US Dow continues to benefit from developing economies - CEO

22 October 2009 17:46  [Source: ICIS news]

HOUSTON (ICIS news)--Government stimulus measures in developing economies such as China and Brazil have had positive impacts on sales of electronic chemicals, coatings and polyurethanes, improving Dow Chemical’s sequential quarterly sales, the US major said on Thursday.

While the company’s third-quarter reported sales were down 22% from the corresponding period of 2008, sales were up 6% from the second quarter, as increased volumes and prices more than offset a $600m (€396m) rise in feedstock and energy costs.

That marked the third consecutive quarter with improved sequential results, chief executive Andrew Liveris said during an earnings conference call with analysts.

“We view the global economy as now on firmer footing,” Liveris said. “World trade is picking up after imports and exports touched a bottom in the second quarter. We are seeing signs of stabilising, with strong growth in the Asia Pacific.”

That was particularly the case within the electronic and specialty materials segment, where volumes increased 7% sequentially due to stimulus measures driving demand in China and other Asian countries, Liveris said.

On a sequential basis, sales to China were up 15% in electronic materials, 16% in coatings and infrastructure, 5% to the automotive sector and 10% in polyethylene (PE), Liveris said. On a year-over-year basis, China volumes grew 10% overall.

Dow also noted growth in Latin America, and Brazil in particular, where volumes surged 18% relative to the second quarter, Liveris said. Overall, Latin American volumes increased 12% in the third quarter from the second quarter, and strength there was expected to continue.

As expected, however, growth from developed economies such as the US and western Europe is likely to lag, Dow said. While Liveris noted that US industrial production rose for a third consecutive month in September, he said Dow’s operating plans did not count on any material market improvement in 2009 or 2010.

Within those economies, the company said its chlor-alkali segment remains under the most pressure, with vinyl chloride monomer (VCM) struggling due to its exposure to the automobile market and caustic soda down due to weak demand in the aluminium, pulp and paper markets.

But due to the strength of the Asia Pacific economies, North American PE exports to Asia remained strong throughout the third quarter, Liveris said. Those exports also benefited from improved pricing within basic plastics, which rose 13% in the third quarter, Dow said.

While those factors could change as increased Middle Eastern capacity comes online, that was unlikely to have a significant impact on long-term North American plans.

“You don’t build new assets in the US or Canada based on exports,” Liveris said. “You can’t do that anymore. You have to keep focused on domestic demand. I think Europe would be more impacted.”

The company’s volumes in health and agricultural sciences were down 32% from the 2008 second quarter due to lower commodity prices, an industry oversupply of glyphosate, and a shift in Brazil farm economics that favoured soybeans instead of corn.

Even so, Dow said the agricultural segment remained one of its long-term plays.

“People will always need food and they increasingly care about nutrition,” Liveris said.

The company said its basic chemicals segment also endured headwinds in the quarter, with volumes down 1% on a sequential basis.

Accordingly, Dow reiterated its long-term strategy of shifting away from the volatility basic chemicals and toward increased specialty products.

Dow shares rose slightly Thursday on the New York Stock Exchange, trading at $25.70/share at 11:20 hours Houston time (16:20 GMT) - up 20 cents, or 0.8%.

($1 = €0.66)

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By: Ben DuBose
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