Good day, and welcome to The Dow Chemical Company's First Quarter 2012 Earnings Results Conference Call. [Operator Instructions] Also today's call is being recorded. I would now like to turn the call over to Doug May, Vice President, Investor Relations. Please go ahead, sir.

Thank you, Audra, and good morning, everyone, and welcome. We are making this call available to investors and the media via webcast. This call is the property of The Dow Chemical Company. Any redistribution, retransmission or rebroadcast of this call in any form without Dow's express written consent is strictly prohibited. On the call with me today are Andrew Liveris, Dow's Chairman and Chief Executive Officer; Bill Weideman, Executive Vice President and Chief Financial Officer; and Dave Johnson, Director in Investor Relations. Around 7:00 a.m. this morning, April 26, our earnings release went out on Business Wire and was posted on the Internet on dow.com. We have prepared slides to supplement our comments in this conference call. These slides are posted on our website on the Presentations page of the Investor Relations section and through the link to our webcast. Now some of our comments today include statements about our expectations for the future. Those expectations involve risks and uncertainties. We can't guarantee the accuracy of any forecasts or estimates, and we don't plan to update any forward-looking statements during the quarter. If you'd like more information on the risks involved in forward-looking statements, please see our SEC filings. In addition, some of our comments reference non-GAAP financial measures. A reconciliation to the most directly comparable GAAP financial measures and other associated disclosures are contained in our earnings release and on our website. Unless otherwise specified, all comparisons presented today are on a year-over-year basis. Sales, volume and price comparisons exclude divestitures and EBITDA and EBITDA margins and earnings comparisons are adjusted to exclude certain items. Our earnings release as well as recent SEC filings are available on the Internet at dow.com. The agenda for today's call is on Slide 3. I'll now hand the call over to Andrew. Andrew N. Liveris: Thank you, Doug, and good morning, everyone. Thank you for joining us. Let's go to Slide 4. Dow demonstrated strength and stability this quarter, executing swiftly and purposefully in the midst of uncertain macro conditions, and we exited the period with momentum. Recall that in our last earnings conference call we projected headwinds would linger into the first quarter of 2012 and that momentum would build as the quarter and the year progressed. In fact, the quarter played out as we anticipated, with macroeconomic volatility impacting a number of our markets and businesses. But despite this, we continued to execute against our goals and deliver value for our shareholders. Here are some highlights. Adjusted earnings per share of $0.61. Adjusted sales grew 4%, representing Dow's 10th consecutive quarter of year-over-year sales gains. While strong revenue growth in Agricultural Sciences was certainly a headline, equally compelling was a strong performance from Dow Water and Process Solutions, Dow Elastomers, Dow Functional Materials and Polyglycols and Surfactants, each of which achieved first quarter sales records. And our geographic diversity benefited us once again this quarter. Developed regions began showing signs of returning strength, particularly in the United States, which posted 5% sales growth. And our emerging regions achieved their 10th consecutive quarter of year-over-year volume growth. As a result, we delivered $2.1 billion of adjusted EBITDA with records in a number of our businesses including Functional Materials, Dow Elastomers, Dow Automotive Systems and, of course, Dow Agricultural Sciences. Also this quarter, we took swift, targeted actions to drive further efficiencies in our operations and liberate resources that enable us to invest in attractive sectors and regions. And finally, we continued our sharp focus on capital management, reducing both debt and interest expense and remaining firmly on track to reach our net debt to cap goal by year end. This stability, this resolve to deliver, is validation of the fact that Dow was and remains in execution mode and enable us to exit the quarter with momentum. So on Slide 5 and on this point, I want to take a moment to dive deeper and further illuminate the momentum we saw build within the quarter. Recall that on our last teleconference, we discussed management interventions that fueled an inflection point in our operating rates. This improvement carried into the new year, both in terms of our operating rate, which improved 12 percentage points on a sequential basis as well as in our sales. We saw positive indicators in a number of the key sectors and regions we serve. For example, our sales in the United States, Germany and China all grew double digits from February to March, excluding the seasonality of our ag business. Importantly, this momentum is ahead of what we saw last year. We also saw sales grow double digits month-over-month in all of our operating segments. Moving through the second quarter and into the second half of the year, we are seizing this momentum, maximizing opportunities for short- and long-term growth. I'll have more to share on this in a moment, but first let me turn it over to Bill for more detail on our financial and operating results. William H. Weideman: Thank you, Andrew. I'd like to remind you that my comments today will be on a year-over-year basis. Sales, volume and price comparisons are adjusted to exclude divestitures and earnings comparisons are adjusted to exclude certain items. Now turning to Slide 6. Adjusted sales rose 4% to $14.7 billion. EBITDA was $2.1 billion, with increases in Agricultural Sciences, and Electronic and Functional Materials. On a reported basis, earnings were $0.35 per share or $0.61 per share on an adjusted basis. This included $0.25 charge relating to our restructuring cost reduction actions announced earlier this month and a $0.01 charge related to the early extinguishment of debt. We believe this represents a strong result and results -- and reflects our focus on execution even in the midst of dynamic market conditions. Now let me turn to volume and price trends on Slide 7. Volume was up 3%, driven by strong demand in Agricultural Sciences, and Feedstocks and Energy, followed by modest gains in Performance Materials. Improvements in consumer confidence drove a 2% increase in our volumes in the U.S. We posted volume improvements in both the developed and emerging regions, with the strongest growth in Europe, Middle East and Africa. The volume increase in Europe was primarily driven by sales of propylene, the result of a new supply agreement from the sale of our Polypropylene business late last year. Volume declined year-over-year in Latin America, reflecting the shutdown of our TDI plant in Brazil. Volume also declined in Asia Pacific, where soft demand in Electronics continued. Price was up 1% versus the first quarter last year with gains in Feedstocks and Energy, Agricultural Sciences and Electronic and Functional Materials. Now turning to our operating segment, starting with Electronic and Functional Materials on Slide 8. Electronic Materials volume declined due to continued softness in the industry. However, the business reported strong demand gains in display technologies in Europe. Functional Materials reported record first quarter sales as well as record quarterly EBITDA, with notable gains in microbial and personal care applications. The business also benefited from broad-based pricing initiatives, leading to margin expansion. Turning to Coatings and Infrastructure Solutions, Dow Building Construction reported sales gains across all geographic areas. However, the business continued to face headwinds in Europe where the construction industry is still weak. This quarter, you also saw us take action, adjusting our footprint in response to these market realities and reducing our structural costs to compete long term and benefit as market fundamentals improve. Now turning to Dow Water and Process Solutions, which reported record first quarter sales with gains in both price and volume. Result in Dow Coating Materials reflected normal seasonality. However, there is clear evidence that we are seeing an uptick in demand as we enter the second quarter. Moving to Agricultural Sciences where we experienced broad-based gains across all products in all geographies, driven by new products, healthy market fundamentals in Crop Protection, strong gains in Seeds and Healthy Oils, as well as favorable planting conditions in North America. In Performance Materials, volume rose in all geographic areas except Latin America due to the shutdown of our TDI asset in Brazil. Polyurethane sales were up slightly with the strong double-digit growth in the U.S. despite a weak de-icing season. Dow Oil and Gas, Amines, and Oxygenated Solvents all recorded double-digit volume increases. Epoxy sales contracted due to continued softness in allylics and phenolics, while Dow Automotive Systems and Polyglycols, Surfactants and Fluids both reached new EBITDA records. Moving now to Performance Plastics on Slide 10. Performance Plastics sales were in line with the year-ago period. Dow Elastomers posted new quarterly sales and EBITDA records due to strong demand in transportation, infrastructure and adhesives. Revenue in Dow Electrical and Telecommunications increased with double-digit gains and volume gains in Asia Pacific. Performance Packaging benefited from very strong market fundamentals in North America. However, this was more than offset by pricing pressures on naphtha-based margins in Europe and Asia Pacific. Finally, Feedstocks and Energy recorded double-digit sales gains due to increases in both price and volume. Next, I'll cover equity earnings on Slide 11. Equity earnings were $169 million, down compared to $259 million in the prior quarter and $298 million in the same quarter last year. The primary driver for the decrease is Dow Corning, which experienced higher material costs and lower prices due to oversupply market conditions in polysilicon. However, industry consolidation is underway. In fact, industry estimates show that of the original 40 polysilicon manufacturers in China, only 6 or 7 are still operating. Dow Corning is at the low end of the cost curve and is taking actions to respond, including delaying capacity additions and reducing structural costs, all in an effort to reinforce its competitive advantage. Now I'd like to cover a few additional financial highlights on Slide 11. We continue to tightly manage working capital. DSO was 43 days, down 1 day versus the prior quarter, and inventory was up as we prepare for planned turnaround. We reduced debt by more than $1 billion this quarter, and interest expense declined nearly $50 million due to the deleveraging actions we've taken over the past 12 months. Net debt to total capitalization was 41.2%, remaining on target to reach the company's 2012 year-end goal of 40%. We also recently declared a 28% increase in the second quarter dividend from $0.25 per share to $0.32 per share. Now looking to the second quarter, I'd like to provide a few comments. As Andrew mentioned, we expect the momentum we experienced in March to continue into the second quarter. Agricultural Sciences will continue to be strong but will be down sequentially, in line with normal seasonality. Planned turnaround costs will be up approximately $100 million sequentially as we enter the summer months. Based on current propylene trends, our Feedstocks and Energy costs will increase sequentially despite lower U.S. ethane costs. Our tax rate going forward will be similar to what you saw this quarter. And equity earnings will be down slightly versus the first quarter due to planned turnaround at the MEGlobal. And now I'd like to turn it back over to Andrew. Andrew N. Liveris: Thank you, Bill. As you can see Dow continues to advance its strategy, and we are doing so with a laser-like focus on execution, deriving value from all key value drivers shown on Slide 14. These are drivers that place us in a unique position to deliver shareholder value, both in the near term as well as over the long term. First, our world leading feedstock advantage, an advantage that will strengthen in the back half of this year and even longer term as we invest for growth, both on the U.S. Gulf Coast as well as in the Middle East. Second, our ability to pivot within our integrated portfolio and maximize the diversity of our geographic footprint to capitalize on growth wherever it is happening. Next, driving the value of our innovation pipeline to the bottom line, enabling customers and shareholders to realize the benefits of the game-changing products and technologies we are bringing to the market. And finally, managing our capital and cost structure to drive efficiencies and reduce debt. We are making tremendous strides in every front, beginning with our strong feedstock position and investments we are making to further bolster this competitive advantage. And looking at Slide 15, we have long said that we expect favorable dynamics in the ethylene cycle to continue. In fact, our industry is rapidly progressing towards the intersection of 3 compelling and disruptive trends. One, persistently favorable oil-to-gas ratios. Never before have we seen an oil-to-gas spread as attractive as what we see today. Higher oil and therefore, higher naphtha prices has placed upward pressure on ethylene derivative pricing. Meanwhile, natural gas prices are at all-time lows. However, we do expect prices to stabilize over time in about the $4 range, encouraging an increasing supply and attractive economics for natural gas liquids extraction. Second, this is reflected in the forward pricing on U.S. Gulf Coast ethane, which is expected to go structurally long in the second half of 2012 and beyond, as more than $6 billion of fractionation and pipeline investments come online, accelerating faster than the ability of petrochemical producers to consume ethane. This naphtha-to-ethane arbitrage will provide tremendous margin expansion opportunities for ethane-based producers. As a reminder, every $0.10 per gallon decline in ethane adds nearly $200 million of EBITDA for Dow annually. Third and finally, ethane industry operating rates, which are ramping up and are now projected to exceed 90% as early as next year as demand improvements gain traction and capacity startups continue to be delayed. All of these dynamics are a real game-changer for our industry and, of course, for Dow. In fact, we anticipate this value, coupled with our current feedstock investments, will translate into an additional $2 billion of EBITDA in 2017. Turning to Slide 16. As you know, Dow is the world's largest and most flexible ethylene producer, a full 70% of our global ethylene assets are in regions with cost-advantaged feedstocks. And just one year ago, we launched a comprehensive plan to take advantage of structural changes in the United States natural gas liquids market, and further shoring up integration advantages for our ethylene and propylene-based downstream businesses. These investments, as you've just seen, are perfectly timed, and we have much progress to report. Our cracker in St. Charles is on track to restart this year. We are moving forward with our new on-purpose propylene facility and recently signed a technology licensing agreement. This project is slated for production startup in early 2015. And just last week, we announced plans to site a worldscale cracker at our integrated operations in Freeport, Texas. In total, these investments will increase Dow's ethylene production capabilities by as much as 20% in the U.S. over the next 3 years, providing significant margin expansion potential for our Performance Plastics, Performance Materials and Advanced Materials businesses. Let's turn to Slide 17, which brings me to Dow's integrated portfolio. Here, you'll see the normalized margin targets for our operating segments. Note, in particular, Coatings and Infrastructure, and Performance Materials, where we plan to deliver margin growth as recovery in key markets, such as construction and transportation, takes hold and as we begin to realize the benefits of the integration investments I just discussed. In fact, our propylene integration through propane dehydrogenation will bring margin expansion on the order of 100 to 200 basis points in our Coatings and Infrastructure segment and margin improvements in the range of 300 basis points for Performance Materials. I'd also point out that our Performance Plastics portfolio is currently delivering margins in the 20% range even in the midst of trough-like conditions in Europe and in Asia. So as you can see, the upside potential is indeed significant. Let's turn to Slide 18. Equally compelling is the way in which we are able to pivot our portfolio to take advantage of attractive markets and regions, mitigating risks and capturing value on multiple fronts. For example, we used our deep value chain integration to opportunistically take advantage of attractive market dynamics, whether it's in the epoxy chain, from allylics and phenolics, all the way downstream in the formulated systems and automotive applications. In epoxy, for example, we took advantage of very strong upstream fundamentals and delivered record level EBITDA in the first quarter of 2011. Today, we are moving that same molecule preferentially downstream. For example, to structural adhesive applications in Dow Automotive systems, which this quarter posted record EBITDA. Our geographic diversity and broad reach also gives us flexibility as you've seen over the last several quarters. Our growing footprint in the fast-growing emerging world has now delivered 10 consecutive quarters of year-over-year volume growth. And our leadership in the United States and Western Europe, particularly Germany, provides a solid platform from which to grow as demand in these economies returns. This geographic presence and on-the-ground know-how gives us the unique capability to deliver high-tech solutions across a wide range of industries and end markets, speeding up the timeline from innovation to commercialization and optimizing the value of our $33 billion technology pipeline. So let's turn to Slide 19. We are monetizing this pipeline across our businesses. And the impact is already reaching our bottom line, with sales from new products having delivered about $400 million of EBITDA since 2009. Looking forward, we expect our technology pipeline will deliver nearly $2 billion by 2015. Take the AgroSciences for example. Here, we are reaping the benefits of our strategy to invest in Seeds and Traits. We now have a $1 billion Seeds, Traits and Oils business with market share gains last year in both Latin American corn and U.S. cotton. In fact, we increased our cotton share by another 5 percentage points last year alone. Our Enlist Herbicide will launch in the 2012/2013 time frame, and it promises to be an industry game changer. Just last week, we announced investment plans in Texas for production of our proprietary 2,4-D choline in addition to investments we've already announced in Michigan. This will fuel a key component of the technology that is found in our Enlist Duo herbicide system. Other innovations are accelerating as well. We are expanding availability of our POWERHOUSE Solar Shingle, partnering with elite professional roofing contractors in California and Texas to distribute our complete roofing systems. Also, together with Ford, we've announced plans to develop next-generation carbon fibers that will reduce vehicle weights, building on our recent joint venture with Aksa, and representing a critical step in meeting fuel economy and electric vehicle range targets. Let's turn to Slide 20, because here we talk about EVOQUE, a breakthrough technology offering in our Coatings portfolio that enables better paint by improving the efficiency of titanium dioxide. We've received high interest regarding this launch, so let me give you an update. Recall we launched this product in March 2011, just one year ago. And typical adoption cycles for completely new materials run from 18 months to 5 years. However, we've sped up the time frame from launch to adoption, and the success of our technology is playing out. We are hitting all of our key milestones, with customers validating the value proposition of EVOQUE and working to develop commercial formulations. As you can see on this slide, sampling, trialing and formulations are underway in every region of the world, with customer commercialization in progress for this paint season. In addition, we are expanding our technology portfolio beyond all acrylic polymers to include styrene and vinyl-based formulations to capture both share gains and volume growth. We will continue partnering with all major customers to fully bring this technology to the marketplace. Turning to Slide 21, and operating and capital efficiency, which of course is another key value driver for Dow and its shareholders. As we have demonstrated over the last several quarters, we have the ability and the resolve to take swift strategic interventions to ensure we remain solidly on track and deliver against our cash flow and EBITDA targets in the near term. Key management of our portfolio enables us to react quickly to shifting market dynamics and mitigate downside risks. This is exactly what we did earlier this month as we announced plans to adjust our footprint primarily in Western Europe in response to new structural realities. We took clear surgical actions that are directly linked to our target of delivering $250 million in cost savings this year. In addition, our efficiency for growth programs continued to deliver with another $200 million in cash this quarter due to plant reliability improvements, purchasing efficiencies and freight optimization programs. Taken together, we remain on the trajectory to reach our target of $1 billion in cash flow and cost interventions by year end. And if needed, we have identified an additional $1.5 billion in levers we can pull, which is why we continue to carefully manage growth and CapEx spending. As a result, Dow's financial discipline and foundation is indeed strong. And turning to Slide 22. This is demonstrated, as Bill has talked about, on our balance sheet and our cash flow targets, where we remain firmly on track to deliver $8 billion in cash from operations in 2011 and 2012. As you know, over the last several years, we have undertaken significant debt paydown actions and this has reduced our annual interest expense on a go-forward basis, cash and savings that go right to the bottom line. And in terms of how we plan to use this cash, we've been very clear. Our firm priority is to increasingly reward shareholders, pay down debt and invest prudently in organic growth. We delivered on our first priority with our recent announcement of a 28% increase in our second quarter dividend, and this is on top of the 67% increase we delivered last year, bringing our payout ratio within the range of our historic 45% levels and among the top of our peer group. I'm also very proud to point out that 2012 marks the centennial anniversary of Dow paying quarterly dividends. This consistent delivery of shareholder value underscores our board's commitment to pursue a dividend practice that is reflective of a growth company long term. And importantly, it signals our confidence in our ability to deliver higher and sustainable earnings growth over the long term, which brings me to our outlook on Slide 24. Our vast reach into end markets and geographies gives us a unique perspective, and the trends we are seeing are consistent with our previous outlook. We continue to see improvement and expect that it will accelerate in the back half of 2012. Asia is showing improvements, as Southeast Asia is showing solid demand growth, and Japan moves into post-tsunami recovery after a slow end to 2011. China is stabilizing and growth is likely to accelerate later this year as their government keeps shifting its policies to inspire and incentivize domestic growth. In the United States, we see improving consumer confidence coupled with cautious optimism on housing starts and remodeling investments. Add to that, tailwinds in the industrial sector driven by the country's abundant access to low-cost natural gas, which enables low-cost exports and it's easy to see why we anticipate improvements across a variety of sectors in this country. In Western Europe, we do see encouraging signs coming out of Germany. However, the rest of the region continues to struggle with structural competitive issues and debt constraints and shows recessionary trends. Therefore, our plans do not call for any material improvements over the near term. Across the end markets Dow serves, we are already benefiting from strong fundamentals in agriculture, food and industrials, and are seeing encouraging signs of improvement in construction, electronics and transportation. From a geographic perspective, we will continue to benefit from our strong positions in both the United States and Latin America. You should expect that we will continue managing our costs in Europe given the structural headwinds in that region, and we will continue to expand our footprint in Asia. On the whole, we continue our assertion that demand growth will gain momentum in the second quarter and throughout the remainder of the year. So on Slide 25, and within this context, I want to revisit our earnings growth roadmap, where we are relentlessly focused on executing against our priorities. What are they? Delivering organic growth and margin expansion by leveraging our feedstock-advantaged integrated portfolio and global reach to take advantage of growth wherever it is happening. And despite some specific and unique headwinds, on the whole, our portfolio equity companies will continue to derive benefits from their leverage to attractive regions and low-cost feedstocks. And third, we will continue commercializing new products and technologies that deliver real value to our customers and our shareholders. Let me also repeat our priorities for use of cash. Rewarding our shareholders is foremost in our minds as we grow through the organic growth that is already funded in our business plans. We have no need for acquisitions. In closing, we have had a solid start to the year. We are a company with positive momentum, and I'm confident in our growth prospects as we remain firmly on the path to higher and more consistent earnings. And with that, Doug, let's turn to Q&A.

Thank you, Andrew. Now we'll move onto your questions. First, however, I'd like to remind you that our comments regarding forward-looking statements and non-GAAP financial measures apply to both our prepared remarks and the following Q&A. Audra, will you please explain the Q&A procedure?

[Operator Instructions] We'll go first to P.J. Juvekar at Citi. P.J. Juvekar: Your Performance Plastics results were somewhat negatively impacted by crackers in Europe and Asia. Have you looked at sending NGLs like propylene from U.S. to some of your crackers in Europe, and does that make financial sense? Andrew N. Liveris: Yes, so thank you for the clarify on Performance Plastics in the quarter, that's indeed the right observation. The compression of margins in Western Europe, many are in negative cash margin territory. We're in positive territory because of our flexi-crackers over there which, of course, then, as your question, which can we take LPGs from low-cost jurisdictions into those crackers. The answer is yes. Have we looked at U.S. exports in particular? We are evaluating that sort of thing. The real key issue is export terminal availability, especially on propane. But we are looking into it for Terneuzen in particular. P.J. Juvekar: And just quick question on ag particularly in Seeds. You got great treatment technology, but you seem to be limited by your germplasm both here and in Latin America. Is there any thought about rounding that out through M&A or other options? Andrew N. Liveris: Well, so ag as you -- to go backwards on your question, Latin America, we're already in double-digit territory without any feel for constraint on germplasm. In fact, our germplasm for corn and soy and cotton, we are very happy with in the U.S. as well. And in fact, we're building our position in corn without the need to go and acquire a hell a lot more germplasm because we have channels that we can get to and negotiate licensing agreements to give us value to our shareholders. However, having said that, we also -- I want you to note that, that I can talk about Enlist as a unique and unbelievable opportunity to help us with respect to maximizing the value in those channels, because we will have the most complete insect and herbicide trait package through SmartStax and Enlist. And we're looking at the next 2 years as further game changers in our access to market whether that be direct germplasm ourselves and especially in corn to get to double-digit market share, as we talked about several years ago or indeed to, in fact, do licensing.

We'll go next to Andy Cash at UBS. Andrew W. Cash: Play off of what P.J. is talking about, these crackers. Our understanding is that in the Middle East a number of the ethylene producers were actually operating below 90% in the first quarter. So I'm just curious what was Dow's experience in the first quarter, and if it was less than 90%, why would that be the case given the very low-cost position against the naphtha crackers in Europe and elsewhere? Andrew N. Liveris: Well, so turnarounds to -- you'll remember we've started turnarounds, so you got to take that out, but if you look at the crackers that were operating actually globally, they're all in the 90% range. So all higher and especially the U.S. Canadian crackers, which of course, as you just noted in your question, Andy, low-cost. We have lots of turnarounds this quarter. It's a big turnaround season, not really any different to this time last year it's what we see every year about -- in the spring season, if you like, in the northern hemisphere. But we really do expect 90% operating rates once they're all up and running in the back half of this year. Andrew W. Cash: Okay. And just secondly, what were your turnaround costs in the year-ago quarter? You said it'd be up about $100 million from the first quarter, but what were they last year? William H. Weideman: Yes. Andy, this is Bill. In the second quarter of last year, our turnaround costs were $291 million. So about $290 million. And this quarter, we're -- or second quarter this year, we're projecting around $300 million. So it'll be very similar to a year ago, but as you mentioned they will be up $100 million versus first quarter due to the summer months is when we do most of the turnaround.

Next, we'll move to John McNulty at Crédit Suisse. John P. McNulty: Just a couple quick questions. On ag, when I look at the revenue generation, it was significant. It looks like record-breaking, and yet when we look at the margins, the margins aren't at record-breaking levels, they're actually below where they've been for the last couple of years. So I guess if you can walk us through maybe the disconnect there, and how we should be thinking about that going forward. Andrew N. Liveris: Well, the key is we had, in our view, a record top and bottom line quarter driven by gains in both price and volume, but we have a lot of front-loading on the big launches going on not the least of them being Enlist. So that's why you should see it, we're scaling up SG&A in particular now, to the first question that was asked, I think by P.J., in terms of what we're going to do to actually see access to market. We're building that access through direct channel, and that's what you're seeing at the front end in terms of maybe taking away a little bit from the bottom line. John P. McNulty: Okay, great. That makes sense. And then just with regard to Enlist, is it still on schedule for a late '12, early '13 launch? Is that still kind of the time frame, or is there any change to that? Andrew N. Liveris: Yes. It's on time. You made me do a double negative there. Yes, it is on time for late '12.

We'll go next to Don Carson at Susquehanna Financial.

Andrew, you talked about ethylene operating rates getting above 90% in the next year, so I'm just wondering. Is that sort of a comment on how positive you are about economic growth, or do you see some pent-up restocking going on? And maybe as part of that, can you just comment on how you see the balance of this year shaping up, particularly in demand out of Asia? Andrew N. Liveris: Yes. So I think it's -- the last part of your point is the Asian dynamic has been quite troubled for lots of reasons. Not the least of them being Japan and post-tsunami Japan, and many -- much of the capacity not coming back up again. And then, of course, the squeeze on margins out there due to the higher oil and naphtha price. Even many of the state owned crackers in China are under severe pressure to actually change their entire footprint. We ourselves have been asked to come in and help them. In fact, help them with flexi-crackers and they want to start in their shale gas in a big way, not that they've discovered a lot yet. But you can see a new dynamic happening in Asia, which is running crackers where they have return on capital as their metric rather than just running them. And that's creating a very different dynamic in terms of North American exports to Asia. I tell you, Don, we're about to enter, unless we do something really silly on energy policy, a golden age again for North American exports to Asia based on the new dynamic in Asia and good solid growth, 7.5% in China is slower than normal, but still very solid growth as well as the North America arbitrage ethane to naphtha. We'll create operating rates that we feel will be for the next 3 or 4 years in the 90-plus range, but U.S. will be the exporter of very close second resort, if not competitive with many of the crackers even in the Middle East. John P. McNulty: And just as a follow-up, any update on the Kuwaiti arbitration, which always seems to be 4 to 6 weeks away? Andrew N. Liveris: I take your comment with a grain of salt that my answer will now provide you I said days, weeks, not months, and I'll stay there.

Next one to Bob Koort at Goldman Sachs.

Andrew, I get a sense from some investors' reluctance to take a position in your stock ahead of the summer where there seems to be some speculation that there's going to a crashing of ethylene margins. And I guess when I look at the ethane costs out in the future, they're actually flat to a little bit down even after all these shutdowns are over. So I was just wondering, I know you talked about sometime in the second half, things loosening. Can you give a little more specifics about what you see happening as your own shutdowns cease in the summer, and sort of what we might expect later in this year? Andrew N. Liveris: Yes, look, I can't conjecture about the reason people don't come into the stock. But to the extent they're trying to read the cycle down to the month, I think they -- people do overreact to that. I think our numbers speak for themselves. We've said it will be volatile through the cracker season. And as the crackers come back up, they'll be lots of demand and not as much supplies, that will get tight again. So Q2, Q3 will remain volatile, but we believe by Q4 and beyond, it will go structurally long and stayed there for several years. So you can expect this up and down volatility in the next several months to continue. At the same time, normalized demand recovery environment, which we are seeing in the United States, I don't want to repeat what I said in my commentary and we said in our press release. We are seeing recovery in some really good areas in the U.S., not the least of them being construction, which is a pretty powerful signal. First time we've seen that for several years, and we are seeing it across a range of our different businesses. I think U.S. being a strong economy, being the size it this, will help price increase environment in the resin as well. So you're going to see the double effect of that tighter ethylene based on low-cost ethane, U.S. running hard exports as well as domestic going up and price power in all those [ph] plastics.

If I could follow up. The ethane markets have been talked to death, and I think people are pretty aware of a long position developing until the mega crackers start up again several years out, but can you give us a brief education on the propane markets. I know on your slide you talked about a $4 natural gas price. Does this imply we should see an elevation in propane? Or are we going to see the same sort of excess supply dynamics and switch outs of propane for natural gas heating and keeping those markets long as well? Andrew N. Liveris: We've always said certainly in our calls and in our investor roadshows that one thing people don't read as detailed as they read the ethane is in fact the propane dynamic, which is a governor on the ethane dynamic. In essence, propane going structurally long as U.S. natural gas recalibrates back to some normalized number in the, let's call it $4 range. As ethane calibrates around that based on a premium to natural gas at the $4 range. Propane will be -- it's alternative value is the fuel market, but the fuel market is structurally long based on natural gas and ethane. So what happens is it has to be exported but there's not enough export terminal being built. So as a consequence of that, propane will become a very, very favorable feedstock for flexi-crackers that can take it, which will include ours. So even our U.S. announcement last week, we'll be able to take some propane into that cracker, won't be a pure ethane cracker because of this natural effect. Therefore, we believe propane dehydrogenation and the arbitrage to propylene will be a competitive advantage for many years to come, and there is no natural new sync for propane. Of course, over time, export capacity will be built, and so back to P.J.'s question we'll be able to even export some of it ourselves, but we believe for us, it's 1/3 of U.S. Gulf Coast capability and propane cracking resides with Dow, and we'll be able to use as a natural governor on ethane price if ethane price tends to go high.

We'll go next to Peter Butler at Glen Hill Investments.

I had 2 short questions and a comment. One of the questions is, I think in the history of Dow, I've never sat through a conference call without the word polyethylene being mentioned. Has Howard disappeared, or what's going on? Andrew N. Liveris: So, no, Howard has not disappeared and Performance Plastics, which as you know, is realigned to now have a market orientation. That market orientation, Peter, is recreated in a complete new way because of packaging. And we bought the Rohm and Haas Packaging Adhesives Materials business, combined it with our plastics franchise, our polyethylene franchise and have created an $8 billion packaging unit, which really, today, is technology-driven, market-driven and takes the feedstock advantage as a bonus. In other words, Howard's machine is market-driven. And then the second part of that is Elastomers, which had a bang-up quarter especially into automotive. And the third part of that is Health -- Hygiene and Medical, which goes into everything from diapers to you name it, wound care. And as a consequence of that, what the unit is doing today is what we promised it would to. We've moved away from commodity resin sales, and we've moved into value-add technology, market-driven sales across those 4 buckets. Of course, we still make a lot of resin, but we don't want to -- to use the term, Howard's term, we're not pellet heads. We are market-driven solutions providers.

Second question is earlier in the first quarter, the wag among the Dow folks that I talked to was almost despair about how bad the quarter was going to be, and then you report something that's above first call which implies that March was not just a good quarter but a fantastic quarter, and I'm wondering whether maybe you're are being too conservative if you take margin multiplied by 3, don't you get a pretty nice number for the second quarter? Andrew N. Liveris: Yes. So look, January February was always jury out, and we said it in the latter part when we announced the Q4 that Chinese New Year was going to be seminal. The thing that's happened, Peter, is the sales momentum, especially as you just said March, which we saw a plus 20% over year-over-year. That was almost across the board, across every sector and across all geographies, including China. The China rebound was kind of tepid after Chinese New Year in February but started picking up in March. So now if you look going forward, that momentum has continued on into Q2 and with our cost intervention, because Europe is still a bit of a weight, with our cost interventions in Europe in particular but certainly even the big takedown of the plant in Brazil. We feel the U.S. is showing tailwinds and strength, and Asia is good to strong and Latin America is good to strong. So we believe we don't want to be irrationally exuberant, good curtail winds coming out of March.

Okay. The comment, Andrew, is my hat is off to Dow's top management regarding your intention to grow organically without the help of investment bankers who, in my experience, would marry a rabbit to a snake. But I think the more money that goes to the owners while avoiding potential acquisition errors [ph]has got to be a huge new plus for Dow stock and the Dow story. Andrew N. Liveris: Well, it's the focus around -- we, in the last 5 years, we've executed around one of the most major portfolio transformations in Dow's history, probably nothing bigger has been done like this since the '40s and '50s when we got into petrochemicals in the first place. That 5 or 6 years has put us in a great position. We have the portfolio in place to deliver the cash we promised our shareholders and the earnings targets that underpin that, which also means then that we have to continue to execute and deliver shareholder remuneration. That is the single focus here. It's a drumbeat that we have out there for a year. The dividend increase hopefully shows that we're serious, the board is serious and is all about execution from here, Peter. We don't need acquisitions for the reasons I just said.

And next we'll go to Vincent Andrews at Morgan Stanley.

Maybe you could talk a little bit more about March. A lot of the companies that have reported so far, March has sort of been this magical month where all of a sudden customers just sort got back to doing business. So maybe in some of your businesses or in important geographies, could you just sort of help us understand the customer conversations and how they changed in March and sort of what was it that went away, was it fear, was it strong underlying demand that was actually improving, or was it rebuilding inventory, or what were the dynamics? Andrew N. Liveris: I think it's a great question. I think it would be fair to say it's all of the above. I mean I'd tell the rebuilding of inventory especially after the very low points of late last year. Now we took actions and moved volume to capture share. Now what's going as we're out there with good operating rates. I mean, let me give you polyurethanes as a good example. Polyurethanes in the United States gained share late last year, has kept share and has now got price increases in place. And so as you go forward, whether it's epoxy or propylene oxide-based polyols, we actually are seeing strength. And it's share plus price, and it all was really started to take traction in March, as people started to rebuild inventories. But then the other amplifier, and we talked about this in the Q4 call. We said the amplifier would be if the market started to take traction again based on confidence. The restocking will be an amplifier and that's indeed what we saw in March. The fact that it all happened in March versus February and March, that's a fairly new dynamic but we're watching this carefully. We track it, if not daily, weekly here and we're seeing the order book is reasonably strong on the March clock, not on the first quarter clock. So the quarter is looking like March, not like the quarter, not like Q1.

And maybe just a quick follow-up on your inventory days at 75 days. Could you just put that in perspective with -- is that, do you consider that normal for now or is it the function of rebuilding your operating rate or how should we think about that trending as we move through the second quarter? William H. Weideman: This is Bill Weiderman. That's actually normal. We normally build inventory in the first quarter in advance of our higher turnaround season, and so it's very much in line, it was very planned in terms of building that inventory level. So as you know, in the first quarter, working capital ends up being a use of funds in Dow and as we move through the year becomes the source of fund. so very much in line with past practice.

We'll go next to Kevin McCarthy at Bank of America Merrill Lynch. Kevin W. McCarthy: A question on your balance sheet and cash flow. If we look at the last year or so, it looks like your net debt over the past 12 months has come down, $865 million, and that's probably within $50 million or so of proceeds that you've gotten from divestitures. Meanwhile, you've obviously had a lot of large capital projects on the Gulf, Middle East, a large recent dividend increase. Should we infer from this that you're reasonably happy with the structure of the balance sheet today, or what should we expect with regard to leverage over the next year or 2? William H. Weideman: This is Bill, again. Well, as you know, we made significant progress deleveraging our balance sheet over the last few years, and we've also got a significant amount of liquidity. Having said that, clearly as we've mentioned and reemphasized our cash priorities. As Andrew mentioned, our priorities will continue to be remunerating shareholders but also continuing to delever. So -- and then also funding growth, and we believe with our projected cash flows, we have the ability to do all 3. Kevin W. McCarthy: Okay. Then, Andrew, as a follow-up, if I may, on the propane line of discussion. If I look at the April benchmarks for the U.S. Gulf, it looks like the propane crack is within about $0.02 of the ethane-based ethylene margin. Meanwhile, export capacity constraint, it looks like propane is getting longer here. So my question is over the next 6 months or so, do you foresee a scenario where propane gets long enough to catalyze enough feedstock switching to drive ethane into the cost floor? Is that perhaps an upside scenario for you over the next couple of quarters? Andrew N. Liveris: Yes. You've just said a much more eloquent job than I did in answering the question, but I think you articulate exactly a scenario that we think will play out.

We'll go next to Frank Mitsch at Wells Fargo Securities. Frank J. Mitsch: Andrew, you've given some a very constructive comments on March, I'm wondering where you stand on this pull-forward debate that has gone on in the ag side between Monsanto and Dupont. And also perhaps comment on the favorable weather here in the first quarter. What sort of impact did you see, if any, in terms of a pull-forward from Q2 into Q1 that was either weather-related, related to ag or related to construction? Andrew N. Liveris: Yes, so on ag, thanks again, Frank, for giving me a chance to just say that ag had just a blow-out quarter, and I know the others out there did as well. But look, just our sales in our new ag chem products, I mean, 41% versus same quarter last year on the news whether it be SmartStax, pyroxsulam, [indiscernible] but we all did well. The ag fundamentals because of this weather, we believe there might be a $0.01 pull-forward for us. That's about it based in our mix. Why? Because we've been gaining share -- our Seed, Traits and Oils posted outstanding mid double-digit growth in Q1. It's now $1 billion business. This will be a longer season in both ag chem as well as in construction to answer your question. Frank J. Mitsch: Okay, great. And thank you for the update on EVOQUE. Can you offer some sort of guidepost in terms of how big can that business get to when it gets to maturity? Andrew N. Liveris: I'm going to probably defer to answer that question to the next earnings call, and the only reason I'm doing that is that we're doing June strategy week, and our Dow Coating Materials business has been in here, and we're very excited by the slide we provided you in this deck, which shows you market penetration. This is potentially a $500 million NPV launch. And the most important part of this is it's gen-1 only and it's near term, and we have the assets pretty much in place. So this is near-term EBITDA not back loaded. And I will give you more on it in the next call if you remember to ask.

We'll take our last question from David Begleiter at Deutsche Bank. David L. Begleiter: Andrew, just on U.S. ethane prices. I know you have a lag versus published prices. Did we see the full benefits of the very low ethane price in your numbers, or will we see those more in Q2? Andrew N. Liveris: So the turnaround season is a driver to answering your question. As you know, it's currently trading at about $0.50. We expect that will be what you'll see in Q2 but there is a slight lag, one; and two, to the previous question that was asked on volatility, it will go structurally long in Q4. But yes, I mean, it lags slightly and it lags slightly in our numbers mostly because of polyethylene. David L. Begleiter: And just on propylene, Andrew, what was the headwind from the propylene price increases you saw on Q1 versus your own selling price increases and will that reverse, do you think, or will price increases catch up with propylene in Q2? Andrew N. Liveris: Yes, they will catch up in Q2. And it's just simple, the dynamic around the quarter that people have asked about which is January and February were slow and so traction was hard. But as the market came back with the strong tailwind in March as we've already answered, their price increases started to go through and you'll see much more of that in the whole quarter versus the month.

Okay, thank you very much. Andrew, do you want to make a few comments to close. Andrew N. Liveris: Yes. Look, I'm loath to use sporting analogies because some of you have used them for headlines but look, this was straight down the fairway tee shot, the quarter. Middle of the fairway, not above a Watson shot, although he did pretty well. This was right down the middle of fairway, green in sight. And as far as Dow AgroScience is concerned, they actually got on the green in one. And so we have work to do in the volatile economy, but we have tailwinds and we have strength. Where? I've mentioned AgroScience. I also said that we're seeing positive indicators of construction, transportation and electronics, and we're also seeing a stronger U.S., and with good tailwinds and Dow's great position in the United States enhanced by the feedstocks that we've talked about and the technology launches we've talked about whether they be in AgroSciences or whether they be EVOQUE. So there's a momentum going on, and the momentum will ensure that we keep delivering our quarters and our cash flow and our shareholder remuneration as Peter Butler said, this is a different Dow. We are very focused on execution in the current portfolio, so we can delever, but as critically important to us, show to all of you why your patience in us is justified. This is a company that's executing and will continue to execute. We look forward to talking to you on the next call.

Thank you, Andrew, and thank you, everyone, for your questions and for joining us this morning. We do appreciate your interest in The Dow Chemical Company. For your reference, a copy of our prepared comments will be posted on Dow's website later today. This concludes our call, and we look forward to speaking to you again soon. Thank you.

And that does conclude today's conference. Again, thank you for your participation.