What Are DowDuPont’s Key Sources of Revenue?

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DowDuPont (NYSE:DWDP) is a U.S.-based chemicals company, formed after a merger between Dow Chemical Company & Dupont in 2017. The company operates primarily into three verticals ~ Agriculture, Materials Science, and Specialty Products ~ and it plans to split these businesses into three different companies by 2019. The company’s key revenue and EBITDA sources are  Packaging & Specialty Plastics, which accounts for roughly 30% of the company’s total revenues, Agriculture (17%), Industrial Intermediates & Infrastructure (17%), and Performance Materials & Coatings with 11% contribution to the overall top line. We have created an interactive dashboard ~ What’s DowDuPont’s Revenue And EBITDA Breakdown? ~ which highlights the segment wise breakup of revenues and EBITDA for DowDuPont. You can also modify the revenue and EBITDA drivers to see the impact on the company’s overall revenues and EBITDA.

Packaging & Specialty Plastics is the largest segment for DowDuPont. The business includes elastomers, polyethylene, and other products used in the electrical, telecommunication, and packaging industry. It also includes performance polymers, which delivers a broad range of polymer-based high performance materials, that includes elastomers and thermoplastic and thermo-set engineering polymers. The segment revenues have grown from $18.4 billion in 2015 to $22.4 billion in 2017, and we forecast it to grow to north of $25 billion by 2019. This can be attributed to higher demand for elastomers, and the benefits from the company’s increased capacity in Sadara. Most of the elastomers demand comes from Asia-Pacific, and Sadara unit will aid the supply. The market size of elastomers is estimated to grow in the mid-single digits to $92 billion by 2021. The overall expansion of the market will bode well for DowDuPont.

Agriculture segment revenues are generated from wide variety of agricultural chemicals such as herbicides, insecticides, and fungicides for farmers. Also included in this division’s sales are genetically modified (GM) seeds/traits for corn, soybean, and cotton crop. The segment revenues saw low single digit growth in 2017 to $14.3 billion. We forecast the growth rate to remain moderate in the near term, due to expected headwinds from Brazil. While the company is positioned to benefit from corn plantations over soybean in Brazil, the country is seeing higher demand for soybean plantation, and this will likely result in lower corn planted area. This will likely impact the segment’s overall performance in the near term.

Industrial Intermediates & Infrastructure segment includes functional materials that consists of a portfolio of products which find application in pharmaceuticals, personal care, and industrial specialty industries. The segment revenues have increased from a little under $11 billion in 2016 to $12.6 billion in 2017, and we forecast them to grow to a little under $16 billion by 2019,  primarily led by volume gains. The added capacity at Sadara is aiding the overall sales, especially in the Asia-Pacific. Also, the polyurethane market is expected to grow at a CAGR of 8% in the coming years, and this should aid the sales for DowDuPont, given it is one of the largest players in the polyurethane market.

Looking at Performance Materials & Coatings, the segment includes amines, chlorinated organics, epoxy, among others. Adhesives and sealants, construction materials, cellulosic-based construction additives, raw materials for architectural paints and industrial coatings, and technologies used for water purification are also part of this segment. The segment revenues have seen strong growth in the recent past, and stood at $8.7 billion in 2017. We forecast them to grow north of $10.5 billion by 2019, primarily led by pricing gains.

These four segments combined account for roughly three-fourths of DowDuPont’s overall EBITDA, which has grown from less than $10 billion in 2015 to over $16 billion in 2017, and we forecast it to grow to a little under $20 billion by 2019. Higher revenues, and growth in margins led by price increases, along with cost synergies will likely drive the overall EBITDA growth.

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