Union Carbide Corporation 2024 Annual Report Review

Introduction

Union Carbide Corporation (UCC), a wholly owned subsidiary of The Dow Chemical Company (TDCC), has released its 2024 Annual Report on Form 10-K. This report provides a comprehensive overview of UCC's business operations, financial performance, and strategic initiatives. As a chemicals and polymers company, UCC plays a crucial role in TDCC's global operations. This review will delve into the key aspects of UCC's 2024 Annual Report, highlighting its business description, financial performance, risk factors, and future outlook.

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Business Description

UCC operates as a chemicals and polymers company, primarily selling its products to TDCC. The company's product portfolio includes ethylene oxide/ethylene glycol, hydrocarbons, industrial chemicals and polymers, polyethylene, solvents and intermediates, technology licensing and catalysts, vinyl acetate monomer, and wire and cable applications. UCC's operations are integrated with TDCC's global businesses, allowing for streamlined customer interactions and optimized resource allocation.

Key Products

• Ethylene Oxide/Ethylene Glycol (EO/EG): Used in the production of monoethylene glycol, polyethylene glycol, glycol ethers, and other performance chemicals.
• Hydrocarbons: Ethylene and propylene, primarily consumed by downstream product lines.
• Industrial Chemicals and Polymers: Products for specialty applications, including personal care, industrial cleaning, and coatings.
• Polyethylene: Includes FLEXOMER™, TUFLIN™, and UNIVAL™ resins for various applications.
• Solvents and Intermediates: Used in industrial coatings, printing inks, and pharmaceuticals.
• Technology Licensing and Catalysts: Licensing of the METEOR™ Process for EO/EG and the LP OXO™ process for oxo alcohols.
• Vinyl Acetate Monomer: Used in the manufacture of polymers for paints, adhesives, and textiles.
• Wire and Cable Applications: Polyolefin-based compounds for insulation and jacketing systems.

Financial Performance

Net Sales

UCC reported total net sales of $4,277 million in 2024, slightly down from $4,296 million in 2023. The decrease in average selling price by 8% was offset by an 8% increase in volume. The decline in selling prices was attributed to lower downstream pricing and reduced global energy and feedstock costs.

Cost of Sales

Cost of sales increased by 4% to $3,968 million in 2024, primarily due to lower selling prices, unplanned events, and higher costs of site services. The cost of sales as a percentage of total net sales rose to 92.8% from 88.5% in 2023.

Net Income

UCC reported a net income of $250 million in 2024, down from $381 million in 2023. The decrease in net income was influenced by higher cost of sales and restructuring charges.

Cash Flow

UCC generated $566 million in cash from operating activities in 2024, compared to $698 million in 2023. Capital expenditures increased to $338 million, reflecting investments in production assets on the U.S. Gulf Coast.

Risk Factors

UCC faces several risk factors, including climate change-related risks, global economic considerations, financial flexibility, and legal and regulatory risks. The company is subject to extensive environmental regulations and potential litigation, particularly related to asbestos-related claims.

Climate Change

UCC is exposed to climate-related risks, including severe weather events and regulatory changes. The company is committed to reducing its carbon footprint and aligning with Dow's sustainability goals.

Legal Proceedings

UCC is involved in numerous asbestos-related lawsuits, with a total liability of $791 million at the end of 2024. The company continues to manage these claims aggressively.

Future Outlook

UCC's strategic focus remains on optimizing its operations and enhancing its competitiveness. The company is investing in new technologies and processes to drive growth and sustainability. UCC's integration with TDCC's global operations provides a strong foundation for future success.

Conclusion

Union Carbide Corporation's 2024 Annual Report highlights its resilience in a challenging economic environment. While facing several risks, UCC's strategic initiatives and integration with TDCC position it well for future growth. Investors should consider UCC's strong market position, diverse product portfolio, and commitment to sustainability when evaluating its investment potential.