Smaller European locations likely to be part of Dow shutdown plans – CEO

Tom Brown


LONDON (ICIS)–Plans by Dow to cut costs through headcount reduction and shutting down some assets is likely to hit smaller-scale operations in its European portfolio amid a wider global move, the CEO of the US-based chemicals major said on Thursday.

The company announced more detail on plans to realise $1bn in cost savings through 2023, with $500m in earnings before interest, tax, depreciation and amortisation (EBITDA) expected to be driven through a 2,000-person headcount reduction, some shutdowns and process improvements

The company intends to save an additional $500m by decreasing turnaround spending, reducing raw materials purchases, and reducing some spending.

Intended to prioritise business operations towards more cost or growth-advantaged markets in the wake of the shifting energy cost landscape seen since the onset of the UKraine war, the cost-cutting measures are likely to eliminate around 6% of the company’s global workforce.

The measures will not be exclusively focused on Europe, but the shifting dynamics in the region as governments struggled to adapt to the loss of most of the cheap Russian gas that powered the continent was a major factor in Dow’s financial results last year, according to CEO Jim Fitterling.

Around 60% of the nearly $3bn decline in 2022 company earnings before interest and taxes (EBIT), to $6.59bn, was related to energy pricing in Europe and the cooling effect that has had on demand, he said.

Conditions improved in the fourth quarter on the result of a warmer winter and more favourable inventory conditions in the region, but long-term competitiveness remains a concern.

“They’ve done an admirable job, especially in Germany, switching away from Russian natural gas over to other sources,” Fitterling said, speaking on an investor call on Thursday.

“So that has helped, but we still have to take a look at long-term energy policies and work with governments [and] EU member states on energy policies because we’re a long way away from long term competitiveness in Europe,” he added.

No specific locations or sites have been publicly earmarked for closure, with more clarity expected before the end of the quarter, but decisions that are in the process of being worked through so far largely fall on smaller European assets, Fitterling said.

Dow has substantial integrated cracker operations in Terneuzen, Netherlands, Tarragona, Spain, and Bohlen, Germany, as well as substantial operations in Schkopau and Stade in the country. The company also operates smaller sites, such as Barry, UK, and Leuna, Germany,.

Even within the larger integrated complexes, there are units that are seeing increasingly challenged economics. Trinseo announced plans in September 2022 to close its Bohlen styrene plant, with potential implications for Dow’s benzene operations at the site.

The company’s Stade propylene oxide operations also utilise older chlorohydrin technology, which is less economical than the process technologies used at newer production units in the space.

The focus of the closure plans is on units that are likely to struggle to remain competitive irrespective of energy price movements, according to Fitterling.

“The decisions we announced today around restructuring, we’ve looked at locations that are going to be challenged in any scenario and take actions on those,” he said.

The company is less focused on its larger operations, despite the economics of its European cracker operations standing as less competitive than lower-cost North American units, but discussions are ongoing with European governments about improving the long-term economics of those sites.

“On large sites like our large cracker sites, we’re still able to run cashflow positive, and we’re working hard on the energy situation. We’ll continue to analyse that through this year and see what kind of work we can do with the governments there to make them more competitive long term,” Fitterling said.

The headcount reduction plans are not focused exclusively on Europe, but conditions in the region are a large part of the impetus for the moves, he added.

“The 2,000 headcount reduction is not all specific to Europe, although Europe is a big part of the earnings decline that is driving us to take these actions,” he said.

“The site and asset decisions we’ve made so far are really smaller-scale locations where we know they will be challenged through the year. We haven’t released the list of those, we’re working through that with the European works councils, but we will be doing that as we get towards the end of this quarter,” he added.

Front page picture: Dow facilties in Delfzijl, in Groningen, the Netherlands
Source: European Chemical Site Promotion Platform (ECSPP)

Focus article by Tom Brown

Clarification: Recasts list of smaller Dow sites in paragraph 11.


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