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January 28, 2016 01:00 AM

Sizing up DowDuPont

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    When Dow Chemical Co. and DuPont Co. announced in December they would merge to create a $130 billion giant, a selling point to shareholders was the complementary nature of their businesses and products. So how do the two companies compare?

    Dow is by far the bigger of the two groups in terms of sales. Dow's group sales were $58.2 billion in 2014 while DuPont's sales were $34.7 billion – DuPont later spun off Performance Chemicals as Chemours Co. Operating profit, shown in an investor presentation as adjusted EBITDA, were $9 billion at Dow and $6 billion at DuPont.

    They are more evenly matched when measured by staff numbers, with Dow and DuPont both estimated to have about 53,000 employees at the end of 2015, although DuPont announced new staff cuts of 5,000 or more in December.

    The polymer businesses of Dow and DuPont will be concentrated in the material science company that is the biggest of three independent companies to be spun off in 2018. Its annual sales (based on 2014 figures) will be $51 billion, with $45 billion contributed by Dow businesses and $6 billion by DuPont ones. The company will also include the silicone materials of Dow Corning, the joint venture in which Dow is increasing its stake from 50 to 100 percent.

    Dow, a major producer of polyethylene, and DuPont, which is big in engineering thermoplastics, say that together they can enhance their ability to target end markets. About 70 percent of the materials company's sales will focus on three key end markets for global polymer producers: packaging, transportation and construction. It will be the world's largest packaging materials supplier, according to the partners.

    Five-layer film for food packaging is one application area where Dow and DuPont think they can leverage the strengths of their respective materials. One example is a barrier film type with Dow LLDPE outer layers and DuPont polyamide and EVA inner layers.

    In the automotive market, Dow and DuPont both have leading polymer supply positions, but in different types of products. DuPont's strength is in engineering thermoplastics – especially nylons and specialty polyamides – used “under the hood” and in other high performance applications. Dow is known particularly for its polyurethane products in adhesives and foams.

    There are some overlapping product groups, such as elastomers. But the two groups make different types of materials: Dow specializes in polyolefin-based elastomers and EPDM, while DuPont produces thermoplastic copolyester elastomers, ethylene acrylic elastomers and perfluoroelastomers. A previous joint venture in this area, DuPont Dow Elastomers, ended in 2005.

    DuPont's polymer-related business is characterized by its breadth in performance products. Its engineering resins include products based on nylon, polyester and acetal, while additive products include modifiers based on ethylene copolymer and ethylene vinyl acetate copolymer.

    Dow is an integrated producer of ethylene and propylene feedstock, high volume polymers including polyethylene, polyurethane and associated chemicals. It is also a major producer of ethylene oxide, an upstream chemical in polyester and PET production. Dow separated a significant part of its chlor-alkali and downstream derivatives businesses and merged them with Olin Corp.

    R&D has long been a priority for DuPont and represents about 6 percent of annual sales. Dow spends about 3 percent on R&D in proportion to annual sales.

    Both groups have global reach, but Dow's operations are focused on larger operations, with a total 201 manufacturing plants in 35 countries. DuPont has 322 manufacturing plants in 90 countries.

    In their respective materials businesses, Dow generates the majority of its sales in North America and Europe, Middle East and Africa (EMEA), while DuPont can add a sizeable contribution from Asia-Pacific to its sales from North America and EMEA. Reflecting this, DuPont Performance Materials has 16 facilities in the United States and Canada, eight in EMEA, 17 in Asia-Pacific and one in Latin America.

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