Dow Q1 op profit drops 4% on rising cost base

24 April 2008 12:25  [Source: ICIS news]

LONDON (ICIS news)--Dow Chemical’s first-quarter EBIT (earnings before interest and tax) dropped 4% year on year to $1.39bn despite strong sales as the company absorbed a $2.2bn increase in additional feedstock and energy costs, it said on Thursday.

 

Sales rose 19% to reach a record $14.8bn as the company recorded double-digit price hikes in all geographical regions and 6% volume growth in emerging economies.

 

“Dow delivered an exceptionally good quarter, in which broad-based pricing initiatives, growth in our Performance businesses, especially Dow AgroSciences, and our strong international presence counterbalanced ongoing weakness in the US and an unprecedented increase in purchased feedstock and energy costs,” said CEO Andrew Liveris.

 

Dow’s Performance Plastics division reported a 25% drop in first-quarter EBIT to $329m despite price and volume increases. Specialty plastics and elastomers could not pass on large run-ups in hydrocarbon and energy costs, while the epoxy business faced declining industry margins.

 

Performance Chemicals’ EBIT fell 13% to $271m as emulsion polymers were hit by large cost increases in butadiene and other raw materials. Dow Corning made a lower contribution due to a short-term spike in raw materials costs.

 

Basic Plastics’ EBIT dropped 19% to $427m as the segment reported lower demand for polyolefins in North America due to lower consumer spending amid slowdowns in housing and automotive sectors. Polystyrene production also suffered from increasing feedstock prices.

 

However, earnings in the Basic Chemicals business improved 19% to $159m driven by pricing increases in key chemicals including caustic soda and ethylene oxide/monoethylene glycol (EO/EG).

 

Dow also posted a 17% increase in its Agricultural Sciences' EBIT to $331m on the back of a 27% increase in sales, reflecting ongoing favourable conditions in the global agricultural and food industry.

 

In its outlook, Dow expected a good second quarter, saying a strong international economy and a robust agricultural sector should counterbalance a soft US economy.

 

By: Mark Watts
+44 20 8652 3214

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