DowDuPont Inc. (NYSE:DWDP) Q2 2018 Earnings Conference Call - Final Transcript

Aug 02, 2018 • 08:00 am ET


DowDuPont Inc. (NYSE:DWDP) Q2 2018 Earnings Conference Call - Final Transcript


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Good day and welcome to the DowDuPont's Second Quarter 2018 Earnings Call. (Operator Instructions) Also today's call is being recorded.

At this time, I would now like to turn the call over to Neal Sheorey. Please go ahead, sir.

Neal Sheorey

Good morning, everyone. Thank you for joining us for DowDuPont's second quarter 2018 earnings conference call. We are making this call available to investors and media via webcast. We have prepared slides to supplement our comments during today's conference call. These slides are posted on the Investor Relations section of DowDuPont's website and through the link to our webcast. Speaking on the call today are Ed Breen, Chief Executive Officer; Howard Ungerleider, Chief Financial Officer; Jim Fitterling, Jim Collins and Marc Doyle, Chief Operating Officers for DowDuPont's Materials Science, Agriculture and Specialty Products divisions respectively and Greg Friedman, Vice President of Investor Relations.

(Forward-Looking Cautionary Statements)

I will now turn the call over to Ed.

Ed Breen

Thanks, Neal and good morning, everyone. As you saw, we had a strong second quarter. The highlights were that we grew sales, volume and operating EBITDA by double digits percent and we delivered local price gains and operating EBITDA margin expansion. We are delivering growth in each division, due to a combination of strong global demand and innovation. These are key indicators for me that our business focus and our people are making a difference in the marketplace for our customers and for shareholders.

Net sales grew double digits percent in every division, and we were up in every region. Growth was fueled by broad based volume gains, enabled by capacity expansions from our US Gulf Coast and Sadara investments, benefits from the recovery of Ag sales due to weather-related delays last quarter, and pricing strength. This is the second quarter in a row that we see synchronized growth in our end markets.

We also continued to benefit from cost synergies. We realized more than 375 million of savings in the second quarter. Savings since the merger closed total nearly 900 million. Examples of our cost synergy work include renegotiating procurement contracts, streamlining manufacturing operations and rightsizing our organization. Most of our nearly 900 cost synergy projects have been initiated. Based on our progress so far, we are increasing our year-over-year savings target to 1.4 billion, up more than 15% from our previous target. And we remain on pace to deliver our target of 3.3 billion on a run-rate basis at the end of two years.

We're seeing benefits in our gross margin, which was up this quarter, despite raw material costs; and we're seeing it in SG&A, which declined as a percent of sales. I am very pleased with the progress our teams are making with synergies, while continuing to run the business well.

Now I will turn to the status of the intended separation and spins, on slide 3. Since our last call, we have made substantial progress determining the capital structures of each of the spins. We expect to share our capital structures at