30 July 2009 19:43 [Source: ICIS news]
HOUSTON (ICIS news)--Dow Chemical beat analyst forecasts for second-quarter performance behind stabilising economic conditions, continued aggressive cost-cutting and a transition to specialty chemicals and away from basic chemicals, the US major said on Thursday.
While the company posted a net loss of $435m (€309m) due to charges related to its acquisition of Rohm and Haas, its earnings per share, excluding items, were 5 cents. Analysts expected a loss of 5-9 cents/share.
“We are seeing clear signs that stabilisation is occurring,” CEO Andrew Liveris said on a conference call. “We’re seeing operating rate improvements because of sequential volume improvements, especially in the emerging world.”
Dow cited particularly strong growth in the Asia Pacific region, and said it had seen evidence that ?xml:namespace>
In particular, Dow said its electronic and specialty materials segment was very strong in
The company also cited volume recovery within coatings and basic plastics.
However, it said the economic rebound in the
As such, the company said its second-quarter operating rate was at about 75%, with overall demand still below last year and excess capacity remaining.
That 75% figure is roughly equivalent to October 2008, and a 30 percentage point improvement from December.
Overall, volumes increased 5% from the first quarter, Dow said, marking the first time since the 2008 second quarter it had posted a sequential volume gain.
The company said it also outperformed expectations because of cost-cutting measures. Dow has already achieved $573m, or about 70%, of its 12-month cost synergy run rate target of $780m for its 1 April acquisition of Rohm and Haas.
Likewise, Dow also said it had agreed the sale of its stakes in the Optimal olefins, glycols and chemicals joint ventures to
That sale should be complete in the third quarter, Dow said.
That marks the fourth divestiture Dow has agreed to this year. Other divestments include Morton Salt, the company’s TRN refinery, and its calcium chloride business, which closed in the second quarter, Dow said.
The divestments are part of a long-term plan to raise $23bn-26bn in asset sales to help pay down the company’s debt. Dow said it remains on track to reach its goal of $4bn in asset sales for 2009.
In addition, Dow said its selling, general and administrative expenses (SG&A) were down $150m year over year, and it was more than halfway to its target of 8,000 job cuts.
Dow also said it would continue to lower its manufacturing footprint, reducing ethylene production by 30% on the US Gulf and eliminating purchases of ethylene from the merchant market.
Moreover, Dow said it had shut down 1m tonnes of chlorine/caustic soda capacity in
Those actions are part of the company’s long-term plan to reduce its exposure to basic chemicals.
“As we create our new portfolio, we believe we will continue to surprise to the upside on our results,” Liveris said.
Liveris said volumes gained momentum throughout the second quarter, peaking in June. However, he cautioned that July figures were not at June levels, due largely to European vacations.
Liveris said the company’s operating plan did not count on any material improvement in market conditions for the remainder of 2009, due to the general economic uncertainty.
Dow shares surged to $21.76 in mid-day trading on the New York Stock Exchange, up $1.49, or 7.4%.
($1 = €0.71)
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