Dow (DOW) Q4 2023 Earnings Call Transcript

Dow (DOW 1.51%)
Q4 2023 Earnings Call
Jan 25, 2024, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the Dow fourth quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator instructions] As a reminder, this conference is being recorded.

I will now turn it over to Dow investor relations vice president, Pankaj Gupta. Mr. Gupta, you may begin.

Pankaj Gupta -- Vice President, Investor Relations

Good morning. Thank you for joining today. The accompanying slides are provided to this webcast and posted on our website. I'm Pankaj Gupta, Dow investor relations vice president.

And joining me are Jim Fitterling, Dow's chair and chief executive officer; and Jeff Tate, chief financial officer. Please note, our comments contain forward-looking statements and are subject to the related cautionary statement contained in the earnings news release and slides. Please refer to our public filings for further information about principal risks and uncertainties. Unless otherwise specified, all financials, where applicable, exclude significant items.

We also will refer to non-GAAP measures. The reconciliation of the most directly comparable GAAP financial measure and other associated disclosures are contained in the earnings news release and slides that are posted on our website. On Slide 2 is an agenda for today's call. Jim will review our fourth quarter results, full year highlights, and operating segment performance.

Jeff will provide an update on the macroeconomic environment, our strong financial position through the cycle, as well as the modeling guidance. To close, Jim will provide an update on key milestones for our long-term growth and sustainability roadmap, which will continue to drive shareholder value. Following that, we will take your questions. Now, let me turn the call over to Jim.

Jim Fitterling -- Chairman and Chief Executive Officer

Thank you, Pankaj. Beginning on Slide 3. In the fourth quarter, we continue to execute with discipline and advance our long-term strategy in the face of a dynamic macroeconomic environment. Net sales were $10.6 billion, down 10% versus the year-ago period, reflecting declines in all operating segments.

Sales were down 1% sequentially as volume gains in packaging and specialty plastics were more than offset by seasonal demand declines in performance materials and coatings. Volume increased 2% year over year with gains across all regions, except the Asia-Pacific, which was flat. Sequentially, volume decreased by 1%, including the impact of an unplanned event from a storm that was equivalent to a Category 1 hurricane at our Bahia Blanca site in Argentina. Local price decreased 13% year over year with declines in all operating segments due to lower feedstocks and energy costs.

Sequentially, price was flat, reflecting modest gains in most regions. Operating EBIT for the quarter was $559 million, down $42 million year over year, primarily driven by lower prices. Sequentially, operating EBIT was down 67 million as gains in packaging and specialty plastics were more than offset by seasonally lower volumes in performance materials and coatings. Our cash flow generation and working capital management enabled us to deliver cash flow from operations of $1.6 billion in the quarter.

We continued to reduce costs and focus on cash generation, completing our $1 billion of cost savings for the year. And in the fourth quarter, we pursued additional derisking opportunities for our pension plans, including annuitization and risk transfer of $1.7 billion in pension liabilities and a one-time noncash and nonoperating settlement charge of $642 million. We also advanced our long-term strategy while returning $616 million to shareholders. And we reached a final investment decision with our board of directors for our Path2Zero project in Fort Saskatchewan, Alberta.

Now, turning to our full year performance on Slide 4. Our 2023 results demonstrate strong execution and a commitment to financial discipline. Against a dynamic macroeconomic backdrop, Team Dow continued to take proactive actions. As a result, we generated $5.2 billion in cash flow from operations for the year, reflecting a cash flow conversion of 96%.

We also returned $2.6 billion to shareholders through dividends and share repurchases. Our efforts continue to be recognized externally through industry-leading awards, certifications and recognitions. And we continue to outpace our peers on leadership diversity. I'm proud of how Team Dow is delivering for our customers, driving shareholder value, and supporting our communities as we progress our long-term strategy.

Now, turning to operating segment performance on Slide 5. In the packaging and specialty plastics segment, operating EBIT was $664 million, up $9 million compared to the year-ago period. Results were driven by lower input costs and higher operating rates, where we closed out the year strong and hit record ethylene production levels on a full year basis. Local price declines were driven by lower global prices, while volume increases were led by higher packaging demand primarily in the U.S., Canada, and Latin America.

Sequentially, operating EBIT increased by $188 million. This was driven by higher integrated polyethylene margins, the impact of planned maintenance activity in the third quarter, and higher licensing revenue. Moving through the industrial intermediates and infrastructure segment, operating EBIT was $15 million compared to $164 million in the year-ago period. Results were driven by lower local prices in both businesses, as well as reduced supply availability and industrial solution.

Sequentially, operating EBIT was down 6 million, driven by seasonally lower volumes in building and construction and markets, which were partially offset by seasonally higher demand for deicing fluid and higher demand for mobility applications. And in the performance materials and coating segment, operating EBIT was a loss of 61 million compared to a loss of 130 million in the year-ago period, driven by lower costs and reduced planned maintenance turnaround activity. Volume was up year over year, driven by higher demand in project-driven building and construction end markets. Sequentially, operating EBIT decreased 240 million, primarily due to seasonally lower volumes.

Next, I'll turn it over to Jeff to review our outlook and actions on Slide 6.

Jeff Tate -- Chief Financial Officer

Thank you, Jim. Before I begin, I'd like to mention how excited I am to have rejoined Dow last November. I've been connecting with key stakeholders, analysts, and shareholders, including many of you on this call today. And I look forward to meeting with so many others in the future.

After four years serving in a CFO role outside of Dow, I'm pleased to see that Dow's culture of execution, commitment to advancing our ambition, and the focus everyone has demonstrated on delivering on our financial priorities and spend remain. This is an exciting time for the company. As CFO, I'm proud to carry forward our commitment to maintaining a disciplined and balanced approach to capital allocation over the economic cycle as we advance our growth strategies and deliver long-term value for shareholders. Now, for our outlook on Slide 6.

As we enter 2024, we expect near-term demand to remain pressured by elevated inflation, high interest rates, and geopolitical tension, particularly in building and construction, and durable goods end markets. That said, we are seeing some initial positive indicators. While inflation is still elevated compared to pre-COVID levels, its growth rate is moderating, supporting more stable economic conditions. In addition, the destocking that began in late 2022 has largely ran its course, resulting in low inventory levels throughout most of our value chains.

In the U.S., industrial activity continues to be moderate. In December, industrial production increased 1% year over year, and chemical railcar loadings are up 9.6% in January versus the prior year. U.S. consumer spending has remained resilient with retail trade sales up 4.8% in December.

We're also encouraged by recent forecasts from the American Coatings Association, which expects market demand to grow approximately 3% in 2024, following three consecutive years of declines. In Europe, while inflation has moderated, consumer demand remains weak with retail trade sales down 1.1% year over year in November. In December, manufacturing PMI remains in contractionary territory and new car registrations fell 3.3% year over year after 16 consecutive months of growth. We continue to monitor China where we see improving conditions, which could provide a source of demand recovery following the Lunar New Year.

Industrial production was up 6.8% year over year last month, exceeding market estimates of 6.6%. December auto sales also continue to be strong in China, supported by year-end incentives. In other regions around the world, industrial activity remains constructive. While India manufacturing PMI remains expansionary, ASEAN manufacturing PMI enter contractionary territory last month.

In Mexico, November marked the 25th consecutive month of industrial production growth. On Slide 7, our competitive advantages, early cycle growth investments, and operational discipline position us well to capitalize on a recovery and deliver growth when economic conditions improve. Our differentiated portfolio with structurally advanced assets, global scale, and strong cost positions enable us to competitively support global demand growth over the cycle. Healthy oil to gas spread, supported by growing natural gas and NGL production in the U.S., favor our cost advantage and ability to capture margin momentum.

We've also taken action to position the company for profitable growth, including ongoing execution of near-term investments that are expected to deliver approximately $2 billion in incremental underlying EBITDA by mid decade. In addition, we've improved our cost profile, delivering $1 billion in targeted savings in 2023 that included lower planned maintenance spending and structural improvements to raw materials, logistics, and utility costs. In addition, more than 90% of the 2,000 impacted rolls exited by year-end. Our strong balance sheet allows us to navigate the bottom of the cycle and have the strength to capitalize on the next upside in the global economy.

Turning to our outlook for the first quarter on Slide 8. In the packaging and specialty plastic segment, lower feedstock and energy costs will be more than offset by lower earnings from nonrecurring licensing activity from the prior quarter, resulting in a $25 million headwind. Additionally, we expect a $50 million headwind due to higher planned maintenance activity at select energy assets in the U.S. Gulf Coast.

In the industrial intermediates and infrastructure segment, we expect margin expansion on higher MDI and MEG spreads, as well as lower European energy costs, resulting in a $50 million tailwind. Increased seasonal demand for deicing fluid is expected to provide a $25 million tailwind despite being partly offset by continued weakness in consumer durables demand. We also expect a headwind of $50 million due to planned maintenance activity in the quarter, primarily related to a PDH turnaround and catalyst change. In the performance materials and coating segment, downward pressure is expected to continue due to excess supply from competitive supply additions that will keep margins at depressed levels.

However, we expect higher seasonal demand in building and construction in markets to contribute $150 million tailwind for the segment. We also expect higher planned maintenance turnaround activity at our Deer Park acrylic monomers site and PDH to result in a $50 million headwind in the quarter. With all the puts and takes, we expect first quarter earnings to be approximately $25 million to $50 million above fourth quarter performance. Next, I'll turn it back to Jim.

Jim Fitterling -- Chairman and Chief Executive Officer

Thank you, Jeff. Moving to Slide 9. Our Decarbonize & Grow and Transform the Waste strategies uniquely positioned us to capitalize on demand for more sustainable and circular solutions across our attractive market verticals. Altogether, by 2030, these investments enable us to deliver an increase of more than $3 billion to our underlying earnings through the cycle while reducing Scope 1 and 2 emissions by 5 million metric tons and commercializing 3 million metric tons of circular and renewable solutions annually.

In November, we reached a key milestone as our Path2Zero project in Fort Saskatchewan, Alberta, achieved final investment decision by our board of directors. We also continue to advance our Transform the Waste strategy via intentional actions, strategic partnerships, and offtake agreements. In the fourth quarter, Valoregen's 15,000 tons per year mechanical recycling line in France achieved mechanical completion. And Mura Technology in the U.K.

commenced commissioning, which is expected to contribute 20,000 tons per year of advanced recycling capacity. Both Valoregen and Mura expect to reach commercialization in the first half of this year. As the next step of our sustainability strategy, Dow has established a Green Finance Framework, which was published on our investor website today. This allows us to further align our funding with our goals and targets while also providing an opportunity for the investor community to take part in the execution of our sustainability strategy.

Altogether, we remain confident in our long-term earnings growth with continued focus on a more sustainable future while maintaining a disciplined and balanced approach to capital allocation. Now turning to Slide 10. Polyethylene demand is expected to continue to grow at approximately 1.2 to 1.4 times GDP through 2050. A growing population, regulations, and consumer preferences support this.

And our customers have expressed an increasing need for low and zero carbon emissions and circular products. As global demand grows, no new cost advantage ethylene capacity is expected to come online in North America until the late 2026 to 2027 timeframe, which is expected to tighten the supply demand balance in the near term. We are well positioned to capture new and growing demand with our existing assets and partnership agreements. In addition, we are investing in low carbon emissions infrastructure to capture growing demand for polyethylene as you will see on Slide 11.

Our Fort Saskatchewan project will build upon the strong foundation of our Texas-9 cracker, where we have proven our best-in-class execution, capital efficiency, reliability, and emissions reduction. Canada's feedstock cost advantage provides Dow with lower cash costs compared to the rest of the world, even more advantaged than the U.S. Gulf Coast. We also anticipate potential upside from the commercialization of low and zero emissions products.

Total capex spend is expected to be $6.5 billion on this key growth project, excluding any incentives, with Dow's total enterprise capex to ramp in 2024 to approximately $3 billion and exceed depreciation and amortization levels annually through 2027. We remain committed to keeping our capex within D&A across the economic cycle and expect to return to those levels as we complete this project. We expect to receive governmental support totaling more than $1.5 billion in cash and tax incentives that will bring the net capital outlay for this project to $5 billion. The majority of these incentives are expected to be received by Dow through 2030, which is closely aligned with our capex deployment for the project.

We will begin construction in the first half of 2024 with phase 1 start up of approximately 1.3 million tons per year of capacity expected in 2027. In phase 2, we will add another 600,000 tons of capacity, which is expected to start up in 2029. Phase 2 also includes the retrofit of our existing cracker, reducing net 1 million metric tons per year of CO2 Scope 1 and 2 emissions. Closing on Slide 12, the actions we've taken since then have strengthened our balance sheet, increased cash flow, and enhanced the financial flexibility and resilience of our business.

In 2023, we built on that foundation, moving swiftly to deliver $1 billion in cost savings and focus on cash generation as economic conditions remain challenging. As a result, we delivered on all of our capital allocation priorities, including a fully funded dividend, $625 million of share repurchases, and growth investments, all while maintaining the strongest balance sheet we've ever had at this part of the cycle. With all of our debt at fixed rate, we have no substantive debt maturities due until 2027 and $13 billion of available liquidity. Additionally, we have returned approximately 90% of our net income to shareholders and spend well above our 65% target across the economic cycle.

With global reach, presence in attractive end markets, and advantaged cost position and early stage growth investments in flight, we are well positioned to capture attractive growth opportunities as economic conditions recover. With that, I'll turn it back to Pankaj to open the Q&A.

Pankaj Gupta -- Vice President, Investor Relations

Thank you, Jim. Now, let's move on to your questions. I would like to remind you that our forward-looking statements apply to both our prepared remarks, as well as the following Q&A. Operator, please provide the Q&A instructions.

Questions & Answers:

Operator

[Operator instructions] We ask that you please limit yourself to one question only. Your first question comes from a line of Hassan Ahmed from Alembic Global. Your line is open.

Hassan Ahmed -- Alembic Global -- Analyst

Good morning, Jim. Jim, you know, a couple of times through the prepared remarks, you talked about inventory. You know, it just seems that there are two camps out there in terms of the thought process with regards to, you know, what a potential restocking may look like. And I'd love to hear your views about that.

You know, on one side of the debate, you know, people are sitting there and saying, "Hey, look, you know, since the second half of 2022, you know, the destocking was quite significant and, you know, maybe as and when we should expect an equally impressive restock." But then, on the other side of the camp, you know, you have some of the folks sort of sort of debating that, you know, buying patterns across, you know, the supply chains change quite dramatically, you know, coming out of the pandemic. And maybe a restock, you know, could, you know, not look that impressive. So, I'd love to hear your views and if you could also sort of elaborate on that, you know, within some of the main product chains, be it polyethylene, polyurethane, and the like.

Jim Fitterling -- Chairman and Chief Executive Officer

Morning, Hassan. I think that's a great question. I think one of the reasons that December and fourth quarter ended up stronger than expected, especially -- I'll use packaging and specialty plastics as an example, was because, you know, you had a pretty mixed year in '23. And, you know, in December you can sometimes see the behavior that the last half of December things slow down and people manage cash, and they don't buy.

That was not what we experienced in December. We actually experienced strong demand right through the month. I don't think that's an indication of restocking, but I do think it's an indication that inventories are low through the supply chain and the consumer demand was resilient. And so, people had to buy to keep their supply chains moving.

So, I would say through the value chains today and almost all the businesses, it looks like there's not an excess of inventory out there. And as demand is coming, people are having to buy to keep the chains full. Secondly, inventories are low in areas like P&SP, industrial solutions because, you know, the arbitrage is open. And in our own footprint, 85% of our own global footprint is in light cracking jurisdictions where we crack ethane and propane, which have been highly advantaged.

And so, that's what allowed us to set an ethylene record for the year. I would say, we're not -- I don't think we're in a restocking cycle yet. I think people are, you know, coming together around the soft landing here. I mean, we're seeing positive signs on housing permits that doesn't turn into housing demand until we start to see, say, maybe interest rates come down.

If interest rates come down in the second quarter, maybe you start to see some pickup in housing construction. And that starts to show up more toward the back half of the year. You've got to remember that energy costs are low. And so, if people are thinking, you know, that energy costs are low and I'm still able to buy at reasonable prices going forward, there may not be a reason for them to do a big restock right now.

But this will turn. And as energy costs start to move up and the whole complex starts to move up with demand, I think, at that point, I think we would be wise to keep our eye on what's happening, when the potential for restock. It might just be a little soon right now.

Operator

Your next question comes from the line of Mike Sison from Wells Fargo. Your line is open.

Mike Sison -- Wells Fargo Securities -- Analyst

Hey, guys. Nice end of the year. Just curious, you know, you had good volume growth in PSP in the fourth quarter. Do you expect that to continue into the first? And maybe any of your thoughts on how your operating rates for polyethylene will sort of improve sequentially and the cadence for the year?

Jim Fitterling -- Chairman and Chief Executive Officer

Yeah, thanks, Michael. Good question. Operating rates in the advantaged region, especially Canada, U.S. Gulf Coast, Argentina were strong through the end of the year.

I mentioned ethylene production record. We saw rates above 90% in those regions for the fourth quarter. And obviously, you know, we saw a little bit of an improvement in Europe. I'd say the Suez Canal situation means not as much material from the Middle East is flowing into Europe.

And so, that's given Europe a little bit of a lift on operating rates as we go into the first quarter. And of course, with propane being where it is, you know, we're cracking LPG in Terneuzen and in Tarragona. And that's helping out a bit there. I would say, I think, P&SP is going to continue to see good volume growth.

That's what our outlook is going forward. I think industrial solutions is holding up relatively well. We have our own self-inflicted issue with the Plaquemine Glycol plant, but I'm expecting that back up in the second quarter. And, you know, we're watching carefully on construction, chemicals, demand, and durable goods to see if we see an uptick there.

We saw some good movement in consumer electronics, and so, you know, that's got me a little bit optimistic.

Operator

Your next question comes from the line of Vincent Andrews from Morgan Stanley. Your line is open.

Vincent Andrews -- Morgan Stanley -- Analyst

Hi. Thanks. Maybe two quick ones for me. Just on Slide 7, you have some project starts that are going from '24 to '26? Talk about how materials some of that might be for 2024.

And then, also, if you could just give us an update on what you did with the pension ending the year?

Jim Fitterling -- Chairman and Chief Executive Officer

You know, on projects starts, you know, we've got -- things that we've got coming up, obviously, as we've got some calculation capacity that came up, you know, in '22 and '23 that's running really well. We started up the MDI distillation facility in Freeport in the third quarter. I think that'll start to show some positive benefits us as we move forward. That's about a 30% increase in MDI distillation and also reduction of a footprint getting us out of the port side.

And we've got Seadrift alkoxylation second wave expansion in fourth quarter this year, and then Terneuzen in fourth quarter of 2025. Both of that supports growing demand and energy and also consumer solutions and pharma business, so that's good. Amines business for carbon capture is growing well. And so, that's good.

If you look at plastics industry, there's only no new capacity come on in plastics, say one train at the Shell plant in the United States. Otherwise, all the plastics capacity is in the market. Inventories are low. Export channel is running strong.

And we saw volume growth year over year in the fourth quarter. So, I feel good about the overall outlook for plastics as we're going into 2024. When you get into polyolefins, our polyurethane, and propylene oxide, a little bit different story. We had capacity come on in China.

We've seen the same in siloxanes last year. I think we're working through that. The silicone's growth is going to eat up that siloxane capacity. But we've got to see the durable goods market and the housing markets come back to tighten up PO.

Propylene glycol side has been strong. But as you know, housing and automotive drives PP a lot. Those two things drive the propylene markets, and we got to keep a close eye on them. On the pension --

Operator

Your next question --

Jim Fitterling -- Chairman and Chief Executive Officer

Jeff, do you want to cover pension and what we did?

Jeff Tate -- Chief Financial Officer

Sure, Jim. You know, as we've been communicating to the street here in recent quarters, one of the things that we're consistently looking to do as we're solidifying our financial position is look for ways to derisk our pension plans. And, you know, one of those could be around the annuitization, as well as risk transfer of our liability. So, specifically, in fourth quarter, we were actually able to reduce our pension liabilities by $1.7 billion.

The execution of those transactions did not require any additional cash from the company. As Jim mentioned in some of his opening remarks, you know, the impact of that was a one-time noncash nonoperating settlement charge of $640 million in the quarter.

Operator

Our next question comes from a line of Jeff Zekauskas from JPMorgan. Your line is open.

Jeff Zekauskas -- JPMorgan Chase and Company -- Analyst

Thanks very much. Recently, there was a cold snap in Texas. And, I didn't notice that there was any penalty and EBITDA for the first quarter. Are you still assessing what the amounts might be, or do you think that it's zero? And then, secondly you pulled out $1 billion in costs.

Can you allocate the billion dollars across your three segments?

Jim Fitterling -- Chairman and Chief Executive Officer

Sure, I'll take the cold snap, and then, Jeff, I'll have you take a look at the costs. Look, on the freeze, Jeff, I just want to go back, you know, two years ago, this is the third consecutive year of freeze on the Gulf Coast, and we've improved plans every year to be able to be ready for that. This year will be the lowest impact that we've had of any of the three years. And so, you know, the big impacts that hit us were at Deer Park and at Seadrift, but almost all of that is back up and running now, so we were able to rebound pretty quickly.

You know, you never go completely unscathed, but I think we manage through it pretty well. We haven't had to disrupt any customers because of downtime. And I think we're going to recover pretty strong here and be running hard by the end of this month. So, I feel that we've navigated it pretty well.

And we didn't see enough of an impact that we put that into first quarter estimates. I think our biggest build in first quarter is we've got quite a few turnarounds in the first quarter. And so, that's our biggest impact, about 200 million of turnarounds in the quarter, 150. And then, you know, we expect some margin and some seasonality in first quarter, say, plus 200 million on margins and minus 150 million on turnarounds in the quarter.

So, that's the biggest net-net on the first quarter '24 guidance. Jeff, do you want to hit, you know, how the 1 billion costs fell across the business?

Jeff Tate -- Chief Financial Officer

Absolutely, Jim. In the simplest terms, about 50% of those cost savings are in PS&P, 20% to 25% are in the other two segments, respectively. Then, we also have a little bit in corporate as well. So, pretty well distributed based on our operations and our revenues as well.

Jim Fitterling -- Chairman and Chief Executive Officer

We ended the year at a $1.4 billion run rate on that. So, if you look at full year '24, Jeff, we've still got another 400 million coming in, in terms of the cost savings for '24. But we have 200 million higher turnarounds in '24. So, net-net, 200 million coming into '24.

I hope that covers what you're looking for.

Operator

Your next question comes from the line of Steve Byrne from Bank of America. Your line is open.

Steve Byrne -- Bank of America Merrill Lynch -- Analyst

Yes, thank you. I would -- I'd like to get some help from you on, you know, why were there earnings in PM&C, so much lower than what you were expecting, say, in the third quarter slide deck. Would you attribute this to just lower pricing, higher raws? You know, help me on this one. And maybe, in particular, coatings, you know, you've got a key customer raising price and targeting mid single-digit lower raws.

You know, your propylene costs are higher. Why not able to push more price in this segment, or cut back on operating rates, or something along those lines? What's your outlook for that segment?

Jim Fitterling -- Chairman and Chief Executive Officer

Yeah. Good question, Steve. I'd say, starting at the top, siloxane and monomers in the silicone -- siloxanes and silicone and monomers, and coatings and monomers are both oversupplied. And so, that put pressure obviously on both volume and pricing in the quarter.

And you had volumes decrease sequentially across all regions and all markets. And that's not unusual, especially in coatings and monomers. That's pretty typical of fourth quarter that we would see that. But silicones was a little bit softer.

And I think that was the biggest delta there. Year over year, they were down on price, which was because of that supply demand for both siloxane and acrylic monomers. The downstream in terms of the -- the binders business in coatings held up relatively well and, actually, had decent volumes in the fourth quarter. So, what we supply to the downstream, coatings customers look good, and as we mentioned, our view going forward is about a 3% increase this year in downstream coatings.

And I'd say, downstream silicones demand continues to hold up pretty well. I'd say the one thing we're keeping an eye on is what happens with EV volume production. EV drives a lot of silicones content, a lot into batteries, and so we need to keep an eye on that. But the other segments in silicones are also showing pretty substantial growth for 2024.

And so, it's upstream monomers markets that we're going to keep an eye on. And I think things will start to tighten up a bit in China, and that will help on siloxanes.

Operator

Your next question comes from the line of Josh Spector from UBS. Your line is open.

Josh Spector -- UBS -- Analyst

Yeah. Hi, good morning. I was wondering if you could comment on your polyethylene price assumptions in the first quarter. I think, within your bridge, you talk about lower costs and some other moving pieces, but there's not really anything there on price.

So, are you assuming that you get positive pricing in February and March like some of the consultant data shows? Or are you assuming something different? Thank you.

Jim Fitterling -- Chairman and Chief Executive Officer

Morning, Josh. We've got $0.05 price increases on the table for January and February. I would say, you know, globally, we're looking pretty flat quarter over quarter on pricing. I'm expecting to see some price up in EMEA.

I mentioned the Suez Canal and the impact that had on Middle East volumes going up into EMEA. So, I think we're going to see that up. I think we're going to see price up in Asia-Pacific, and I think we're going to see a relatively flat in the Americas. Integrated margins for the Americas ought to be about where they were in the fourth quarter.

Integrated margins in Europe should be up a few cents. That's what the market markers would look at right now. And input costs are in line. I mean, even though we had that cold snap, natural gas costs are very competitive.

I think costs are very competitive. Propane's been a little bit high because of the heating demand, but I think that may start to come off a little bit as we move through this cold spell.

Operator

Your next question comes from the line of David Begleiter from Deutsche Bank. Your line is open.

Dave Begleiter -- Deutsche Bank -- Analyst

Thank you. Good morning. Jim, you highlight the U.S. chemical railcar loadings up 10%.

What do you think is driving that? And given the strong start to the quarter, do you expect volumes to be up in all three segments in Q1? Thank you.

Jim Fitterling -- Chairman and Chief Executive Officer

Yeah, look, I think on chemical railcar loadings, industrial production in the U.S. is starting to come back. The U.S. has a tremendous cost advantage.

Operating rates in most of the sectors are up. And, you know, I think the destocking, being -- you know, it's always hard to have enough visibility to call the end of it. But I think what we saw in December were signs that destocking has worked through. So, any downstream demand is turning into orders, and I think that's what you're seeing with the railcar loadings.

You know, also, remember, you know, rail car service the Mexican market as well. Mexico has been very strong. They've benefited a lot from near-shoring. And so, having both China volumes up and Mexico volumes up, I think, is a positive here.

I would say, on volumes, my expectations, we have volume growth for all three segments for 2024. I think that's going to start to materialize. I think plastics is underway right now. I think construction chemicals, housing-related demand on polyurethane will probably be geared more toward the back half of the year.

I think downstream, silicones, industrial solutions will be throughout the year. And then, we'll have a step-up in industrial solutions when we get the Glycol 2 plant back in Plaquemine. And I think I can speak for the business here, the -- you know, as soon as we get that plant back up, we'll have it sold out. So, we're working really hard to get that thing back online.

Operator

Your next question comes from the line of Laurence Alexander from Jefferies. Your line is open.

Dan Rizzo -- Jefferies -- Analyst

Hi, this is Dan Rizzo on from Laurence. Thank you for taking my call. Can we just discuss your strategy on mechanical recycling? What do you expect by 2030? And longer term, do you expect that to outgrow the market?

Jim Fitterling -- Chairman and Chief Executive Officer

You know, I think when we look at -- if you look at what we put in the deck on polyethylene demand, you know, our view is that both mechanical recycling and advanced recycling are going to continue to grow. There's going to be demand drivers to grow, you know, all of those segments. We're in the middle of discussions on a global plastics treaty right now. We've got a big conference in Ottawa at the end of April, beginning of May.

And there's another one in Korea toward the end of the year. And I think what's coalescing around the industry and also the consumer brand owners and some of the NGOs that we work with is a focus on enhanced producer responsibility as part of it to drive circularity, a focus on recycled content mandates, a focus on all forms of recycling and bio-based products that are made from waste or alternative feedstocks. And in some cases, like, we have a project that's making bio-based materials from waste from corn production, corn stover that's used to convert into bio feedstocks. You're going to see demand for all forms of that in place.

We've got some capacity coming up in Europe, and we started there because the enhanced producer responsibility schemes are there. Some of the mandates are there, and the demand from the downstream is very strong. That's coming -- when you look around the states in the United States, that's coming in Canada, I think we're going to see it come globally. So, I feel that over time, you're going to see more focus on low-carbon fossil approaches, like we're doing with Alberta.

So, how can you make plastics from fossil fuels that have zero CO2 emissions? You're going to see focus on advanced recycling and mechanical recycling and all of the above. And we're just going to place bets in different regions based on what the market demand dictates. Good uptake from the customers. We see good volume growth there.

We see pricing ahead of virgin materials. And, of course, virgin materials are relatively low right now. And we continue to work to get plants certified with ISCC PLUS so that we can certify that recycled content for our customers.

Operator

Your next question comes from the line of Kevin McCarthy from Vertical Research Partners. Your line is open.

Kevin McCarthy -- Vertical Research Partners -- Analyst

Yes, good morning. Jim, on a year-to-date basis, we've seen polyethylene export prices rise by, let's say, $0.04 to $0.05 a pound. And I'm curious as to what you think is driving that. Would you attribute that pattern to better demand or some of the logistics challenges that have emerged in the Red sea, or, perhaps, other factors? And then, maybe as a related question, if you don't have any unplanned outages, how hard do you think you might be able to run your U.S.

Gulf Coast, you know, ethylene linked assets in the first quarter? Just trying to get a sense of whether the export market might be strong enough to lift up the U.S. domestic market.

Jim Fitterling -- Chairman and Chief Executive Officer

Yeah, good question, Kevin. I would say if you look back at 2023, in the first half of the year, really, the limit on PE export volumes and prices was just more on the volume side, on the supply chain side. It was the ability to get marine cargo moving. That improved considerably as we worked through the year.

In fact, December was one of the highest months of the year for PE export sales. And we've got the export channel full and lined up. And overall, you know, we're running Canada, United States, Argentina as hard as we can. You know, we ran rates on crackers, above 90% for the back part of the year, especially in the fourth quarter.

And so, to your point, unconstrained. If there's no freeze impact or anything else, we're going to be running them hard. The arbitrage is open, the volumes are there. We add up double-digit volumes for the year in plastics going to China.

We actually were up year over year in China on P&SP, as well as industrial solutions, and I think a little bit in coatings -- consumer solutions, I'm sorry, in consumer solutions. So, we were often industrial solutions because of the Plaquemine outage, but we're up in -- slightly up in PU, slightly up in consumer solutions, and up double digits in P&SP. So, I think the market is there. And that is -- you know, everybody's talking about China being relatively light GDP last year, and we can move those kind of volumes.

My expectations are taking actions that are going to help 2024 be better as we do the walk on 2024. For the full year EBITDA walk, we've got about 300 million of margin expansion. So, we start with 5.4 billion in 2023 of EBITDA. We have about 300 million for margin expansion.

We've got about 800 million full volume growth that's in all three segments. We've got turnarounds which cost us 200 million, and then we've got about 100 million of improvement from equity earnings in the JVs. So, net-net, you know, you're walking it up to the 6.4, 6.5 kind of a range for 2024. And I think with soft landing scenario in the United States, that'll help domestic market.

We saw good domestic volume in PE as well here.

Operator

Your next question comes from a line of Frank Mitsch from Fermium Research. Your line is open.

Frank Mitsch -- Fermium Research -- Analyst

Good morning. And, Jeff, nice to hear your voice again. Hey, Jim, really appreciate that walk-up into 2024. I want to take a step back to Slide 7, where you talked about the projects midcycle that started up in '22 should contribute 400 million.

The projects that started up in '23 should contribute another 400 million. Can you just look at those 800 million worth of mid-cycle earnings and suggest what you're anticipating they're going to contribute in 2024?

Jim Fitterling -- Chairman and Chief Executive Officer

Yeah, I think, Frank, you know, I think coming back to that -- and I probably didn't answer what Vince was asking very well at the beginning, you know, I think you're probably looking back half of this year to 2025 before you start to see midcycle types of returns. We're not in midcycle yet. I mean, obviously, we're navigating the bottom here. But I think with interest rates potentially coming off in the first half of the year, some amount that stimulates some demand and midcycle probably get there.

So, maybe 300 million to 400 million of that, you'll see in 2024, the balance into 2025.

Operator

Your next question comes from the line of Duffy Fischer from Goldman Sachs. Your line is open.

Duffy Fischer -- Goldman Sachs -- Analyst

Yeah, good morning. If you could just on the the 50 million to 100 million on the equity income improvement, can you walk through your major JVs and just kind of say what's additive, what's subtractive from that number?

Jim Fitterling -- Chairman and Chief Executive Officer

Yeah, sure. You know, I think you're going to see on the, you know, Sadara JVs year over year should be up, I don't know, say, about 100 million. Remember, they had some outages in the first part of the year, so they had some volume impact to the first part of the year. And, obviously, they're seeing the same improvements in arbitrage that we're seeing out of the U.S.

Gulf Coast. You're going to see Kuwait JVs up about 60. Obviously, that's a strength on ethylene glycol. We saw a bit of that in the fourth quarter and their ability to run hard as well.

I think the Thai JVs will be down, a lot of pressure, obviously, naphtha cracking, and they're based on naphtha cracking. So, I expect them to be down about 20 and then everything else down about 30. So net-net, you're up about 100 million.

Operator

Your next question comes from a line of John Roberts from Mizuho. Your line is open.

John Roberts -- Mizuho Securities -- Analyst

Thanks. And it looks like a pretty smooth transition in finance, so congratulations on the stability there. I believe you were considering some additional infrastructure divestments. Could you give us an update on that?

Jim Fitterling -- Chairman and Chief Executive Officer

Sure. And nice to hear your voice on the call, John, welcome back. Yeah, we've got a number of nonproduct-producing infrastructure assets that we continue to evaluate. We have in-flight for this year greater than 1 billion.

I say, I think maybe even greater than a 1.5 billion of additional cash proceeds from transactions related to that. We had a very successful divestiture in 2020 of our rail and marine infrastructure assets, and that is working well. And the idea there was deliberate some cash but keep a competitive cost structure. And that same mindset is in place here.

And we think, you know, obviously, the cash proceeds are going to help us with reinvesting in revenue-generating assets like the Alberta project as we move forward. And then, the other, you know, cash-related, kind of unique levers to now for the year is we've got, you know, the last part of the settlement from the Nova litigation, which should wind all that up, and that's about $500 million for the year. So, I'd say net-net, you know, we're pushing north of 1.5, plus the Nova litigation to try to get those kind of unique cash levers into the company. Anything else you want to add, Jeff?

Jeff Tate -- Chief Financial Officer

Yeah. The only other thing -- and good morning, John, and thank you. The only other thing I would add is the working capital structure, working capital improvement opportunities that will continue to focus on. If you recall, we reduced eight days of -- made eight days of improvement around our cash conversion cycle since then.

So, tremendous work across Team Dow. We're going to look to continue to get at least another one to two days of improvements out of that, which should also give us another unique to down cash lever.

John Roberts -- Mizuho Securities -- Analyst

Great. Thank you.

Operator

Your next question comes from the line of Patrick Cunningham from Citigroup. Your line is open.

Patrick Cunningham -- Citi -- Analyst

Hi. Good morning. So, you mentioned II&I, you mentioned, you know, turnarounds, you know, maybe weighted toward the first quarter, Plaquemine coming back in 2Q, Freeport bringing on the increase in MDI distillation. Should we expect, you know, more significant sequential earnings improvement throughout the year and maybe help size where we can exit the year for the segment? And then, if you could also just briefly comment on what's driving the direction of MDI and MEG spreads into 1Q, that'd be great.

Thanks.

Jim Fitterling -- Chairman and Chief Executive Officer

Yeah, I think, generically, true, Patrick, that I think you'll see that builds through the year. First quarter, obviously, we mentioned the turnaround. But second quarter, we expect to get Glycol 2 back in Plaquemine. That'll be positive.

And then, third quarter will be more positive. So, we'll ramp into the back half of the year. On isocyanates, obviously, the biggest driver is on construction-related and durable goods-related markets. Obviously, there's some impact in automotive as well.

Any of the ridges is where most of that volume gets consumed. So, as those volumes start to pick up, you'll start to see MDI take off. And that's usually a driver of value across the entire portfolio, both the polyols and the MDI side of things. So, I'm hoping that we start to stimulate some of that demand in the back half of the year.

And I think what China's doing in the markets in the financial markets to try to stimulate some things could be between U.S. interest rates and what's going on in China that we see some momentum build in the back half of this year.

Operator

Your next question comes from the line of Mike Leithead from Barclays. Your line is open.

Mike Leithead -- Barclays -- Analyst

Great. Thank you. Good morning. Two questions on your Sadara joint venture, first, I believe there was a report earlier this month that Aramco is raising feedstock prices.

Will that impact Sadara? Or should we expect input costs there to remain relatively flat? And second, EBITDA remains quite depressed right now relative to net debt of the JV. Should we expect any further restructuring or cash infusion needed over the next year or so? Or is the runway there sufficient to get back to, say, more mid-cycle type EBITDA levels?

Jim Fitterling -- Chairman and Chief Executive Officer

Yeah, it's a good question. We've had no cash contributions that needed to be made to Sadara '21, '22, '23. I'm not expecting any going forward. Sadara itself, like us, when you navigate in the bottom of the cycle, is focusing on self-help actions to try to pull levers to keep costs down.

There is talk in the Kingdom about a raise in feedstock prices. And so, we'll obviously have to look at things that we can do within Sadara to offset those costs, but those haven't taken hold just yet. And then, obviously, the market comes back. You know, Sadara is very levered to oil price.

And so, oil clears the market for plastics, especially because that drives the Asia-Pacific operating prices and costs. And so, when oil price comes up, which the expectations are that that's going to be constructive as we move into '25 and beyond, there hasn't been a lot of investment in oil production. Demand is back above -- demand for oil is back above where we were pre-pandemic. And yet, we have big parts of the market that are not back above where we were pre-pandemic.

So, I think the outlook for demand is going to come as the global markets improve, but the supply is going to lack. And so, what we're sitting here at $80 oil, that could firm up, you could start to see the top end of oil, you know, be pitched more toward $90, $100 as you get into the '25, '26 timeframe. And that has a pretty substantial impact to the bottom line in Sadara. So, near term, we're going to navigate the cost at Sadara to keep the costs down and to be able to handle those feedstock costs longer term, obviously, lean into the market as the economy improves.

Operator

Your next question comes from the line of Aleksey Yefremov from KeyBanc Capital Markets. Your line is open.

Alex Yefremov -- KeyBanc Capital Markets -- Analyst

Thanks. Good morning, everyone. Jim, you just made a couple of comments that siloxane capacity could be absorbed by demand growth. And to me, you sound a little more positive here than in the past.

But do you think this upstream silicones market could see margin uplift maybe within the next 12 months, or is this a longer-term project?

Jim Fitterling -- Chairman and Chief Executive Officer

You know, if you look at the amount of capacity that's coming on in 2024 versus what came on in '23, it's down quite a bit. You've got a couple of projects. There's four projects in China that are coming on, and I think a couple of them could delay beyond 2024. The downstream markets have been continuing to grow, and we've been continuing to invest in debottlenecking.

It's just the amount of upstream that's come on has added to that. The other positive that's happened is, obviously, silicon metal prices have come down, too. And so, that helps on the input side of things. So, I think you're going to see that, you know, as the downstream demand continues to improve and as the global economy continues to improve, we're going to see that as the project pipeline for buildings continues to grow.

And remember, this goes into everything. It can go into high-rise buildings, it can go into new airports, it can go into schools and all kinds of other construction. Those are big volume pools. I think as you start to see construction activity pick up, and then you're going to see that ramp.

We're seeing strong demand in areas. Obviously, EVs were a big part of it. 5G and connectivity is a big part of it, data centers. So, as you're looking at things like how to handle cooling on data centers, silicone fluids, or dielectrics, and some immersive cooling applications and data centers which are big energy hogs and need energy efficiency.

That's a growth area for us as well. And then, the normal downstream demand in consumer goods and beauty care products continues to be good. So I'm optimistic, you know, maybe it may take more until late '24 and into '25 to see it. But I do feel like we're going to start to move toward midcycle in 2025.

Operator

Your next question comes from the line of Arun Viswanathan from RBC Capital Markets. Your line is open.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Great. Thanks for taking my question. So, that's a good segue actually to what I was thinking about was, you know, if you think about the guidance that you're issuing here for Q1. It looks to be in the $1.3 billion or so level for EBITDA, give or take a little bit.

But annualizing that will get you to 5.2, you know, or -- and then maybe add in a little bit for seasonality gets you to closer to 6 billion. Would you consider that kind of trough-like conditions? And as you move through the year, in '24, what are some of the things that makes you excited that we can, you know, maybe achieve midcycle by -- when you're exiting the year? And I guess, maybe if you can just comment on what your expectations are for China growth going forward. Obviously, we'll likely to see a maybe a slower growth environment for the next four or five years versus the last four or five years. Just wanted to get your thoughts on that as well.

Thanks.

Jim Fitterling -- Chairman and Chief Executive Officer

Yeah, I think, you know, the things that are constructive to me as we're moving forward is no new capacity coming in plastics -- packaging and specialty plastics. You've got high operating rates in all the cost advantage regions of the world. And you've got an export arbitrage window open to China. As I mentioned, double-digit growth for us in China.

And I think our view is we're able to move -- continue to move products. India has been strong so we're moving product into India. Mexico has been really strong. We supply a lot of plastics to Mexico by rail.

I think that's all positive. I would say, you know, our view in the Americas, our view in Asia-Pacific, as China comes back, you know, so will the rest of Asia-Pacific. And then, our view in Europe is a bit mixed. energy cost is better in Europe, which I think in the short term helps.

It's not as big a drag as it was. But I think longer term, you know, Europe's got some structural issues. If we can't get energy costs down even lower, it puts a big weight on the consumer, which puts a big weight on demand, but puts additional weight on the industrial economy. So, fortunately, we've got some cost advantaged positions there and that helps us, and I think we'll navigate through that.

Back half of the year, you know, we've got industrial solutions coming back to full strength. We've got our new projects coming on, and I just mentioned 300 to 400 million from that. You know, that's all in that volume growth number that I talked about. And then, margin expansion is just the oil-to-gas spread on our existing business and the strength that we're going to see in some pricing and polyethylene for the year.

So, I think we're going to ramp into '25, get ourselves kind of back on to a midcycle run rate. And, you know, we're going to -- in the meantime, we're going to pull the levers like we've been doing to manage cash, keep the balance sheet strong, be the first mover in the next wave with the Alberta project just like we were with Texas-9. This is the right time to do it. This is the time to lock in the low cost for construction, and we're ready to roll.

Operator

This ends our question-and-answer session. I will now turn the call back over to Mr. Gupta for closing remarks.

Pankaj Gupta -- Vice President, Investor Relations

Yeah. Thanks, Rob. Thank you, everyone, for joining our call, and we appreciate your interest in Dow. For your reference, a copy of our transcript will be posted on Dow's website in approximately 48 hours.

This concludes our call. Thank you again.

Operator

This concludes today's conference call. Thank you for your participation. [Operator signoff]

Duration: 0 minutes

Call participants:

Pankaj Gupta -- Vice President, Investor Relations

Jim Fitterling -- Chairman and Chief Executive Officer

Jeff Tate -- Chief Financial Officer

Hassan Ahmed -- Alembic Global -- Analyst

Mike Sison -- Wells Fargo Securities -- Analyst

Vincent Andrews -- Morgan Stanley -- Analyst

Jeff Zekauskas -- JPMorgan Chase and Company -- Analyst

Steve Byrne -- Bank of America Merrill Lynch -- Analyst

Josh Spector -- UBS -- Analyst

Dave Begleiter -- Deutsche Bank -- Analyst

Dan Rizzo -- Jefferies -- Analyst

Kevin McCarthy -- Vertical Research Partners -- Analyst

Frank Mitsch -- Fermium Research -- Analyst

Duffy Fischer -- Goldman Sachs -- Analyst

John Roberts -- Mizuho Securities -- Analyst

Patrick Cunningham -- Citi -- Analyst

Mike Leithead -- Barclays -- Analyst

Alex Yefremov -- KeyBanc Capital Markets -- Analyst

Arun Viswanathan -- RBC Capital Markets -- Analyst

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