Unlocking Value Creating Three World-Leading Companies 2017 Annual Report
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UNLOCKING VALUE CREATING THREE WORLD-LEADING COMPANIES 2017 ANNUAL REPORT AGRICULTURE MATERIALS SCIENCE SPECIALTY PRODUCTS WorldReginfo - b6146b17-9ab6-4688-a070-21c5404fe6dd FINANCIAL HIGHLIGHTS In millions, except amounts per share 2017 2016 YoY Net sales $62,484 $48,158 $14,326 Pro forma net sales1 $79,535 $70,894 $8,641 Income from continuing operations, net of tax $1,669 $4,404 $(2,735) Pro forma operating EBITDA1, 2 $16,166 $14,114 $2,052 Earnings per common share from continuing operations – diluted $0.95 $3.52 $(2.57) Pro forma adjusted earnings per common share from continuing operations – diluted 1, 3 $3.40 $2.79 $0.61 All year-over-year comparisons are on a pro forma basis and exclude significant items. 1 Pro forma information was prepared in accordance with Article 11 of Regulation S-X. 2 Pro forma Operating EBITDA is defined as earnings (i.e., “Pro forma income from continuing operations before income taxes”) before interest, depreciation, amortization and foreign exchange gains (losses), excluding the impact of significant items. 3 Pro forma adjusted earnings per share is defined as “Pro forma earnings per common share from continuing operations – diluted” excluding the after-tax impact of pro forma significant items and the after-tax impact of pro forma amortization expense associated with DuPont’s intangible assets. WorldReginfo - b6146b17-9ab6-4688-a070-21c5404fe6dd Dear DowDuPont Shareholders, In 2017, we took significant steps forward to create Strengthening our Foundation new value for you, our fellow shareholders. First and Immediately following the DowDuPont transaction foremost, we closed the historic merger of Dow close, our Board and management, with input and DuPont, with a clear purpose to combine our from a range of stakeholders and outside advisors, highly complementary portfolios and create three completed a thorough review of the portfolios industry-leading growth companies in Agriculture, of each of the three intended companies. Materials Science, and Specialty Products. The outcome was unanimous approval of targeted adjustments between the Materials Science and Specialty Products divisions. Together, these moves, which account for more than $8 billion in sales and approximately $2.4 billion in operating EBITDA, further secure each intended company’s industry-leading position and better equip both to deliver greater value-added solutions and to capitalize on enhanced growth opportunities. We are on track to launch these three world-class companies, with Materials Science separating by the end of the first quarter of 2019, followed shortly after by Agriculture and Specialty Products, by June 1, 2019. Andrew N. Liveris Edward D. Breen Capturing Value & Growth Synergies By year-end, the portfolios for these intended new A critical element of the integration work underway is companies were well aligned, with our teams moving delivering on our cost synergies commitment. By the quickly to integrate, begin capturing synergies and end of 2017, we had already achieved annual run- prepare for the spins. Importantly, we also continued rate savings of more than $800 million – exceeding to report strong results after becoming a merged our commitment of $500 million of run-rate savings. entity – building on solid performance from both Based on this quick value capture, we recently legacy organizations and demonstrating our team’s increased our cost synergy commitment from ability to focus on customers as we also prepare $3 billion to $3.3 billion. At the same time, we see the for the future. opportunity to capture $1 billion in growth synergies – a prime focus for our teams. As the intended Having achieved this important progress, we are companies grow with highly focused strategies in now firmly focused on developing three growth their respective industries, we expect each will be a businesses. Through the merger and intended vibrant contributor to all of its communities, given the separations, we are enabling these businesses to growth profiles we are creating for each business. allocate capital more effectively, apply powerful innovation capabilities that are more focused and more productive and expand value-added products and solutions to more customers worldwide. With lower cost structures, increased agility and distinctive investment profiles, each will be better positioned to grow and to thrive over the long term, as they reinvest in science and innovation to deliver significant value for shareholders. 1 WorldReginfo - b6146b17-9ab6-4688-a070-21c5404fe6dd 2017 Performance Highlights A Bright Future Ahead • In Agriculture, new product growth enabled the Our confidence in the future comes, in large measure, division to deliver a solid year despite several from the energy and passion of our people, coupled market headwinds. Innovative products including with the shared values of our respective heritage ARYLEX™ herbicide, LEPTRA® corn hybrids, companies. These guideposts will enable us to VESSARYA™ fungicide and ISOCLAST™ insecticide continue to anticipate and quickly adapt to change continued to generate growth. We also launched and maintain our leadership positions – connecting ENLIST™ cotton in the U.S., and received import science to the marketplace and creating new approval from China to enable the full launch of opportunities to help our customers solve the ENLIST™ corn in the U.S. and Canada for the 2018 world’s challenges. growing season. Looking ahead, we expect our robust pipeline to launch 10 new seed products As we look ahead, we remain focused on capitalizing and 11 new crop protection products over on the synergies, and in particular on the significant the next five years. growth opportunities in front of us. And we look forward to positioning and launching three growth • Materials Science delivered top- and bottom-line companies that will deliver long-term rewards growth on robust consumer-led demand in core for our shareholders. end markets where our segments hold leadership positions today. The division also continued to Thank you for your investment in DowDuPont. advance its long-term growth projects – most notably on the U.S. Gulf Coast, with the startup of its new world-scale ethylene, polyethylene and elastomers facilities, as well as with its Sadara joint venture in the Middle East, which achieved Andrew N. Liveris Edward D. Breen full commercial operations for all 26 production Executive Chairman Chief Executive Officer units, with additional value-added products across these key chains and others including isocyanates, propylene oxide/propylene glycol, polyols, amines and glycol ethers. In addition, the innovation engine in Materials Science delivered more than 2,500 new products in our target markets and won numerous awards. • Specialty Products also produced strong top- and bottom-line growth on continued demand in key end markets. Our Electronics & Imaging business delivered strong results through the semiconductor and consumer electronics end markets, Transportation & Advanced Polymers experienced robust demand from the automotive market and broad-based demand from electronics and industrial markets, and the Nutrition & Biosciences businesses performed well in the microbial control solutions, probiotics and biomaterials end markets. In addition, we closed our acquisition of FMC’s Health and Nutrition business, which significantly enhances this portfolio by expanding our offerings and bringing access to the fast-growing pharmaceuticals excipients market. 2 WorldReginfo - b6146b17-9ab6-4688-a070-21c5404fe6dd AGRICULTURE: A Global Innovation Leader Agriculture Sales The Agriculture Division brings together the strengths of DuPont Pioneer, DuPont Crop Protection and Dow AgroSciences to form a pure-play Agriculture Company with the industry’s most comprehensive and balanced portfolio, focused resources, and the scale needed to deliver the innovative solutions its customers need. The highly productive innovation engine and combined robust pipeline of solutions across seed, crop protection, seed-applied technologies, and digital agriculture will n Seed enable the intended Agriculture Company to bring a broader suite of products to the n Crop Protection market faster and be an even better partner to farmers around the world, helping 2017 Pro Forma them to increase their productivity and profitability. Sales: $14,342 MM • Global leader in production • Superior solutions, greater choice • Strong advocate for farmers 2017 Pro Forma Op. EBITDA: agriculture with a presence in over and deeply committed to being a • World-class R&D capabilities support $2,611 MM 130 countries innovation and new technologies strong corporate citizen LEADING PORTFOLIO OF PRODUCTS AND SERVICES WITH ENHANCED R&D ENGINE TO DRIVE FUTURE GROWTH DELIVERING SOLUTIONS FOR GROWERS ACROSS SEED AND CROP PROTECTION CATEGORIES • Cereals Herbicides Alfalfa Cotton Soybeans • Corn and Soybean Herbicides • Fungicides Canola Rice Sunflowers • Insecticides • Pasture and Land Management Cereals Silage Inoculants Wheat • Rice, Trees and Vines Herbicides • Seed-Applied Technologies Corn Sorghum Digital Ag • Specialty Crop Herbicides • Structural Pest Management • Turf and Ornamental Pest Management NEW PRODUCT PORTFOLIO AND PIPELINE 2017 - 2018 2018 - 2019 Beyond CROP PROTECTION • Arylex™ Active • Inatreq™ Active • Fungicides 1-5 • Enlist Duo® herbicide with Colex-D® • Pyraxalt™ insect control® • Herbicides 1-2 • Expanded Zorvec™ Launch in AP and LA • Rinskor™ Active • Insecticides 1-5 • Lumisena™ seed treatment • Zorvec™ expansion in EMEA