28 April 2010 17:38 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS news)--A string of chemical company results on Wednesday pointed to strengthening markets in the first quarter, strong volume gains and price rises. Dow, the largest US-based chemicals maker, and others revealed figures that reflected stronger growth in developed world markets and clear year-on-year and quarter-to-quarter gains.
Dow’s volumes were up 16% year on year in the quarter; Greater ?xml:namespace>
Given the continued emphasis on costs at Dow, the top-line gains translated into improved operating earnings and a much healthier net result. Dow has been through a period of divestments as it has sought to pay down debt accrued when it bought speciality materials maker Rohm and Haas.
Its underlying results, however, remain strong and equity earnings have powered ahead. The global operating rate was 83% in the quarter, up 7 percentage points from the fourth quarter of 2009.
Dow CEO Andrew Liveris was clearly pleased with the results, but rightly cautioned about the impact on the Dow businesses of still depressed residential and commercial construction in the developed economies, inflation concerns in emerging countries and sovereign debt issues in southern
Worries about the
“Overall, the global economic environment is on a stronger footing and there are signs that this will continue for the foreseeable future,” he said, adding: “This is good news for Dow”.
The point is also that it is good news for all chemical companies. Buoyed by growth in Asia -
The American Chemistry Council’s weekly economic updates have charted growing confidence in chemicals demand growth in the
The sales and profits gains made by Dow, and others, in the quarter are not surprising given the state of the sector a year ago: the most recent reporting period is compared with the most depressed in decades. The sequential gains, however, are welcome and it is they that have helped push company earnings above consensus - well above in some cases.
Dow, Shell, DSM, Rhodia, Praxair, Merck KGaA and Croda reported on Wednesday. Their early-in-the-day releases followed news from Asia players such as Japan’s Showa Denko and major producers in China such as CNOOC and PetroChina, which demonstrated clear first-quarter gains.
The Dow results show that it was the company’s performance businesses that were leading the way in the quarter, not so much the basics or commodity-type operations as might be expected.
Dow’s electronics and speciality materials businesses say volumes improved by 31% year on year in the quarter. Performance Systems and Products volumes were both 27% higher. Basic plastics volumes were up only 5% but prices were 44% higher.
The downstream product gains particularly suggest that the manufacturing economy is improving. Gains are being made in
A striking statistic from the Merck KGaA results was the 82% increase in sales of the company’s liquid crystals. The company said it was operating at full capacity for these products.
The export pull was a significant factor for companies such as Dow in the first quarter. Liveris said in a conference call that 20% of the company’s
“There is demand pull going on,” he added, “not just re-stocking.” That is encouraging and suggests a return to growth that is at long last driven, given Dow’s other comments, by increased consumer confidence.
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