25 October 2007 15:25 [Source: ICIS news]
(Adds analysis in paragraphs 1-3 and lastest share price in final paragraph)
LONDON (ICIS news)--Dow Chemical's shares dropped on Thursday as the US chemical major’s third-quarter earnings fell below analysts' forecasts.
Dow’s third-quarter earnings per share (EPS) of $0.84, excluding aggregate charges, fell short of the analyst consensus of $0.90 and Bank of America’s $0.95 estimate, it said in a report.
Performance chemicals fell furthest short of the bank’s forecast due to several outages and costs related to the Wolff Walsrode acquisition.
Dow Chemical reported a 55% year-on-year rise in its earnings before interest and tax (EBIT) for the third quarter of 2007 at $1.2bn (€840m) on solid increases in prices and volumes.
Year-on-year, volume improved 5%, the strongest growth since the third-quarter of 2004, with particularly robust demand in Europe, Asia Pacific and Latin America.
"Compared with the same quarter last year, Dow reported price increases in every geographic area and across all operating segments, outpacing an increase of almost $400 million in feedstock and energy costs," it added.
"All of this underscores that our strategy to grow internationally - and to develop joint ventures that secure competitively advantaged feedstocks - is working, which will continue to be our focus over the next several years," said Dow chairman and CEO Andrew Liveris.
The US-based chemicals major posted a 10% rise in its sales at $13.6bn, boosted by good contributions from its performance plastics, performance chemicals and basic plastics segments, it added.
The performance plastics segment sales rose 12% to nearly $3.9bn, while performance chemicals revenue rose around 7% to $2.2bn.
Basic plastics sales rose 7% to $3.3bn and basic chemicals sales were 3.3% higher at around $1.5bn.
Dow’s third-quarter profit before tax rose more than 64% to $1.1bn, including a $59m pretax charge for purchased in-process research and development costs related to recent acquisitions, it said. The 2006 figure included a $579m pretax charges for restructuring activities.
However, its net income fell 21.3% to $403m, reflecting the impact of a change in German tax laws and the charge for purchased in-process research and development, it added.
"We will continue to enhance our global footprint. We will invest in organic growth opportunities and well-targeted acquisitions that strengthen our performance business portfolio," Liveris said.
Global economic conditions remain reasonably healthy, even though there may be some concerns about the resilience of the ?xml:namespace>
However, Liveris saw Dow’s most pressing challenge is high and volatile feedstock and energy costs.
"We will mitigate these headwinds through a focus on aggressive actions to maintain margins, and through our joint ventures, which have competitive feedstock positions," he added.
At 10:17 eastern time, Dow shares were down 1.2% from Wednesday’s close at $43.45.
($1 = €0.70)
Additional reporting by Mark Watts
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