Sharp 17% Q1 EBIT fall for Dow on N Am weakness

26 April 2007 13:11  [Source: ICIS news]

LONDON (ICIS news)--Dow Chemical’s operating profits dropped 17% in the first quarter to $1.44bn as core businesses were hit by US housing and automotive sector downturns and compressed margins in chloralkali and PVC (polyvinyl chloride), the US chemicals giant said on Thursday.

Quarterly earnings dropped 19.4% to $1 (€0.73) per share from $1.24 per share, principally due to a decline in licensing revenues from extremely high levels a year ago, Dow said.

US housing and automotive sector weakness fed through to the company’s performance plastics segment, its largest, where earnings before interest and tax (EBIT) plunged 64.6% to $441m on 1% higher sales of $3.5bn.

Basic chemicals EBIT of $134m were down 13% on 7% lower sales of $1.3bn. PVC margins were severely compressed, Dow said, and caustic soda prices fell sharply.

Weakness in key North American businesses was offset by stronger geographical performance and stronger equity earnings from joint ventures.

Equity earnings were up 60% at $274m with strong results form Dow Corning, Siam Polyethylene and Univation technologies and, in the absence of maintenance turnarounds, at the EQUATE and OPTIMAL joint ventures in the Middle East and Malaysia.

Group sales were 3.4% higher at $12.43bn. US sales were down 13% at $4.11bn while sales in Europe gained 18% to $5.01bn. Dow’s rest of world sales were 9% higher at $3.31bn and the company reported double digit improvements in Asia Pacific and Latin America.

The subject of recent break-up and joint venture speculation, Dow stressed the importance of its integration and diversification in its first quarter report.

“Our geographic balance meant that robust sales in Europe, Asia Pacific and Latin America more than offset continued weakness in North America,” chief executive Andrew Liveris said.

“Strong growth in many of our Performance businesses and in Basic Plastics countered a downturn in Basic Chemicals; our joint ventures contributed another quarter of excellent earnings; and we continued to strengthen our position in several key industries through our market-facing business model, “he added.

Liveris said Dow expected solid global demand to continue through 2007. Second quarter feedstock and energy costs were expected to be higher than the similar period of last year.

“That said, strong demand and good pricing momentum has continued through April - reinforcing our view that 2007 will be another solid year for the Company, and that our strategy will continue to maximize shareholder value for the long term,” he added.

($1 = €0.73)

By: Nigel Davis
+44 20 8652 3214

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