What Factors Will Drive DowDuPont’s Industrial Intermediates & Infrastructure Segment Growth

Capacity expansion at Sadara, and the overall growth in the market, will be the key factors that will drive the Industrial Intermediates & Infrastructure segment growth in the coming years, in our view. The Industrial Intermediates & Infrastructure segment accounts for roughly 20% of DowDuPont’s (NYSE:DWDP) value, according to our estimates. The segment includes functional materials that consist of a portfolio of products, such as polyurethane, which find application in various industries. The segment revenues have seen strong growth of late, given the capacity expansion at the Sadara unit, and we expect this trend to continue in the near term. Sadara is the company’s joint venture with Saudi Aramco in Saudi Arabia, and it is the world’s largest chemicals complex with 26 integrated manufacturing plants with capacity of over 3 million tons. The unit has aided the Industrial Intermediates & Infrastructure business, and equity earnings improved by over $100 million (y-o-y) for the segment in the first half of 2018. We have created an interactive dashboard ~ How Is The Industrial Intermediates & Infrastructure Business Trending For DowDuPont ~ on the segment’s expected performance in 2018 and 2019. You can adjust the revenue and margin drivers to see the impact on the company’s overall revenues, earnings, and price estimate.

Expect The Industrial Intermediates & Infrastructure Segment Revenues To Grow In Low Double Digits In The Near Term

DowDuPont’s Industrial Intermediates & Infrastructure segment consists of Construction Chemicals, Energy Solutions, Industrial Solutions, and Polyurethanes & CAV (Chlor-Alkali & Vinyl) businesses. We forecast the Industrial Intermediates & Infrastructure segment to grow in low double digits for the full year 2018, and in high single digits in 2019.

The Construction Chemicals business will largely benefit from the overall positive trends in the market, which is expected to grow at a CAGR of over 6% to north of $25 billion over the next 3-4 years. Asia-Pacific accounts for almost half of the Construction Chemicals market, and the expansion in Sadara will bode well for DowDuPont given the geographic location and logistics to transport.

Similarly, the overall market for polyurethane is expected to grow in high single digits in the coming years to over $80 billion by 2023. Looking at the products, rigid foam will likely see strong growth, given the trends in the construction sector in the North America. In fact, the U.S. construction sector is forecast to grow in mid-single digits over the next three years, according to a research report. This growth will be led by both residential and non-residential construction. DowDuPont is one of the largest players in the polyurethane market, and an expansion in the overall market will bode well for the company.

Looking at the financials, the segment revenues grew in mid-teens to $12.6 billion in 2017, and 30% in the first half of 2018. The growth in EBITDA was even stronger with a 36% jump in 2017, and 44% in H1 2018. The growth was led by double digit gains in both pricing and volume. While the growth rate will likely slow in the coming quarters, the company is poised to see a steady uptick in the segment revenues and EBITDA in the medium to long run, led by growth in the global construction, and DowDuPont’s ability to meet the demand from its enhanced capacity at the Sadara unit.

What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs

For CFOs and Finance Teams | Product, R&D, and Marketing Teams

More Trefis Research

Like our charts? Explore example interactive dashboards and create your own.