 16 percent), Industrial Intermediates & Infrastructure (down 14 percent) and Performance Materials & Coatings (down 15 percent).

Volume decreased 6 percent compared with 2022, with decreases in Packaging & Specialty Plastics (down 5 percent), Industrial Intermediates & Infrastructure (down 9 percent) and Performance Materials & Coatings (down 5 percent).

Volume decreased in the U.S.

& Canada (down 6 percent), EMEAI (down 9 percent), and Asia Pacific (down 4 percent), which was partially offset by an increase in Latin America (up 4 percent).

Currency impact on net sales was flat compared with 2022.

Restructuring and asset related charges - net were $528 million in 2023 primarily reflecting restructuring actions approved by the Board in January 2023.

The restructuring charges consisted of severance and related benefit costs of $344 million and asset write-downs and write-offs of $191 million and were partially offset by other asset related credit adjustments of $7 million related to a prior restructuring program.

Equity in losses of nonconsolidated affiliates was $119 million in 2023, compared with earnings of $268 million in 2022, primarily due to declines at Sadara and the Kuwait joint ventures.

Sundry income (expense) - net for Dow Inc.

and TDCC was income of $727 million and $714 million, respectively, in 2022, compared with expense of $35 million and $79 million, respectively, in 2021.

Sundry income (expense) - net increased primarily due to the successful and final resolution and recognition of a long-running patent infringement award.

and TDCC was expense of $280 million and $327 million, respectively, in 2023, compared with income of $727 million and $714 million, respectively, in 2022.

Sundry income (expense) - net decreased primarily due to a non-cash settlement charge related to the Company's pension de-risking activities and higher foreign currency exchange losses, which included the impact of the December 2023 devaluation of the Argentine peso.

Income from the successful and final resolution and recognition of a long-running patent infringement award was included in 2022.

Net income available for Dow Inc.

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was $0.82 per share in 2023, compared with $6.28 per share in 2022.

In 2022, the Company redeemed $750 million aggregate principal amount of 3.625 percent notes due May 2026.

In 2023, Dow Inc.

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Other notable events and highlights from the year ended December 31, 2023 include:

• On January 31, 2022, the Company announced that Mary Draves, vice president of Environment, Health and Safety ("EH&S") and chief sustainability officer, announced her decision to retire in April 2022 after 32 years of service.

• On March 22, 2022, the Company announced that Jack Broodo, President of Dow Feedstocks and Energy, would retire at the end of July 2022 after 40 years of service with Dow.

• On March 30, 2022, Dow announced global capacity expansion in response to growing demand for mobility technologies.

• On April 7, 2022, the European Commission selected Dow ACCUTRACE™ Plus Fuel Marker as the new common fiscal marker for tax rebated fuels in the European Union.

• On April 13, 2022, the Dow Inc.

Board of Directors ("Board") approved a new share repurchase program authorizing up to $3 billion for the repurchase of the Company's common stock, with no expiration date.

• Effective April 14, 2022, following the Company's Annual Meeting of Stockholders, Jerri DeVard, former Executive Vice President and Chief Customer Officer of Office Depot, Inc., was elected to the Dow Inc.

• On May 31, 2022, Moody's Investors Service announced a credit rating upgrade for TDCC from Baa2 to Baa1, affirmed its P-2 rating and maintained a stable outlook.

On June 8, 2022, Standard & Poor’s affirmed TDCC’s BBB and A-2 rating, and revised its outlook to positive from stable.

On June 16, 2022, Fitch Ratings affirmed TDCC’s BBB+ and F2 rating, and revised its outlook to positive from stable.

• On January 25, 2023, the Board approved restructuring actions ("2023 Restructuring Program") to achieve the Company's structural cost improvement initiatives in response to the continued economic impact from the global recessionary environment and to enhance its agility and long-term competitiveness across the economic cycle.

This program included a global workforce cost reduction program, decreased turnaround spending and actions that rationalized the Company’s manufacturing assets, which included asset write-down and write-off charges and related contract termination fees.

• On April 25, 2023, the Company announced that it had selected Linde as its industrial gas partner for the supply of circular hydrogen and nitrogen for its Fort Saskatchewan Path2Zero investment.

• On May 11, 2023, Dow Inc.

announced Seadrift, Texas, as the location of its small modular nuclear reactor project as part of a joint development agreement with X-energy.

• On June 15, 2023, Fitch Ratings affirmed TDCC’s BBB+ long-term credit rating and announced a short-term credit rating upgrade to F1 from F2, and also revised its long-term outlook from positive to stable.

August 22, 2023, Standard and Poor's affirmed TDCC's BBB and A-2 rating, and revised its outlook from positive to stable.

These credit agencies' decisions were made as part of their annual review process and reflect the Company's supportive financial policies and strong operating performance.

• On September 7, 2022, Great Place to Work® and Fortune magazine honored Dow as one of the 2022 Best Workplaces in Manufacturing & Production™.

Dow ranked fourth in the large organization category, and this was the second consecutive year the Company was named to this prestigious list.

• On October 17, 2022 Dow Inc.

announced it will accelerate the sustainability targets the Company set in 2020 by expanding its stop the waste target to a transform the waste target.

By 2030, Dow will transform plastic waste and other forms of alternative feedstock to commercialize 3 million metric tons of circular and renewable plastics solutions annually.

• On October 26, 2022, Dow announced its launch of the world’s first recyclable silicone self-sealing tire solution.

• On November 1, 2022, the Company announced that Diego Donoso, President of Packaging & Specialty Plastics, announced his decision to retire in the first quarter of 2023, after over 30 years of service.

• On November 1, 2022, the Company announced that Karen S.

Carter, Chief Human Resources Officer and Chief Inclusion Officer for Dow, was named President of Packaging & Specialty Plastics.

• On November 8, 2022, the Company announced that Lisa Bryant was named Chief Human Resources Officer.

Effective December 15, 2022, the Board elected Lisa Bryant as an Executive Officer of the Company.

• Dow was named to FORTUNE's World's Most Admired Companies list for 2022.

• Dow was named to the JUST 100 list for the third consecutive year.

Dow earned the top spot in the Chemicals sector overall and received the number one position in the Workers and Stakeholders & Governance categories versus industry peers.

• Dow was named to Bloomberg’s 2022 Gender-Equality Index for the second consecutive year.

• Dow was named by the Human Rights Campaign ("HRC") Foundation to its 2022 list of “Best Places to Work for LGBTQ+ Equality.” This marks the Company’s seventeenth consecutive year receiving a perfect score on HRC’s Corporate Equality Index.

• Dow received the 2022 Artificial Intelligence Excellence Award for its Predictive Intelligence capability.

• Dow received eight 2022 Edison Awards™, (two gold, four silver and two bronze) once again earning more awards than any other organization.

• Dow was named the 2022 Organization of the Year by the Society of Asian Scientists and Engineers for its contributions to science and engineering and its commitment to ensuring that inclusion, diversity and equity are a business imperative.

• Dow advanced to 15th place on the 2022 DiversityInc Top 50 Companies for Diversity list making it the fifth consecutive year on the list.

Dow was also included on six of DiversityInc's Specialty Lists including:

Top Companies for Executive Diversity Councils, Top Companies for People with Disabilities, Top Companies for Black Executives, Top Companies for Latino Executives, Top Companies for Employee Resource Groups and Top Companies for Environmental, Social and Governance.

• Dow was named a 2022 honoree of The Civic 50 by Points of Light, the world's largest organization committed to inspiring, equipping, and engaging people to take action to change their communities and the world.

• For the sixth consecutive year, Dow received a top score on the Disability Equality Index®, placing the Company among the “Best Places to Work for Disability Inclusion” for 2022.

• Dow was honored with a Leading Disability Employer Seal by the National Organization on Disability, marking the sixth consecutive year Dow has received the recognition.

• Dow was honored with a 2022 CIO 100 award for the Company's Digital Manufacturing Acceleration program.

• Dow received six R&D 100 Awards from R&D Magazine for innovative technologies including:

DOWSIL™ ICL-1000 Data Center Immersion Cooling Fluid, DURATRACK™ R-100 and AEH-100 Resins for Green Bike Lanes, ELVALOY™ RET MF 1177 Polymeric PCR Asphalt Paving Compatibilizer, Sustainable Collation Shrink Film enabled by REVOLOOP™, MaizeCare™ Clarity Polymer, and MAINCOTE™ HG-300 Emulsion.

• Dow was named one of the "2022 PEOPLE Companies that Care®" for the third consecutive year.

• Dow received four 2022 BIG™ Innovation Awards from the Business Intelligence Group.

• Dow was awarded 5-Stars in the areas of Employment and Governance in the 2022 Hispanic Association on Corporate Responsibility Corporate Inclusion Index™.

• Dow’s MaizeCare™ Clarity Polymer, a bio-based and biodegradable polymer with film-forming properties for crystal clear formulations, was recognized with an R&D 100 Award and a BIG™ Sustainability Product of the Year in the 2022 Sustainability Awards program.

• Dow's DOWSIL™ TC-6015 Thermally Conductive Encapsulant, an advanced, proven, silicone-based solution that provides exceptional thermal management for power electronics applications, won two prestigious 2022 innovation awards:

one from the Business Intelligence Group (BIG™) in the Manufacturing category;

and a Silver Edison Awards™ in the Industrial Technology category.

• In 2022, CDP (formerly Carbon Disclosure Project, an international non-profit specialized in environmental reporting) confirmed Dow's climate change score of A-.

• On June 19, 2023, Dow Inc.

released its INtersections Progress Report, demonstrating how the Company's continued focus and actions align to its ambition and goal to deliver value growth;

best-in-class performance;

and innovative, sustainable solutions to address global challenges.

• On July 14, 2023, an incident occurred that included an explosion and subsequent fire at Dow's Louisiana Operations Glycol-2 unit in Plaquemine, Louisiana.

There were no injuries reported from the incident and it was limited to the Glycol-2 unit with minimal disruption to other site operations.

The Company completed a root cause investigation and is executing a plan to restore operations.

The Company's estimated impact on pretax earnings from the incident is $100 million per quarter.

The Glycol-2 unit is expected to resume operations in the second quarter of 2024.

• On October 24, 2023, the Company announced that Howard Ungerleider, President and Chief Financial Officer, had elected to retire in January 2024 after 33 years of service with Dow.

• On October 24, 2023, the Company announced that Jeffrey L.

Tate had been named Chief Financial Officer.

• On November 28, 2023, the Company announced the Board declared Final Investment Decision on the Company's Fort Saskatchewan Path2Zero investment to build the world's first net-zero Scope 1 and 2 emissions integrated ethylene cracker and derivatives facility in Alberta, Canada.

• On December 18, 2023, the Company announced that Ronald C.

Edmonds, Controller and Vice President of Controllers and Tax, had elected to retire in July 2024, after 31 years of service with Dow.

• On December 18, 2023, the Company announced that Andrea L.

Dominowski had been named Controller and Vice President of Controllers effective February 1, 2024.

• Dow was named on the Top 100 Global Innovators ™ list for the 12th consecutive year.

• Dow received a record-setting nine 2023 Edison Awards ™ (five gold, three silver and one bronze), once again earning more awards than any other organization for the sixth consecutive year.

• Dow was named to the JUST 100 list, placing 55th overall, an 11-place improvement from last year, and securing the top spot for Communities in the Chemicals sector.

• Dow was named to Bloomberg’s 2022 Gender-Equality Index for the third consecutive year.

• Dow earned a spot in the S&P Global Sustainability Yearbook, recognizing the Company as a top industry performer.

• Dow was honored as a winner of a 2023 Artificial Intelligence Award for the development of technology that identifies and predicts corrosion failures in metal coatings.

• Dow received five 2023 BIG Innovation Awards from the Business Intelligence Group ™ , the most received in a single Business Intelligence Group ™ Awards program by the Company.

• Dow was recognized with a 2023 CIO 100 Award for its successful Smart Search tool, powered by CAS.

• Dow was titled a Supplier Engagement Leader by CDP, a result of actions taken by the Company to address climate change.

• Dow advanced to seventh place on the 2023 DiversityInc Top 50 Companies for Diversity list making it the sixth consecutive year on the list.

Dow was also included on 15 of DiversityInc's Specialty Lists including:

Top Companies for Executive Diversity Councils, Top Companies for People with Disabilities, Top Companies for Black Executives, Top Companies for Latino Executives, Top Companies for Executive Women, Top Companies for Employee Resource Groups and Top Companies for Environmental, Social and Governance.

• Dow's EVOWASH ™ Antifoam Agents and Readily Biodegradable Detergents and Dow's LuxSense ™ Silicone Leather each received a SEAL (Sustainability, Environmental Achievement & Leadership) Sustainable Innovation Award.

Dow's SYL-OFF ™ EM-7920NF Emulsion Coating was a winner of the SEAL Sustainable Product Award.

• Dow received five awards (Overall Winner, three golds, one silver) at the annual U.S Customer Experience Awards.

• For the seventh consecutive year, Dow received a top score on the Disability Equality Index ™ , placing the Company among the Best Places to Work for Disability Inclusion ™ for 2023.

• Dow Technology won the 2023 ICIS Innovation Award which recognizes companies that are paving the way in product, process, and sustainability innovations across the chemicals industry.

• Dow was named one of the 2023 PEOPLE ® Companies that Care by Great Place to Work ® and PEOPLE ® for the fourth consecutive year.

• Dow was honored by Great Place to Work ® and Fortune as one of the World's Best Workplaces.

Dow was also certified as a Great Place to Work ® in 13 countries and ranked on 10 national Best Workplaces lists, including the Fortune 100 Best Companies to Work For ® list in the United States for the third consecutive year.

• Dow was named to the Dow Jones Sustainability World Index by S&P Dow Jones Indices, the world's leading index provider focused on providing essential sustainability intelligence.

In addition to the highlights above, the following events occurred subsequent to December 31, 2023:

• Dow has been named to the JUST 100 list, placing 55th overall, an 11-point improvement from last year, and securing the top spot for Communities in the Chemicals sector.

• On January 25, 2023, the Dow Inc.

Board approved restructuring actions ("2023 Restructuring Program") to achieve the Company's structural cost improvement initiatives in response to the continued economic impact from the global recessionary environment and to enhance its agility and long-term competitiveness across the economic cycle.

This program includes a global workforce cost reduction, decreasing turnaround spending, actions to rationalize the Company’s manufacturing assets, which includes asset write-down and write-off charges and related contract termination fees.

• On January 19, 2024, Moody's Investors Service affirmed TDCC's Baa1 and P-2 rating, and affirmed its outlook of stable.

• On January 25, 2024, the Company published its Green Finance Framework and related Second Party Opinion on its website, to support the execution of its sustainability strategy.

RESULTS OF OPERATIONS

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Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 1, 2023.

The following tables summarize net sales and sales variance by operating segment and geographic region from the prior year:

The following tables summarize net sales and sales variances by operating segment and geographic region from the prior year:

Summary of Sales Results

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2023 Versus 2022

The Company reported net sales of $56.9 billion in 2022, up 4 percent from $55.0 billion in 2021, with local price up 11 percent, an unfavorable currency impact of 4 percent and volume down 3 percent.

Net sales increased in all operating segments except Industrial Intermediates & Infrastructure and across all geographic regions except EMEAI.

Local price increased in all operating segments and across all geographic regions, primarily driven by tight supply and demand dynamics and increasing raw material prices, partially offset by slower macroeconomic growth in the second half of the year.

Local price increased in Packaging & Specialty Plastics (up 7 percent), Industrial Intermediates & Infrastructure (up 11 percent) and Performance Materials & Coatings (up 21 percent).

Volume decreased 3 percent, driven by EMEAI (down 10 percent), which was partially offset by the U.S.

& Canada and Latin America (both up 1 percent), while volume was flat in Asia Pacific.

Volume was flat in Packaging & Specialty Plastics and decreased in Industrial Intermediates & Infrastructure (down 7 percent) and Performance Materials & Coatings (down 6 percent).

Currency unfavorably impacted net sales by 4 percent driven by EMEAI (down 9 percent) and Asia Pacific (down 3 percent).

Excluding the Hydrocarbons & Energy business, sales increased 1 percent.

The Company reported net sales of $44.6 billion in 2023, down 22 percent from $56.9 billion in 2022, with local price down 16 percent, volume down 6 percent, and currency flat.

Net sales decreased by double digits in all operating segments and across all geographic regions, primarily driven by lower prices and demand due to slower global macroeconomic activity.

Local price decreased in all operating segments and across all geographic regions driven by industry supply additions and lower global energy and feedstock costs.

Local price decreased in Packaging & Specialty Plastics (down 16 percent), Industrial Intermediates & Infrastructure (down 14 percent) and Performance Materials & Coatings (down 15 percent).

Volume decreased in all operating segments and geographic regions, except Latin America (up 4 percent).

Volume decreased in Packaging & Specialty Plastics (down 5 percent), Industrial Intermediates & Infrastructure (down 9 percent) and Performance Materials & Coatings (down 5 percent).

Excluding the Hydrocarbons & Energy business, sales decreased 20 percent.

Cost of Sales

Cost of sales ("COS") was $39.7 billion in 2023, compared with $48.3 billion in 2022.

COS increased in 2022 primarily due to higher feedstocks, energy, other raw material costs, and logistics costs, partially offset by insurance recoveries related to certain weather-related events in the prior year.

COS decreased in 2023 primarily due to lower raw material costs on lower volume, lower global energy and feedstock costs and the impact of structural cost improvements.

COS as a percentage of net sales was 89.1 percent in 2023, compared with 84.9 percent in 2022.

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Research and development ("R&D") expenses were $829 million in 2023, compared with $851 million in 2022.

R&D expenses in 2022 decreased compared with 2021 primarily due to lower performance-based compensation costs and a decrease in fringe benefit expenses which reflected stock market declines compared with 2021.

R&D expenses decreased in 2023 primarily due to the impact of structural cost improvements as well as lower performance-based compensation costs.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses were $1,627 million in 2023, compared with $1,675 million in 2022.

SG&A expenses in 2022 increased primarily due to higher bad debt reserves which offset lower performance-based compensation costs and a decrease in fringe benefit expenses which reflected stock market declines compared with 2021.

SG&A expenses decreased in 2023 primarily due to lower bad debt expense, the impact of structural cost improvements and lower performance-based compensation costs, which more than offset increases associated with the Company's restructuring implementation and efficiency actions and fringe benefit expenses tied to stock market changes.

Amortization of Intangibles

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Restructuring and Asset Related Charges - Net

2022 Asset Related Charges

In 2022, the Company recorded pretax asset related charges of $118 million due to the Russia and Ukraine conflict and the expectation that certain assets will not be recoverable.

These charges included the write-down of inventory, the recording of bad debt reserves and the impairment of other assets.

Asset related charges by segment in 2022 were as follows:

2023 Restructuring Program

On January 25, 2023, the Board approved restructuring actions to achieve the Company's structural cost improvement initiatives in response to the continued economic impact from the global recessionary environment and to enhance its agility and long-term competitiveness across the economic cycle.

These actions are expected to be substantially complete by the end of 2024.

As a result of these actions, in 2023 the Company recorded pretax restructuring charges of $535 million, consisting of severance and related benefit costs of $344 million and asset write-downs and write-offs of $191 million.

The restructuring charges by segment were as follows:

$1 million in Packaging & Specialty Plastics, $50 million in Industrial Intermediates & Infrastructure, $49 million in Performance Materials & Coatings and $435 million in Corporate.

See Note 5 to the Consolidated Financial Statements for additional information on restructuring and asset related charges.

These charges were partially offset by other asset related credit adjustments of $7 million in Corporate related to a prior restructuring program.

See Note 4 to the Consolidated Financial Statements for additional information.

Equity in Earnings (Losses) of Nonconsolidated Affiliates

The Company’s share of equity in earnings of nonconsolidated affiliates was $268 million in 2022, compared with $975 million in 2021, with lower equity earnings at all principal joint ventures, primarily driven by margin compression at Sadara and the Kuwait joint ventures.

The Company’s share of equity in losses of nonconsolidated affiliates was $119 million in 2023, compared with earnings of $268 million in 2022, with lower equity earnings at all principal joint ventures and primarily due to margin compression at Sadara and the Kuwait joint ventures as a result of lower local prices and demand.

Sundry Income (Expense) - Net

Sundry income (expense) – net includes a variety of income and expense items such as foreign currency exchange gains and losses, dividends from investments, gains and losses on sales of investments and assets, non-operating pension and other postretirement benefit plan credits or costs, losses on early extinguishment of debt and certain litigation matters.

Sundry income (expense) - net for 2022 was income of $714 million, compared with expense of $79 million in 2021.

Sundry income (expense) - net for 2023 was expense of $327 million, compared with income of $714 million in 2022.

In 2023, sundry income (expense) - net included a $642 million non-cash settlement charge related to the purchase of nonparticipating group annuity contracts for certain pension plans (related to Corporate) and foreign currency exchange losses, including $109 million related to the December 2023 devaluation of the Argentine peso (related to Corporate).

These were partially offset by non-operating pension and postretirement benefit plan credits, a $106 million gain associated with a legal matter with Nova Chemicals Corporation (related to Packaging & Specialty Plastics), and gains on the sales of assets and investments.

See Notes 5, 14, 18 and 24, to the Consolidated Financial Statements for additional information.

In 2022, sundry income (expense) - net included a $321 million gain related to the successful and final resolution and recognition of a long-running patent infringement award (related to Packaging & Specialty Plastics), a $60 million gain related to an adjustment to the Dow Silicones breast implant liability (related to Corporate), non-operating pension and postretirement benefit plan credits and gains on the sales of assets and investments.

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See Notes 5, 13, 14, 18 and 24, to the Consolidated Financial Statements for additional information.

In 2021, sundry income (expense) - net included a $574 million loss on the early extinguishment of debt (related to Corporate and included in "Other net loss" in the consolidated statements of cash flows), and foreign currency exchange losses.

These were partially offset by non-operating pension and postretirement benefit plan credits, gains on the sale of assets and investments, a $54 million gain related to an arbitration award (related to Industrial Intermediates & Infrastructure), and a $16 million gain related to post-closing adjustments on the previous divestiture of a bio-ethanol manufacturing facility in Brazil (related to Packaging & Specialty Plastics).

See Notes 6, 14, 15, 19 and 25 to the Consolidated Financial Statements for additional information.

Sundry income (expense) - net for 2022 was income of $727 million, compared with expense of $35 million in 2021.

Sundry income (expense) - net for 2023 was expense of $280 million, compared with income of $727 million in 2022.

In 2023, in addition to the amounts previously discussed above for TDCC, sundry income (expense) - net included a $42 million net gain associated with agreements and matters with DuPont de Nemours, Inc.

("DuPont") and Corteva, Inc.

("Corteva") (related to Corporate).

In 2022, in addition to the amounts previously discussed above for TDCC, sundry income (expense) - net included a $4 million net gain associated with agreements entered into with DuPont and Corteva as part of the separation and distribution (related to Corporate).

In 2021, in addition to the amounts previously discussed above for TDCC, sundry income (expense) - net included $30 million in gains associated with the agreements entered into with DuPont and Corteva as part of the separation and distribution (related to Corporate).

Interest Expense and Amortization of Debt Discount

Interest expense and amortization of debt discount was $746 million in 2023, compared with $662 million in 2022.

Interest expense and amortization of debt discount decreased in 2022 primarily due to the liability management actions taken in 2021.

The increase in interest expense is primarily due to $1.5 billion of senior unsecured notes issued in the fourth quarter of 2022 and local country borrowings outside the United States in 2023.

See Liquidity and Capital Resources in Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 13 to the Consolidated Financial Statements for additional information related to debt financing activity.

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The underlying factors affecting the Company's overall tax rate are summarized in Note 6 to the Consolidated Financial Statements.

The provision for income taxes was $1,450 million in 2022, compared with $1,740 million in 2021, resulting in effective tax rates of 23.8 percent and 21.4 percent, respectively.

The provision for income taxes in 2022 was lower than 2021 primarily due to a decrease in pretax income, changes to geographic mix of earnings and a reduction in uncertain tax positions recognized.

The tax rate for 2022 in comparison to 2021 was impacted primarily by the level of equity earnings.

The Company reported a tax credit of $4 million in 2023, resulting in an effective tax rate of negative 0.6 percent, compared with a tax provision of $1,450 million in 2022, resulting in an effective tax rate of 23.8 percent.

The credit for income taxes and the lower effective tax rate in 2023 compared with 2022 were primarily due to a decrease in pretax income, changes to geographic mix of earnings, increases in tax basis in assets located in foreign jurisdictions, partially offset by changes in uncertain tax positions in various jurisdictions.

The Company continues to monitor and evaluate legislative developments related to the Global Anti-Base Erosion Proposal ("GloBE") established by the Organization of Economic Cooperation and Development’s ("OECD") Pillar

Two framework.

Several countries in which the Company operates have adopted those rules into their legislation and several others are expected to implement in the future.

The Company continues to evaluate impacts as further guidance is released.

Net Income Attributable to Noncontrolling Interests

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2023 Versus 2022

Packaging & Specialty Plastics net sales were $29,260 million in 2022, up 4 percent from net sales of $28,128 million in 2021.

Local price was up 7 percent, currency had an unfavorable impact of 3 percent, primarily in EMEAI and Asia Pacific, and volume was flat.

Local price increased in both businesses, primarily in EMEAI, and driven by gains in functional polymers and olefins which more than offset lower polyethylene prices.

Local price increased in Hydrocarbons & Energy as prices for co-products are generally correlated to Brent crude oil prices, which on average increased 40 percent compared with 2021.

Local price increased in Packaging and Specialty Plastics in EMEAI and Asia Pacific, notably in infrastructure material and flexible packaging applications, more than offsetting decreases in the U.S.

& Canada and Latin America.

Volume increased in Hydrocarbons & Energy across all geographic regions.

Volume decreased in Packaging and Specialty Plastics, primarily in EMEAI and the U.S.

& Canada, as supply constraints and lower demand more than offset improved demand in Latin America and Asia Pacific.

Packaging & Specialty Plastics net sales were $23,149 million in 2023, down 21 percent from net sales of $29,260 million in 2022, with local price down 16 percent, volume down 5 percent and currency flat.

Local price decreased in Packaging and Specialty Plastics, in all geographic regions, primarily driven by lower polyethylene prices due to unfavorable industry supply and demand dynamics.

Local price decreased in Hydrocarbons & Energy, in all geographic regions, as prices for co-products are generally correlated to Brent crude oil prices, which, on average, decreased 17 percent compared with 2022.

Volume was flat in Packaging and Specialty Plastics, with an increase in Latin America offset by decreases in all other geographic regions.

Volume decreased in Hydrocarbons & Energy, primarily in EMEAI and the U.S.

& Canada, driven by lower sales of olefins and aromatics.

Operating EBIT was $2,700 million in 2023, down $1,410 million from Operating EBIT of $4,110 million in 2022.

Operating EBIT decreased primarily due to compression in integrated margins due to higher raw materials and energy costs and decreased equity earnings at the EQUATE and Sadara joint ventures.

Operating EBIT decreased primarily due to lower selling prices, which was partially offset by lower raw material, energy and feedstock costs and the impact of structural cost improvements.

INDUSTRIAL INTERMEDIATES & INFRASTRUCTURE

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Operating EBIT $ 124 $ 1,418

Equity earnings (losses) $ (91) $ 471

Equity losses $ (276) $ (91)

Industrial Intermediates & Infrastructure

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2023 Versus 2022

Industrial Intermediates & Infrastructure net sales were $16,606 million in 2022, down 1 percent from $16,851 million in 2021, with local price up 11 percent, an unfavorable currency impact of 5 percent and volume down 7 percent.

Local price increased in both businesses and across all geographic regions, except Asia Pacific, primarily driven by strong supply and demand dynamics in the first half of the year and rising energy prices.

Currency unfavorably impacted sales in both businesses, primarily in EMEAI and Asia Pacific.

Volume in Polyurethanes & Construction Chemicals decreased in all geographic regions.

The volume decrease in Polyurethanes & Construction Chemicals was largely driven by inflationary pressure on demand for consumer durables, industrial and building and construction applications.

Volume in Industrial Solutions increased in all geographic regions, except Latin America and was driven by strong demand for pharmaceutical, energy and agricultural applications, as well as improved supply availability, as the prior year was impacted by Winter Storm Uri.

Industrial Intermediates & Infrastructure net sales were $12,538 million in 2023, down 24 percent from $16,606 million in 2022, with local price down 14 percent, volume down 9 percent and an unfavorable currency impact of 1 percent.

Local price decreased in both businesses and across all geographic regions, driven by unfavorable supply and demand dynamics.

Volume in Industrial Solutions decreased in all geographic regions, driven primarily by industrial, coatings and agricultural applications as well as a significant unplanned event at the Louisiana Operations Glycol-2 unit in Plaquemine, Louisiana.

Volume in Polyurethanes & Construction Chemicals decreased in all geographic regions, largely driven by lower demand, particularly in consumer durables and building and construction applications.

Currency unfavorably impacted sales in both businesses, driven by Asia Pacific and EMEAI.

Operating EBIT was $124 million in 2023, down $1,294 million from Operating EBIT of $1,418 million in 2022.

Operating EBIT decreased primarily due to lower equity earnings from the Sadara, EQUATE and Map ta Phut joint ventures and inflationary pressure on demand.

Operating EBIT decreased primarily due to lower selling prices and volume due to lower global demand and lower equity earnings at the Sadara and EQUATE joint ventures, which were partially offset by the impact of structural cost improvements.

PERFORMANCE MATERIALS & COATINGS

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Currency (1) (4)

Volume (5) (6)

Total (21) % 11 %

2023 Versus 2022

Performance Materials & Coatings net sales were $10,764 million in 2022, up 11 percent from net sales of $9,672 million in 2021, with local price up 21 percent, an unfavorable currency impact of 4 percent, and volume down 6 percent.

Local price increased in both businesses and across all geographic regions.

Consumer Solutions local price increased in both upstream siloxanes and downstream silicones due to favorable supply and demand dynamics and higher raw material costs, partially offset by price declines in upstream siloxanes late in the year on increased industry supply.

Local price increased in Coatings & Performance Monomers due to favorable supply and demand dynamics and higher raw material costs, partially offset by price declines late in the year as demand softened.

Volume decreased in both businesses due to lower demand.

Consumer Solutions volume decreased in all geographic regions except Asia Pacific, which was flat.

Coatings & Performance Monomers volume decreased in all geographic regions except the U.S.

& Canada, which was flat.

The unfavorable currency impact was driven by EMEAI and Asia Pacific.

Operating EBIT was $1,328 million in 2022, up $462 million from Operating EBIT of $866 million in 2021.

Operating EBIT increased primarily due to price gains in Consumer Solutions.

Performance Materials & Coatings net sales were $8,497 million in 2023, down 21 percent from net sales of $10,764 million in 2022, with local price down 15 percent, volume down 5 percent and an unfavorable currency impact of 1 percent.

Local price decreased in both businesses and across all geographic regions.

Consumer Solutions local price decreased primarily due to unfavorable supply and demand dynamics in upstream siloxanes.

Local price decreased in Coatings & Performance Monomers primarily in acrylic monomers and architectural coatings and was driven by lower raw material prices and unfavorable supply and demand dynamics.

Volume decreased in Consumer Solutions in all regions, except for Asia Pacific, which was flat, driven by lower demand for upstream siloxanes, industrial and chemical processing and personal care applications, partially offset by higher demand in building and construction applications.

Volume decreased in Coatings & Performance Monomers in all geographic regions and was driven by lower demand in residential construction applications.

The unfavorable currency impact was driven by Asia Pacific.

Operating EBIT was $219 million in 2023, down $1,109 million from Operating EBIT of $1,328 million in 2022.

Operating EBIT decreased primarily due to lower selling prices and lower demand in both businesses, which were partially offset by lower raw material costs and the impact of structural cost improvements.

In millions 2023 2022

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2023 Versus 2022

Net sales for Corporate, which primarily relate to the Company's insurance operations, were $272 million in 2022, down from net sales of $317 million in 2021.

Net sales for Corporate, which primarily relate to the Company's insurance operations, were $438 million in 2023, up from net sales of $272 million in 2022.

Operating EBIT was a loss of $265 million in 2023, compared with a loss of $266 million in 2022.

Operating EBIT decreased primarily due to the Company's insurance operations, increased environmental costs and equity losses.

Improvements in insurance operations and equity earnings were offset by increased environmental costs.

Operating Segments & End-Market Expectations

In 2023, Dow remains focused on managing near-term dynamics while continuing to position the company for long-term value creation.

The Company recognizes initial positive signs from moderating inflation growth in the U.S., improving outlook for energy in Europe, and re-opening in China.

However, Dow will continue to take prudent, proactive actions by implementing a playbook of interventions focused on optimizing labor and purchased service costs, reducing turnaround spending, and enhancing productivity, which is collectively expected to deliver $1 billion in cost savings in 2023.

Going forward, Dow will continue to maintain its disciplined and balanced approach to capital allocation and focus on cash flow generation, while executing its strategic priorities for long-term sustainable and profitable growth.

In Packaging & Specialty Plastics, improved reliability and ongoing logistics improvements are expected to allow the Company to satisfy areas of resilient demand, notably in flexible food and specialty packaging, as well as higher-value functional polymers.

Local prices are expected to continue to be impacted by high energy costs and inflation.

The Company’s feedstock flexibility and advantaged regional footprint will put the segment in a position to navigate energy market dynamics throughout the year.

In 2024, Dow is expected to maintain its commitment to financial and operational discipline while navigating dynamic market conditions.

While the Company expects softness in industrial and durable goods demand to continue in the first quarter, early positive signals in areas including construction, automotive and consumer electronics are encouraging.

The Company's strong balance sheet and cash generation provide flexibility to cover all capital allocation priorities as the Company progresses through the economic cycle and advances its Decarbonize & Grow and Transform the Waste strategies.

A cost-advantaged footprint, leadership in attractive end-markets, and strategic growth investments position the Company well to create long-term value.

In Packaging & Specialty Plastics, moderately improving macroeconomic conditions are expected to support demand growth, notably in higher-value functional polymers and flexible food and specialty packaging.

Integrated margins are expected to improve in the second half of the year on industry operating rate recoveries.

The Company’s feedstock flexibility and advantaged regional footprint will continue to position the segment well to navigate market dynamics throughout the year.

In-region presence and superior derivative flexibility will allow the segment to continue to optimize price and volume mix.

In Industrial Intermediates & Infrastructure, demand growth is expected in consumer and energy end-markets.

Market fundamentals will remain pressured for propylene oxide, polyols, isocyanates and derivatives systems, driven by lower-than-average growth in GDP, elevated raw material and energy costs and the impact of inflation on demand.

Increased industry supply of propylene oxide and polyols is expected to impact margins.

Recent and soon-to-be-completed investments in alkoxylation capacity are expected to service areas of resilient consumer demand in home care and pharmaceuticals.

In Performance Materials & Coatings, demand for performance silicones is expected to be in excess of GDP as the result of prioritization of key end-markets, most notably in mobility and electronics.

Local prices are expected to be impacted by inflation, energy costs in Europe and increased industry supply of siloxanes.

Coatings and acrylic monomers are expected to have improved supply availability from the prior year, especially for architectural coatings applications, while prices will be impacted by inflation and energy costs.

Other factors impacting operating segment profitability include an expected decrease in planned maintenance turnaround spending of approximately $300 million compared with 2022.

In Industrial Intermediates & Infrastructure, market fundamentals are expected to remain pressured for propylene oxide, polyols, isocyanates, construction chemicals and derivatives, largely driven by recent industry capacity additions.

Resilient demand is expected in food and pharma end-markets, and the Company will benefit from its multi-year growth project that will expand propylene glycol production at its Map Ta Phut site, which is expected to come online in 2024.

Additionally, the Glycol-2 unit at Dow's Louisiana Operations in Plaquemine, Louisiana, is expected to resume operations in the second quarter of 2024.

Recent and soon-to-be-completed investments in specialty amines and alkoxylation capacity are expected to serve resilient consumer demand in home care, pharmaceuticals and energy transition.

While sales are expected to be relatively flat, the Company will focus on capturing volume growth in key markets.

In Performance Materials & Coatings, performance silicone products are well-positioned to deliver volume growth in key markets.

Volume growth is expected in feedstocks and intermediates as well as modest price increases, driven by moderately improved industry supply and demand dynamics.

Demand and local prices in architectural and industrial coatings face uncertainty given their correlation with the building and construction market as well as interest rates.

Other factors impacting operating segment profitability include an expected increase in planned maintenance turnaround spending of approximately $200 million compared with 2023.

Projected Uses of Cash

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For each of its foreign subsidiaries, the Company makes an assertion regarding the amount of earnings intended for permanent reinvestment, with the balance available to be repatriated to the United States.

The cash held by foreign subsidiaries for permanent reinvestment is generally used to finance the subsidiaries' operational activities and future foreign investments.

Dow has the ability to repatriate additional funds to the U.S., which could result in an adjustment to the tax liability for foreign withholding taxes, foreign and/or U.S.

Cash held by foreign subsidiaries for permanent reinvestment is generally used to finance the subsidiaries' operational activities and future foreign investments.

Dow has the ability to repatriate additional funds to the United States, which could result in an adjustment to the tax liability for foreign withholding taxes, foreign and/or U.S.

state income taxes and the impact of foreign currency movements.

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Financing activities $ (3,115) $ (3,361) $ (3,028) $ (3,405)

Effect of exchange rate changes on cash, cash equivalents and restricted cash (237) (99) (237) (99)

Increase (decrease) in cash, cash equivalents and restricted cash 907 (2,075) 907 (2,075)

Cash, cash equivalents and restricted cash at beginning of year 3,033 5,108 3,033 5,108

Cash, cash equivalents and restricted cash at end of year $ 3,940 $ 3,033 $ 3,940 $ 3,033

Restricted cash and cash equivalents, included in "Other current assets" 54 45 54 45

Cash and cash equivalents at end of year $ 3,886 $ 2,988 $ 3,886 $ 2,988

Cash Flows from Operating Activities

Cash provided by operating activities from continuing operations in 2023 was primarily driven by the Company's cash earnings, dividends from equity method investments and cash provided by working capital, which were partially offset by performance-based compensation payments, severance payments related to the 2023 Restructuring Program and pension contributions.

Cash provided by operating activities from continuing operations in 2022 was primarily driven by the Company's cash earnings, dividends from equity method investments and cash provided by working capital, which were partially offset by performance-based compensation payments and pension contributions.

Cash provided by operating activities from continuing operations in 2021 was primarily driven by the Company's cash earnings and dividends from equity method investments, which were partially offset by cash used for working capital requirements, pension contributions and performance-based compensation payments.

Net Working Capital and Current Ratio at Dec 31 Dow Inc.

9 unchanged sentences

Days payables outstanding 64 60

Cash used for operating activities from discontinued operations was related to cash payments and receipts the Company had with DuPont and Corteva that related to certain agreements and matters related to the separation from DowDuPont.

Cash used for operating activities from discontinued operations reflected cash payments and receipts for certain agreements and matters related to the Company's separation from DowDuPont Inc.

Cash Flows from Investing Activities

Cash used for investing activities in 2022 was primarily for capital expenditures and purchases of investments, which were partially offset by proceeds from sales and maturities of investments.

Cash used for investing activities in 2021 was primarily for capital expenditures and purchases of investments and previously leased assets, which were partially offset by proceeds from sales and maturities of investments.

Cash used for investing activities in 2023 and 2022 was primarily for capital expenditures and purchases of investments, which were partially offset by proceeds from sales and maturities of investments.

The Company's capital expenditures were $2,356 million in 2023 and $1,823 million in 2022.

Capital spending was higher in 2022 as the Company continued the post-pandemic recovery and ramp up of investments in its higher return, lower risk and quick payback incremental growth projects.

The Company expects capital spending in 2023 to be approximately $2.2 billion.

Capital spending in recent years has included the addition of a furnace to the Company's ethylene production facility in Alberta, Canada, which commenced operations in 2021;

the retrofit of one of the Company's Louisiana steam crackers with Dow's proprietary fluidized catalytic dehydrogenation ("FCDh") technology to produce on-purpose propylene and the addition of a new specialty alkoxylation reactor in Plaquemine, Louisiana, which were both completed in 2022;

the addition of an integrated methylene diphenyl diisocyanate ("MDI") distillation and prepolymers facility at its site in Freeport, Texas, which is expected to be completed in 2023;

Capital spending was higher in 2023 as the Company continued the ramp up of investments in its higher return, lower risk and quick payback incremental growth projects.

The Company expects capital spending in 2024 to be approximately $3 billion, which includes the ramp up of the construction of the Company's Fort Saskatchewan Path2Zero project.

The Company expects capital spending to average $1 billion annually through 2029 for this key growth project.

Enterprise-wide capital spending is expected to exceed depreciation and amortization through 2027, during the first phase of the project.

Capital spending in recent years has included the retrofit of one of the Company's Louisiana steam crackers with Dow's proprietary fluidized catalytic dehydrogenation ("FCDh") technology to produce on-purpose propylene and the addition of a new specialty alkoxylation reactor in Plaquemine, Louisiana, which were both completed in 2022;

the addition of an integrated methylene diphenyl diisocyanate ("MDI") distillation and prepolymers facility at its site in Freeport, Texas, which was completed in 2023;

and construction of a world-scale polyethylene unit on the U.S.

Cash Flows from Financing Activities

Cash used for financing activities in 2022 included payments on long-term debt, which was more than offset by proceeds from issuance of long-term debt.

Cash used for financing activities in 2023 was primarily for debt related activities.

In addition, Dow Inc.

1 unchanged sentence

TDCC included cash outflows for dividends paid to Dow Inc.

Cash used for financing activities in 2021 included payments on long-term debt and transaction financing, debt issuance and other costs, which were partially offset by proceeds from issuance of common stock.

Cash used for financing activities in 2022 included payments on long-term debt, which was more than offset by proceeds from issuance of long-term debt.

In addition, Dow Inc.

10 unchanged sentences

Dow defines Operating EBITDA as earnings (i.e., "Income before income taxes") before interest, depreciation and amortization, excluding the impact of significant items.

Cash Flow Conversion (Operating EBITDA to Cash Flow From Operations)

Dow defines Cash Flow Conversion (Operating EBITDA to cash flow from operations) as "Cash provided by operating activities - continuing operations," divided by Operating EBITDA.

Cash Flow Conversion (Cash Flow From Operations to Operating EBITDA)

Dow defines Cash Flow Conversion (Cash flow from operations to Operating EBITDA) as "Cash provided by operating activities - continuing operations," divided by Operating EBITDA.

Management believes Cash Flow Conversion is an important financial metric as it helps the Company determine how efficiently it is converting its earnings into cash flow.

These financial measures are not recognized in accordance with accounting principles generally accepted in the United States of America ("U.S.

GAAP") and should not be viewed as alternatives to U.S.

GAAP financial measures of performance.

These financial measures are not recognized in accordance with accounting principles generally accepted in the United States of America ("GAAP") and should not be viewed as alternatives to GAAP financial measures of performance.

All companies do not calculate non-GAAP financial measures in the same manner and, accordingly, Dow's definitions may not be consistent with the methodologies used by other companies.

3 unchanged sentences

Free Cash Flow (non-GAAP) $ 2,808 $ 5,663

$ 5,663 $ 5,568

Free Cash Flow for the year ended December 31, 2021 reflects a $1 billion elective pension contribution.

Reconciliation of Cash Flow Conversion (Operating EBITDA to Cash Flow From Operations) Dow Inc.

Reconciliation of Cash Flow Conversion (Cash Flow From Operations to Operating EBITDA) Dow Inc.

In millions 2023 2022

Net income (GAAP) $ 660 $ 4,640

+ Provision for income taxes 1,450 1,740

+ Provision (credit) for income taxes (4) 1,450

Income before income taxes $ 656 $ 6,090

6 unchanged sentences

Cash provided by operating activities - continuing operations (GAAP) $ 5,164 $ 7,486

Cash Flow Conversion (Operating EBITDA to cash flow from operations) (non-GAAP) 2

80.1 % 57.1 %

The year ended December 31, 2022 includes costs associated with implementing the Company's Digital Acceleration program and 2020 Restructuring Program, asset related charges due to the Russia and Ukraine conflict, a gain related to a legal matter with Nova, a gain related to an adjustment of the Dow Silicones breast implant liability, a loss on the early extinguishment of debt and activity related to the separation from DowDuPont.

The year ended December 31, 2021 includes costs associated with implementing the Company's Digital Acceleration program and 2020 Restructuring Program, implementation costs and asset related charges - net, a loss on early extinguishment of debt, a gain on a previous divestiture, litigation related charges, awards and adjustments and activity related to the separation from DowDuPont.

Cash flow from operations to net income (GAAP) 782.4 % 161.3 %

Cash Flow Conversion (Cash flow from operations to Operating EBITDA) (non-GAAP) 95.8 % 80.1 %

The year ended December 31, 2023, includes restructuring charges and implementation and efficiency costs associated with the Company's 2023 Restructuring Program, certain gains and losses associated with previously impaired equity investments, a loss associated with legacy agricultural products groundwater contamination matters, a gain associated with a legal matter with Nova Chemicals Corporation, foreign currency losses and inventory valuation impacts related to the devaluation of the Argentine peso, non-cash settlement charges related to the purchase of nonparticipating group annuity contracts for certain Company pension plans in the United States and Canada and activity related to the separation from DowDuPont.

The year ended December 31, 2022, includes costs associated with implementing the Company's Digital Acceleration program and 2020 Restructuring Program, asset related charges due to the Russia and Ukraine conflict, a gain related to a legal matter with Nova Chemicals Corporation, a gain related to an adjustment of the Dow Silicones breast implant liability, a loss on the early extinguishment of debt and activity related to the separation from DowDuPont.

See Note 24 to the Consolidated Financial Statements for additional information.

Cash flow conversion for the year ended December 31, 2021 reflects a $1 billion elective pension contribution.

Liquidity & Financial Flexibility

2 unchanged sentences

In addition to cash from operating activities, the Company’s current liquidity sources also include TDCC's U.S.

and Euromarket commercial paper programs, committed and uncommitted credit facilities, committed accounts receivable facilities, a medium-term notes program, a U.S.

and Euromarket commercial paper programs, committed and uncommitted credit facilities, committed and uncommitted accounts receivable facilities, a medium-term notes program, a U.S.

retail note program (“InterNotes ® ”) and other debt markets.

The Company continues to maintain a strong financial position with all of its committed credit facilities undrawn and fully available at December 31, 2023.

Cash and committed and available forms of liquidity were $13.7 billion at December 31, 2022, an increase of $1.1 billion from December 31, 2021.

Cash and committed and available forms of liquidity were $12.8 billion at December 31, 2023, a decrease of $900 million from December 31, 2022.

The Company also has no substantive long-term debt maturities due until 2027.

3 unchanged sentences

and Euromarket commercial paper programs.

TDCC had $299 million of commercial paper outstanding at December 31, 2022 (zero in 2021).

TDCC had no commercial paper outstanding at December 31, 2023 ($299 million at December 31, 2022).

TDCC maintains access to the commercial paper market at competitive rates.

5 unchanged sentences

See Note 13 to the Consolidated Financial Statements for additional information on committed and available credit facilities.

Committed Accounts Receivable Facilities

In addition to the above committed credit facilities, the Company maintains an accounts receivable facility in the U.S.

where eligible trade accounts receivable, up to $900 million, may be sold at any point in time.

The Company also maintains a committed accounts receivable facility in Europe where eligible trade accounts receivable, up to €500 million, may be sold at any point in time.

In 2022, the Company sold $391 million of receivables under the U.S.

and Europe committed accounts receivable facilities.

See Note 13 to the Consolidated Financial Statements for additional information .

Uncommitted Credit Facilities

The Company has entered into various uncommitted bilateral credit arrangements as a potential source of excess liquidity.

These lines can be used to support short-term liquidity needs and for general purposes, including letters of credit.

These lines can be used to support short-term liquidity needs and for general purposes.

The Company had no drawdowns outstanding at December 31, 2023.

Accounts Receivable Facilities

In addition to the above committed credit facilities, the Company maintains a committed accounts receivable facility in the United States where eligible trade accounts receivable, up to $900 million, may be sold at any point in time.

The Company also maintains a committed accounts receivable facility in Europe where eligible trade accounts receivable, up to €500 million, may be sold at any point in time.

Sales of receivables under these committed facilities were not material in 2023.

At December 31, 2023, approximately $5 million of receivables remained unremitted.

In addition, the Company has an uncommitted accounts receivable facility in the United States providing additional liquidity.

Sales of receivables under this facility were not material in 2023.

See Note 12 to the Consolidated Financial Statements for additional information .

Early Settlement of Letters of Credit

The Company utilizes, from time-to-time, letters of credit discounting programs to manage and expedite the settlement of letters of credit in certain regions.

These letters of credit are associated with accounts receivable and the Company retains no interest in the transferred letters of credit or receivables once sold.

Accounts Receivable Discounting Facilities

The Company has access to accounts receivable discounting facilities, under which receivables are transferred with limited recourse.

The Company retains no interest in the transferred receivables once sold.

The Company maintains these facilities and also participates in certain customers’ supply chain financing and other early pay programs as a routine source of working capital.

Letters of Credit

4 unchanged sentences

The Company has the ability to monetize its investment in its COLI policies as an additional source of liquidity.

The Company had no outstanding monetization of its existing COLI policies' surrender value at December 31, 2022.

Early Settlement of Letters of Credit

The Company utilizes, from time-to-time, letters of credit discounting programs to manage and expedite the settlement of letters of credit in certain regions.

These letters of credit are associated with accounts receivable and the Company retains no interest in the transferred letters of credit or receivables once sold.

Shelf Registration - U.S.

At December 31, 2023, the Company had monetized $97 million of its existing COLI policies' surrender value.

See Note 5 to the Consolidated Financial Statements for additional information.

Shelf Registration - United States

On June 13, 2022, Dow Inc.

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1,300 939 1,300 939

Net debt $ 10,597 $ 11,439 $ 10,597 $ 11,439

Net debt (non-GAAP) $ 10,799 $ 10,597 $ 10,799 $ 10,597

Total equity $ 19,108 $ 21,247 $ 19,406 $ 21,489

Gross debt as a percentage of total capitalization 44.1 % 42.1 % 43.7 % 41.8 %

Net debt as a percentage of total capitalization 33.3 % 37.9 % 33.0 % 37.5 %

Net debt as a percentage of total capitalization (non-GAAP) 36.1 % 33.3 % 35.8 % 33.0 %

Included in "Other current assets" in the consolidated balance sheets.

In the second quarter of 2022, the Company redeemed $750 million aggregate principal amount of 3.625 percent notes due May 2026.

In the fourth quarter of 2022, the Company issued $1.5 billion of senior unsecured notes.

The offering included $600 million aggregate principal amount of 6.30 percent notes due 2033 and $900 million aggregate principal amount of 6.90 percent notes due 2053.

In the fourth quarter of 2023, the Company redeemed $23 million aggregate principal amount of 2.100 percent notes due November 2030, $14 million aggregate principal amount of 4.625 percent notes due October 2044, and $1 million aggregate principal amount of 4.375 percent notes due November 2042.

In 2023, the Company issued an aggregate principal amount of $80 million of InterNotes ® .

Additionally, the Company repaid $121 million of long-term debt at maturity and approximately $3 million of long-term debt was repaid by consolidated variable interest entities.

Additionally, the Company repaid $250 million of long-term debt at maturity.

The Company may at any time repurchase certain debt securities in the open market or in privately negotiated transactions subject to:

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Management believes TDCC was in compliance with all of its covenants and default provisions at December 31, 2023.

The Revolving Credit Agreement was extended in November 2022 and matures in November 2027.

For information on TDCC's debt covenants and default provisions, see Note 13.

There were no material changes to the debt covenants and default provisions related to TDCC’s outstanding long-term debt and primary, private credit agreements in 2023.

is obligated, substantially concurrently with the issuance of any guarantee in respect of outstanding or committed indebtedness under the Revolving Credit Agreement, to enter into a supplemental indenture with TDCC and the trustee under TDCC’s existing 2008 base indenture governing certain notes issued by TDCC.

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Credit Ratings Long-Term Rating Short-Term Rating Outlook

Fitch Ratings BBB+ F2 Positive

Fitch Ratings BBB+ F1 Stable

Moody’s Investors Service Baa1 P-2 Stable

Standard & Poor’s BBB A-2 Positive

On May 31, 2022, Moody's Investors Service announced a credit rating upgrade for TDCC from Baa2 to Baa1, affirmed its P-2 rating and maintained a stable outlook.

On June 8, 2022, Standard & Poor’s affirmed TDCC’s BBB and A-2 rating, and revised its outlook to positive from stable.

On June 16, 2022, Fitch Ratings affirmed TDCC’s BBB+ and F2 rating, and revised its outlook to positive from stable.

Standard & Poor’s BBB A-2 Stable

On June 15, 2023, Fitch Ratings affirmed TDCC’s BBB+ long-term credit rating and announced a short-term credit rating upgrade to F1 from F2, and also revised its long-term outlook from positive to stable.

On August 22, 2023, Standard and Poor's affirmed TDCC's BBB and A-2 rating, and revised its outlook from positive to stable.

Subsequent to 2023, on January 19, 2024, Moody's Investors Service affirmed TDCC's Baa1 and P-2 rating, and affirmed its outlook of stable.

These credit agencies' decisions were made as part of their annual review process and reflect the Company's supportive financial policies and strong operating performance.

has paid dividends on a quarterly basis and expects to continue to do so, subject to approval by the Dow Inc.

The dividends declared by the Dow Inc.

Board align to the Company's strategy announced in 2018 of returning approximately 45 percent of operating net income 1 to the shareholders through the dividend and total shareholder remuneration of approximately 65 percent, when including share repurchases, over the economic cycle.

has paid dividends on a quarterly basis and expects to continue to do so, subject to approval by the Board.

The dividends declared by the Board align to the Company's strategy announced in 2018 of returning approximately 45 percent of Operating Net Income to shareholders through dividends and total shareholder remuneration of approximately 65 percent, when including share repurchases, over the economic cycle.

The Company defines Operating Net Income, a non-GAAP measure, as "Net income available for Dow Inc.

common stockholders," excluding the impact of significant items.

The following tables provide information on dividends declared and paid to common stockholders:

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October 12, 2023 November 30, 2023 December 8, 2023 $ 0.70

Operating net income is a non-GAAP measure that Dow defines as "Net income (loss) available for Dow Inc.

common stockholders," excluding the impact of significant items.

TDCC has committed to fund Dow Inc.'s dividends paid to common stockholders and share repurchases, as approved by the Dow Inc.

Board from time to time, as well as certain governance expenses.

TDCC has committed to fund Dow Inc.'s dividends paid to common stockholders and share repurchases, as approved by the Board from time to time, as well as certain governance expenses.

Funding is accomplished through intercompany loans.

TDCC's Board reviews and determines a dividend distribution to Dow Inc.

TDCC's Board of Directors reviews and determines a dividend distribution to Dow Inc.

to settle the intercompany loans.

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Share Repurchase Program

On April 1, 2019, the Dow Inc.

Board ratified the share repurchase program originally approved on March 15, 2019, authorizing up to $3 billion for the repurchase of the Company's common stock, with no expiration date.

The Company completed the April 1, 2019 share repurchase program in the second quarter of 2022.

On April 13, 2022, the Dow Inc.

Board approved a new share repurchase program authorizing up to $3 billion for the repurchase of the Company's common stock, with no expiration date.

In 2022, the Company repurchased $2,325 million of its common stock.

At December 31, 2022, $2 billion of the new share repurchase program authorization remained available for repurchases.

On April 13, 2022, the Board approved a share repurchase program authorizing up to $3 billion for the repurchase of the Company's common stock, with no expiration date.

The Company repurchased $625 million of its common stock in 2023.

At December 31, 2023, approximately $1,425 million of the share repurchase program authorization remained available for repurchases.

As previously announced, the Company intends to repurchase shares to cover dilution over the cycle.

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Pension Plans

The Company has both funded and unfunded defined benefit pension plans that cover employees in the United States and a number of other countries.

In 2022 and 2021, the Company contributed $235 million and $1,219 million to its pension plans, respectively, including contributions to fund benefit payments for its unfunded pension plans.

In the first quarter of 2021, the Company elected to contribute $1 billion to its U.S.

tax-qualified pension plans, which is included in the 2021 contribution amount above.

This contribution was based on the Company's funding policy, which is to contribute to defined benefit pension plans when pension laws and/or economics either require or encourage funding.

The Company expects to contribute approximately $150 million to its pension plans in 2023.

The Company has both funded and unfunded defined benefit pension plans in the United States and a number of other countries.

On March 4, 2021, the Company announced changes to the design of its U.S.

tax-qualified and non-qualified pension plans (collectively, the "U.S.

Plans") and, effective December 31, 2023, the Company will freeze the pensionable compensation and credited service amounts used to calculate pension benefits for employees who participate in the U.S.

Plans") and, effective December 31, 2023, the Company froze the pensionable compensation and credited service amounts used to calculate pension benefits for employees who participate in the U.S.

In recent years, the Company had significantly increased funding of its U.S.

plans while employing certain pension de-risking strategies.

Accordingly, in the fourth quarter of 2023, the Company’s pension plans in the United States and Canada purchased or converted to nonparticipating group annuity contracts, irrevocably transferring benefit obligations of $1,681 million for certain participants and $1,617 million of related plan assets to the insurers, requiring no additional cash funding from the Company, with no impact on the pension benefits of participants.

These transactions resulted in non-cash pretax settlement charges of $642 million in 2023, related to the accelerated recognition of a portion of the accumulated actuarial losses of the plans.

The Company’s funding policy for its pension plans is to contribute to funded plans when pension laws and/or economics either require or encourage funding.

In 2023 and 2022, the Company contributed $142 million and $235 million to its pension plans, respectively, including contributions to fund benefit payments for its unfunded pension plans.

Additionally, in the second quarter of 2023, the Company received a pension asset reversion of approximately $90 million for a portion of the excess funding of one of its plans in Europe, which is included in "Other assets and liabilities, net" in the consolidated statements of cash flows.

The Company expects to contribute approximately $150 million to its pension plans in 2024.

See Note 18 to the Consolidated Financial Statements for additional information concerning the Company’s pension plans.

Restructuring

The 2020 Restructuring Program was substantially complete at December 31, 2021, with the exception of certain cash expenditures expected into 2023, consisting of severance and related benefit costs and costs associated with exit and disposal activities, including contract cancellation penalties and environmental remediation.

Restructuring implementation costs totaled $40 million in 2022.

The actions related to the 2023 Restructuring Program are expected to result in additional cash expenditures of $122 million, primarily through 2024 and consist primarily of severance and related benefit costs.

Restructuring implementation and efficiency costs, primarily decommissioning and demolition activities related to asset actions, and costs associated with the Company's productivity and efficiency actions, are expected to result in additional cash expenditures of approximately $285 million, primarily through the end of 2024.

Restructuring implementation and efficiency costs totaled $243 million in 2023.

The Company expects to incur additional costs in the future related to its restructuring activities, which will be recognized as incurred.

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See Note 4 to the Consolidated Financial Statements for additional information on the Company's restructuring activities.

Digital Acceleration

In 2021, Dow announced plans to further advance and expand its digitalization efforts to deliver long-term value creation, by accelerating investment in three key areas:

expanding digital tools to accelerate materials science innovation;

further enhancing the e-commerce buying and fulfillment experience for Dow's customers;

and adopting real-time digital manufacturing insights, operational data intelligence and demand sensing to enhance the productivity and reliability of Dow’s operations.

The Company expects more than $300 million in incremental annual run rate Operating EBITDA generation by the end of 2023 related to digital acceleration, with an additional one-time $100 million in structural working capital efficiency gains, driven in part by enhanced planning from digital tools.

Digital acceleration pre-tax expenses totaled $230 million in 2022.

The Digital Acceleration program was completed at the end of 2022.

Contractual Obligations

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pension plans represent 72 percent of the Company’s pension plan assets and 70 percent of the pension obligations.

The Company uses the spot rate approach to determine the discount rate utilized to measure the service cost and interest cost components of net periodic pension and other postretirement benefit costs for the U.S.

and other selected countries.

Under the spot rate approach, the Company calculates service cost and interest cost by applying individual spot rates from the Willis Towers Watson RATE:Link yield curve (based on high-quality corporate bond yields) for each selected country to the separate expected cash flow components of service cost and interest cost;

pension plans were frozen effective December 31, 2023, and therefore, participants will not accrue additional benefits for future service and compensation.

service cost and interest cost for all other plans (including all plans prior to adoption) are determined on the basis of the single equivalent discount rates derived in determining those plan obligations.

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RATE:Link 60-90 corporate yield curve (based on 60th to 90th percentile high-quality corporate bond yields) to arrive at the plan’s obligations as of the measurement date.

The weighted average discount rate utilized to measure pension obligations increased to 5.64 percent at December 31, 2022, from 3.04 percent at December 31, 2021.

At December 31, 2022, the U.S.

tax-qualified plans were underfunded on a projected benefit obligation basis by $545 million.

The underfunded amount decreased $2,040 million compared with December 31, 2021.

The decrease in the underfunded amount in 2022 was primarily due to the market-related impact of higher discount rates partially offset by unfavorable returns on plan assets.

The assumption for the long-term rate for compensation levels for the U.S.

tax-qualified plans was unchanged.

The weighted average discount rate utilized to measure pension obligations decreased to 5.30 percent at December 31, 2023, from 5.64 percent at December 31, 2022.

At December 31, 2023, the net underfunded status of the U.S.

tax-qualified plans on a projected benefit obligation basis was $1,192 million.

The net underfunded amount increased $647 million compared with December 31, 2022.

The increase in the net underfunded amount in 2023 was primarily due to the market-related impact of lower discount rates.

The Company uses a generational mortality table to determine the duration of its pension and other postretirement obligations.

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Total $ 2,661

The Company expects pension net periodic benefit cost ("NPBC") to decrease in 2023 by approximately $115 million, resulting in an NPBC credit.

The decrease is driven primarily by discount rate increases, resulting in a reduction in the amortization of actuarial losses, partially offset by higher interest cost.

Exclusive of the one-time settlement charge recognized in 2023, the Company expects net periodic benefit cost ("NPBC") to decrease in 2024 by approximately $96 million.

The decrease is primarily due to the freeze of pension

benefits in the United States, effective December 31, 2023, and other de-risking activities, partially offset by discount rate decreases.

A 25 basis point increase or decrease in the long-term return on assets assumption would change the Company’s NPBC credit for 2024 by $53 million.

A 25 basis point increase in the discount rate assumption would decrease the Company's NPBC credit for 2023 by $4 million.

A 25 basis point increase in the discount rate assumption would increase the Company's NPBC credit for 2024 by $7 million.

A 25 basis point decrease in the discount rate assumption would decrease the Company's NPBC credit for 2024 by $16 million.

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Based on the evaluation of available evidence, both positive and negative, the Company recognizes future tax benefits, such as net operating loss carryforwards and tax credit carryforwards, to the extent that realizing these benefits is considered to be more likely than not.

At December 31, 2022, the Company had a net deferred tax liability balance of $150 million, after valuation allowances of $1,269 million.

At December 31, 2023, the Company had a net deferred tax asset balance of $1,087 million, after valuation allowances of $2,948 million.

In evaluating the ability to realize the deferred tax assets, the Company relies on, in order of increasing subjectivity, taxable income in prior carryback years, the future reversals of existing taxable temporary differences, tax planning strategies and forecasted taxable income using historical and projected future operating results.

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Environmental Policies

Dow is committed to world-class environmental, health and safety (“EH&S”) performance, as demonstrated by industry-leading results, a long-standing commitment to Responsible Care®, a strong commitment to achieve the Company's 2025 Sustainability Goals and Dow's drive to deliver against new targets on climate protection and a circular economy.

Dow is committed to world-class environmental, health and safety (“EH&S”) performance, as demonstrated by industry-leading results, a long-standing commitment to the American Chemistry Council's Responsible Care ® program, a strong commitment to achieve the Company's 2025 Sustainability Goals and Dow's drive to deliver against its targets around a circular economy and climate protection.

These goals and targets set the standard for sustainability in the chemical industry, focusing on improvements in the Company’s local corporate citizenship and product stewardship, and by actively pursuing methods to reduce the Company's environmental impact.

To meet the Company’s public commitments, as well as the stringent laws and government regulations related to environmental protection and remediation to which its global operations are subject, the Company has well-defined

policies, requirements and management systems.

The Company's EH&S Management System (“EMS”) defines the “who, what, when and how” needed for the businesses to implement the Company’s policies and requirements and meet performance objectives, leadership expectations and public commitments.

The EMS is integrated into a company-wide management system for EH&S, Operations, Quality and Human Resources.

To ensure effective utilization, the EMS is integrated into a company-wide management system for EH&S, Operations, Quality and Human Resources.

The Company believes third-party verification and transparent public reporting are cornerstones of world-class EH&S performance and building public trust.

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Dow manages environmental data for reporting with a waste, water and emissions inventory system.

All manufacturing sites globally record their emissions and water use in the system.

The data is reviewed at the facility level and then by global coordinators before being aggregated for ESG reporting.

All emitting manufacturing sites globally record their emissions and water use in the system.

The data is reviewed at the facility level and then by global coordinators before being aggregated for corporate environmental reporting purposes.

Dow's EH&S policies help to ensure the Company achieves its annual health and safety performance targets and the Company seeks to continuously improve on these targets through process and personal safety project implementations.

Improvement in these areas, as well as environmental compliance, remains a top management priority, as the Company continues to implement its 2025 Sustainability Goals and progressive, multi-decade sustainability targets that include advancing a circular economy and climate protection.

Progress is reviewed regularly by management and with the Environment, Health, Safety & Technology Committee of the Board.

Progress is reviewed annually by management and with the Environment, Health, Safety & Technology Committee of the Board.

Detailed information on Dow’s performance regarding environmental matters and goals is accessible through the Company's Science & Sustainability webpage at www.dow.com/sustainability .

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Public and political attention continues to be placed on the protection of critical infrastructure, including the chemical industry, from security threats.

Sabotage, terrorism, war, natural disasters and cyber incidents have increased global concerns about the security and safety of chemical production and distribution.

Sabotage, terrorism, war, natural disasters and cybersecurity incidents have increased global concerns about the security and safety of chemical production and distribution.

Many, including the Company and the American Chemistry Council, have called for uniform risk-based and performance-based national standards for securing the U.S.

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regulations with established risk-based and performance-based standards that must be met at U.S.

Coast Guard-regulated and Chemical Facility Anti-Terrorism Standards-regulated facilities promulgated by the U.S.

Coast Guard-regulated facilities promulgated by the U.S.

Department of Homeland Security.

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The Company continues to support uniform risk-based national standards for securing the chemical industry.

Since 1988, the Company has maintained a comprehensive, multi-level security plan that focuses on security, emergency planning, preparedness and response.

The Company maintains a comprehensive, multi-level security plan that focuses on security, emergency planning, preparedness and response.

This plan, which has been activated in response to significant world and national events, is reviewed on an annual basis.

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Climate Protection

Addressing climate-related risks and opportunities is part of Dow’s overall climate strategy.

This science-based strategy includes a phased approach to decarbonize while meeting growing demand for Dow's products and contributing to a low-carbon future through continued investment in new products, technologies and processes.

In 2020, Dow announced commitments to reduce its net annual Scope 1 and 2 carbon emissions by an additional 5 million metric tons by 2030 versus its 2020 baseline, a 15 percent reduction and a 30 percent reduction since 2005 as Dow had reduced its carbon emissions 15 percent between 2005 and 2020.

Evaluation of climate-related risks and opportunities continues to be a catalyst for the development of the Company’s Decarbonize & Grow strategy (Dow’s climate transition plan), its water-intensity goal and its Valuing Nature goal.

Dow's science-based strategy includes a phased approach to decarbonize while meeting growing demand for Dow's products and contributing to a low-carbon future through continued investment in new products, technologies and processes.

In 2020, Dow announced commitments to reduce its net annual Scope 1 and 2 CO 2 e emissions by an additional 5 million metric tons by 2030 versus its 2020 baseline, a 15 percent reduction versus 2020 and a 30 percent reduction in greenhouse gas emissions since 2005.

Additionally, Dow announced its intention to be carbon neutral by 2050 (Scope 1+2+3, as defined by the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard, plus product benefits).

Reflecting Dow's focus to make meaningful progress in the near term, Dow intends to reduce its carbon emissions by approximately 2 million metric tons from 2022 to 2025 while growing underlying earnings.

In 2021, Dow outlined a path to decarbonize its production processes (Scope 1 and 2 CO 2 e emissions), utilizing a phased approach in which end-of-life capacity is replaced with higher-efficiency, lower greenhouse gas emitting assets.

Reflecting Dow's focus to make meaningful progress in the near term, Dow intends to reduce its CO 2 e emissions by approximately 2 million metric tons by 2025 versus its 2020 baseline while growing underlying earnings and plans to build the world's first net-zero Scope 1 and 2 CO 2 e emissions integrated ethylene cracker and derivatives facility in Alberta, Canada, which is expected to add approximately 1,885 KTA of ethylene and polyethylene capacity by 2029.

Dow is also committed to advancing water stewardship within the Company's operations and to working collaboratively to enhance water management at the watershed level.

As part of this commitment, Dow has set a global target to reduce freshwater intake intensity by 20 percent at its key water-stressed sites by 2025.

Despite these commitments, climate change-related risks and uncertainties, legal or regulatory responses to climate change, and failure to meet climate change commitments could negatively impact Dow’s operations, financial condition and/or reputation.

As part of this commitment, Dow has set a global target to reduce freshwater intake intensity by 20 percent at six key water-stressed sites by 2025.

Additionally, Dow has implemented a robust process to quantify the value of products and projects that are better for nature, including nature-based solutions.

Climate-related risks include both physical and transition risks.

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Climate-related physical risks include more frequent severe weather events, potential changes in precipitation patterns, water scarcity and extreme variability in weather patterns, which can disrupt the operations of the Company as well as those of its customers, partners and vendors.

In 2021, Dow partnered with S&P Global Trucost (Trucost) to assess the Company’s exposure to climate-related physical risks based on the geographic location of manufacturing operations.

The risks assessed included water stress, heat waves, cold waves, droughts, hurricanes, wildfires and flooding.

The analysis included an assessment of the physical risks using a baseline year of 2020 with time periods ranging to 2050, and scenarios of low, moderate and high climate change.

Based on the Trucost methodology, which scores the exposure of sites to physical risks relative to global conditions, Dow was assessed at moderate exposure in 2050 under all scenarios, with a weighted average that is slightly lower than the average of the materials industry (as defined by Trucost).

Dow will use this information to inform decision-making at sites with respect to managing climate-related physical risks.

To evaluate physical risks, Dow partnered with S&P Global Trucost (“Trucost”) to assess the Company’s exposure to physical risks based on the geographic location of its manufacturing operations.

The risks assessed included water stress, flood, heat waves, cold waves, hurricanes, wildfires and sea level rise.

The analysis included an assessment of the physical risks using a baseline year of 2020 with time periods for medium- (year 2030) and long-term (year 2050) using the Intergovernmental Panel on Climate Change representative concentration pathways.

These pathways represent varying degrees of global atmospheric greenhouse gas concentrations (low, medium and high), and thus different expectations on global temperature rise.

Results will be incorporated into Dow’s long-term assessments of its manufacturing sites, which is a key input into Dow’s capital approval process.

Transition Risks

Climate-related transition risks include the availability, development and affordability of lower greenhouse gas emissions technology, the effects of carbon pricing and changes in public sentiment, regulations, taxes, public mandates or requirements.

Climate Opportunities and Actions

There are also significant climate opportunities for Dow, including the ability to be a leader in the development of lower emissions technology, such as Dow’s 2021 announcement to build a net-zero (Scope 1 & 2 emissions) ethylene and derivatives complex in Alberta, Canada.

Additional opportunity actions to achieve carbon neutrality include expanding access to clean power, developing lower carbon emissions manufacturing technology, such as Dow's proprietary FCDh technology, and collaborating with Shell to develop electrified cracking technology powered by clean energy.

Dow’s technology and materials science leadership also provide a significant opportunity to deploy materials to help reduce emissions for customers and industries that will allow Dow to capture value from increasing demand for low-carbon and sustainable products.

These are just some examples of critical steps on Dow’s path to carbon neutrality by 2050 while enabling business growth.

The potential impacts of climate-related risks and opportunities are part of Dow’s climate strategy and factored into the Company’s business and financial planning.

When assessing the magnitude of impact, Dow evaluates elements such as changes to the cost of raw materials, impact on operating cost (e.g., energy costs, costs of complying with regulation), cost of investment in new technology to reduce emissions, impact to the price at which products can be sold, impact of potential lost sales or, in the case of opportunities, improvements in production, increased revenues, cost efficiencies and market share gained.

In addition, there could be impacts that need to be considered that cannot be financially quantified (e.g., reputational impact of certain risks and opportunities).

Dow is taking specific actions to mitigate identified climate-related physical and transition risks, while also advancing opportunities in several key areas.

Climate-related transition risks include the availability, development and affordability of lower greenhouse gas emissions technology, the effects of CO 2 e pricing, and changes in public sentiment, regulations, taxes, public mandates or requirements as they relate to CO 2 e, water or land use.

Climate-related risks, including both physical and transition risks, are assessed with input from internal and external sources including corporate, business, function and geographic leaders;

subject matter experts;

and other stakeholders.

The evaluation of climate-related risks and opportunities is integrated into an annual company-wide

risk management process, known as enterprise risk management (“ERM”).

ERM identifies significant or major risks to the Company and develops action plans to modify or mitigate risks.

Every few years, Dow also utilizes a robust scenario analysis to assess the long-term materiality and impact of climate-related risks and opportunities.

Scenario analysis is used to challenge business-as-usual assumptions and strengthen the resiliency of the Company’s Decarbonize & Grow strategy.

Scenarios are used to evaluate both physical and transition risk and are particularly useful in evaluating the potential and impact of emerging risks.

Decarbonize & Grow

Dow’s Decarbonize & Grow strategy involves specific actions to mitigate identified climate-related physical and transition risks, while also advancing opportunities in several key areas.

These include:

• Optimizing Manufacturing Facilities and Processes for Sustainability:

Dow is investing approximately $1 billion in annual capital spending allocation to decarbonize assets, in a phased approach, while growing capacity.

This investment plan includes large, industry-leading projects, such as the announced net-zero carbon emissions (Scope 1 & 2 emissions) site in Alberta, Canada, as well as emissions-reduction investments in existing facilities and replacement of end-of-life carbon intensive assets with state-of-the-art, carbon-efficient and sustainable technologies.

In 2021, Dow implemented energy efficiency and emissions reduction projects, reducing energy consumption by 1.232 million kilojoules per year and amounting to 611,500 metric tons of carbon dioxide ("CO 2 ") reduction.

In 2021, Dow’s Terneuzen site outlined a roadmap to support the Dutch Climate Agreement and enable a reduction of 1.7 million metric tons of CO 2 annually by 2030 versus a 2020 baseline.

These projects are part of Dow’s roadmap that will enable the Company to decarbonize its manufacturing while meeting growing demand for its products and includes replacing end-of-life assets with high-efficiency, low-carbon assets.

Dow is also working to reduce water use and the potential impact of water stress.

One example is the Company’s commitment to 100 percent water circularity by 2025 at Dow’s site in Terneuzen, The Netherlands.

Dow is investing approximately $1 billion in annual capital across the economic cycle to decarbonize assets, in a phased approach, while growing capacity.

• Increasing Clean Energy in Purchased Power Mix:

Dow continues to invest in cost-efficient clean energy, including wind, solar and hydropower, across operations.

In 2021, Dow expanded access to renewable power to more than 900 megawatts, so that more than 25 percent of purchased electricity comes from renewable sources.

Dow is a leading user of renewable energy in the chemical industry and in the top 20 among global corporations according to BloombergNEF.

Dow is also collaborating with X-energy with the intent to deploy carbon-free small modular nuclear technology options at one of the Company's U.S.

sites by approximately 2030.

Dow continues to invest in cost-efficient clean energy, including wind, solar, biomass and hydropower, across operations.

• Developing Next Generation, Low-Carbon Manufacturing Technologies:

Dow is investing in longer-term, future-focused manufacturing technologies that will be critical in the decarbonization of the Company's manufacturing.

For example, Dow is collaborating with Shell on technology to electrically heat steam cracker furnaces.

Combining electrical cracking with clean electricity sources would reduce the CO 2 footprint of the production process to near zero emissions.

Dow also developed its proprietary FCDh technology, which can be used to make cracking a less carbon intensive process, and has installed the technology in a mixed-feed cracker in Louisiana to produce on-purpose propylene, reducing energy use and emissions by up to 20 percent.

Dow is leveraging the learnings from the FCDh development to also advance ethane dehydrogenation technology for ethylene and propylene production, which has the potential to reduce emissions by 40 to 50 percent.

• Collaborating With the Supply Chain to Tackle ‘Upstream’ Carbon Emissions:

Dow is working closely with its suppliers to set emissions reduction targets and to embed ESG performance as a metric in supplier selection, contracting, and relationship management.

Approximately 70 percent of Dow’s emissions footprint fall into the Scope 3 categories and more than half of those come from the raw materials, transportation, and other services purchased as a company.

Reducing Scope 3 emissions is a tremendous challenge for all companies.

Dow recognizes the significant opportunity it has to work with suppliers to reduce those emissions, just as Dow's customers are looking to the Company to reduce emissions for the Dow products they buy.

Dow was recently recognized as a Global Supplier Engagement Leader by CDP, placing among the top 8 percent of companies that disclose their data to CDP.

CDP's Supplier Engagement Rating system independently evaluates supplier engagement practices with the aim of accelerating action to reduce emissions in global supply chains.

• Building a Value-Generating Scope 3 Decarbonization Pathway:

Approximately two-thirds of Dow’s emissions footprint fall into the Scope 3 categories and more than half of those come from the raw materials, transportation and other services purchased as a company.

The Company was recognized as a Supplier Engagement Leader for the second straight year by CDP, a global non-profit that directs the world’s environmental disclosure system for companies, cities, states and regions.

Dow has significantly advanced its Scope 3 strategy by improving emissions accounting, advancing transparency along the value chain, and working closely with key suppliers to set and meet emissions reduction targets.

• Developing Low-Carbon Products, Technologies and Services:

Dow products are essential to a low carbon future, and the Company wants the world’s best brands to look to Dow to help them achieve their goals and make their products more sustainable.

Dow is helping its customers achieve their climate goals by providing products that facilitate energy efficiency, light weighting, fuel transition, circularity, increased operational efficiency, resource reductions and reduced emissions.

Examples include Dow’s MobilityScience™ platform, which is focused on developing cutting-edge material innovations that will enable the next generation of electric and autonomous vehicles to achieve longer range, greater comfort, enhanced safety, and a lower carbon footprint.

Dow’s ENDURANCE™ compounds for cable systems support next-generation, longer-life, and lower-carbon emissions infrastructure, including on- and off-shore windfarms.

Dow’s Novel ENDURANCE™ HFDD 4201 enables significantly lower-carbon emissions (approximately 80 percent), and material and energy savings during cable production.

Additionally, in September 2022, Dow introduced DOWSIL™ Immersion Cooling Technology, a next-generation solution for cooling hyperscale cloud enterprise data centers with optimized efficiency and sustainability.

DOWSIL™ ICL-1000 Fluid, the first product in this new technology family, is estimated to absorb heat about one thousand times more efficiently than air-cooled systems, resulting in up to a 95 percent reduction in energy use for server cooling and up to a 50 percent reduction in overall data center power consumption.

This product can also be recycled to increase its circularity.

Dow is helping its customers achieve their climate goals by providing products that facilitate energy efficiency, lightweighting, fuel transition, circularity, increased operational efficiency, resource reductions and reduced emissions.

Advancing Water Stewardship and Resilience

As one of the largest materials science companies in the world, Dow depends on a steady supply of fresh water to create the products that are essential for everyday life and human progress.

Dow strives to use the Company’s technology, expertise and partnerships to help conserve and promote regenerative water use, protect watersheds and create a future where clean water is abundant and available to all.

Effective water stewardship is also required for long-term company viability and Dow’s senior executive leadership team oversees the Company’s water strategy.

Dow’s water risk management approach recognizes that every site and every business is accountable for water while certain watersheds require additional measures to address specific water stress challenges.

Key Dow locations have specific water action plans to address risk to operations given their dependence on a stressed watershed.

These action plans include mitigations for local water scarcity or quality issues and consider the needs of other local users for freshwater.

Additionally, Dow identified six sites in 2015, located in Texas (2);

Bahia Blanca, Argentina;

Terneuzen, The Netherlands;

Böhlen, Germany;

and Tarragona, Spain;

where operations are located in a water-stressed watershed, have local water quality issues, have competition among local users for water, or have some local knowledge of watershed challenges, and these six sites have been the focus of actions since that time.

Advancing a Circular Economy

Dow’s vision for turning the tide on plastic waste is centered on solving challenges:

from designing for recyclability at the beginning of a product’s life to increasing Dow's capacity to use plastic waste as feedstock and other alternative feedstock, enabling plastic waste to be blended with virgin plastic as recycled resins, and building and partnering in industrial ecosystems to close the loop.

The issue is complex, and through partnerships, Dow is working across the value chain to improve access to collection, recycling, and processing infrastructure and to create new circular business models.

Improving circularity of plastics through recycling and reuse is critical to a world that is also targeting carbon emissions reduction.

The lower-carbon benefits of polyethylene-based packaging serve as a key driver and source of value, as well as the lifecycle perspective of plastic versus other available materials.

Moving to circular products includes increasing the share of plastics production from circular feedstocks.

In 2020, Dow announced "stop the waste" and "close the loop" targets to address plastic waste and, in 2022, Dow committed to accelerating the circular ecosystem by turning waste and alternative feedstock into raw materials that help deliver 3 million metric tons per year of circular and renewable solutions by 2030 with a new "transform the waste" sustainability target.

Meeting this expanded “transform the waste” target will require investments in technologies and infrastructure and strategic partnerships.

To do this, Dow will expand its efforts to “stop the waste” by building industrial ecosystems to collect, reuse or recycle waste and expand its portfolio to meet rapidly growing demand.

Dow expects the waste required to produce this expanded target to surpass and replace the original 1 million metric ton stop the waste goal.

Dow is also catalyzing a circular economy for plastics through global partnerships with non-governmental

organizations and investors, such as the Alliance to End Plastic Waste, The Recycling Partnership, Circulate Capital and Closed Loop Partners.

Additionally, Dow is accelerating its progress through several recently announced circular and mechanical offtake agreements and projects that will help contribute to achieving the new target, including:

• Agreements with Mura Technology to construct multiple world-scale advanced recycling facilities in the U.S.

and Europe, collectively adding as much as 600 kilotons of annual capacity.

• An investment to build the largest single hybrid recycling site in France, managed by Valoregen, which will secure a source of post-consumer resins (“PCR”) for Dow.

• Mechanical recycling collaboration with Boomera LAR in Brazil.

• An investment in Mr.

Green Africa and an agreement to co-develop more traceable, fair, and high-quality PCR that can be used in the production of new flexible plastic packaging.

• A memorandum of understanding with Lucro Plastecycle to develop and launch polyethylene film solutions using PCR plastics in India.

• The launch of a bold new collaboration with WM to improve consumer recycling for hard-to-recycle plastic films throughout the U.S.

by allowing consumers to recycle these materials directly in their curbside recycling.

Once operating at full capacity, this collaboration is expected to divert more than 120,000 metric tons of plastic film from landfills annually.

Dow is also working directly with its customers, brand owners and the value chain to help customers redesign and create packaging solutions that are both high-performance and recyclable or made with circular polymers.

Dow continuously invests in application development, packaging redesign and infrastructure improvements to deliver on the Company's circularity goals.

As one of the world’s largest producers of plastic, Dow wants to put an end to plastic waste.

Eliminating plastic waste is about more than just recycling and reusing.

It is about creating innovative solutions that are sustainable and continuing to invest in an industrial ecosystem for the circular economy.

Dow is committed to turning the tide on plastic waste and meeting customers’ increasing demands for more sustainable and circular products through Dow's materials science expertise and its investments in circular innovations and partnerships – from designing for recyclability at the beginning of a product’s life to building materials ecosystems that will help turn plastic waste into a valuable resource that can be used to create new products.

Dow is working to advance circularity for its key materials and, to this end, is working to deliver on its

enterprise target to Transform the Waste, which entails transforming plastic waste and other forms of feedstocks to deliver 3 million metric tons of circular and renewable solutions annually by 2030.

To reach the target, Dow is collaborating with other stakeholders across value chains to build materials ecosystems to collect, reuse or recycle plastic waste.

This, in turn, will enable Dow to return more plastic waste into the circular system, and scale production of circular and low-carbon emissions solutions.

Since 2020, Dow has invested more than $200 million into impact funds, recycling infrastructure, venture capital, research and development and key technologies to transform waste into solutions that support a circular economy.

Dow is catalyzing a circular economy for plastics through global partnerships with non-governmental organizations and investors, such as the Alliance to End Plastic Waste, The Recycling Partnership, Circulate Capital, Closed Loop Partners and Lombard Odier Global Plastic Circularity Fund.

Additionally, Dow is making progress on its Transform the Waste target through several recently announced circular and renewable offtake agreements and projects that will help contribute to achieving the new target.

Business for updates on these investments, partnerships and projects.

In support of, and in collaboration with, value chain partners and customers, Dow is aligning its innovation and application development programs so its products are recycle-ready at the outset or enable circularity in customers’ products and processes.

Designing for circularity at the molecular level expands the possibilities for recycling across a variety of applications, and ultimately lessens the environmental impact of Dow's customers’ products.

Dow's efforts under Transform the Waste expand beyond packaging.

In 2023, the Company launched and/or commercialized a number of other circular solutions like SPECFLEX C, a recycled polyurethane solution for the automotive sector and Propylene Glycol CIR.

Developing Safer Materials

How the Company manufactures, distributes and enables the proper use and disposal of its products can have a large and meaningful impact on the environment.

Dow’s vision is a future where every material it brings to market is sustainable for the people and the planet.

Dow is working to deliver that sustainable future through its materials science expertise and collaboration with its customers.

By constantly innovating how it sources, manufactures and delivers material solutions, Dow helps customers achieve their goals and create a better tomorrow.

Dow has an impact on safer materials directly through the manufacture and delivery of solutions and indirectly through the chemicals that are sourced.

Dow is committed to demonstrating the value of chemistry and materials science to society and improving the way the world understands and considers science in decision-making to maximize benefits to businesses, society and the planet.

Through Dow’s 2025 Safe Materials for a Sustainable Planet goal, the Company has made progress toward this vision by innovating sustainable materials of tomorrow, leading candid conversations about product safety and committing to the advancement of open and transparent chemistry with value chain partners, customers and the public.

Environmental Remediation

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Although there is currently much uncertainty as to what will ultimately be required to remediate the BCSA and Rohm and Haas's share of these costs has yet to be determined, the range of activities that are required in the interim Record of Decision is known in general terms.

The PRP Group has been approached by the EPA to convene discussions for the Remedial Action Consent Decree the EPA is preparing for the Berry’s Creek Site.

The group submitted the 60 percent design for EPA review and has identified and contracted with a Remedial Action contractor to support completion of the 95 percent design.

Allocation remains incomplete.

At December 31, 2023, the Company had accrued liabilities totaling $319 million ($339 million at December 31, 2022) for environmental remediation at the Midland and Wood-Ridge sites.

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As a result, the damages alleged are not expressly identified as to Union Carbide, Amchem or any other particular defendant, even when specific damages are alleged with respect to a specific disease or injury.

In fact, there are no asbestos personal injury cases in which only Union Carbide and/or Amchem are the sole named defendants.

For these reasons and based upon Union Carbide’s litigation and settlement experience, Union Carbide does not consider the damages alleged against Union Carbide and Amchem to be a meaningful factor in its determination of any potential asbestos-related liability.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis