US Dow's Q4 profit beat forecasts on strong plastics performance

03 February 2011 19:17  [Source: ICIS news]

NEW YORK (ICIS)--US-based Dow Chemical’s fourth quarter earnings blew past Wall Street expectations, driven largely by strong performance in its plastics segment, analysts said on Thursday.

Dow posted underlying fourth-quarter earnings per share of 47 cents – up from 18 cents in the year-ago period and well above consensus estimates of 35 cents.

The upside was “driven by a monster beat in plastics,” said BB&T Capital Markets analyst Frank Mitsch.

Dow’s plastics segment saw sales jump 20% year on year to $2.9bn (€2.1bn), and adjusted earnings before interest, tax, depreciation and amortization (EBITDA) was up 26% to $770m.

Volumes were up 4% year on year, while pricing jumped 16%.

“Tight industry supply and rising feedstocks for competitors led to significant polyethylene sales increase,” Mitsch said.

“This appears beneficial for such other plastics producers as Westlake and LyondellBasell,” he added.

While expectations were high ahead of the earnings announcement, “we believe Dow’s fourth-quarter results came in well above the Street and most buy-side expectations”, said Credit Suisse analyst John McNulty.

“Plastics EBITDA of $770m was 27% ahead of our estimate as Dow benefited from running its units at very high utilisation in tight markets,” said Morgan Stanley analyst Paul Mann.

Citigroup analyst PJ Juvekar noted that plant outages supported ethylene margins in the quarter.

“EBITDA actually increased sequentially in what is typically a weaker quarter of the year,” he said.

“Robust performance in plastics is a positive read-through for LyondellBasell,” he added.

Shares of Dow Chemical traded up 5 cents, or 0.14%, in afternoon trading on the New York Stock Exchange.

($1 = €0.72)

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By: Joseph Chang
+1 713 525 2653



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