Moody's changes Dow Chemical's outlook to positive from stable

01 June 2011 03:50  [Source: ICIS news]

SINGAPORE (ICIS)--Moody's Investors Service changed the outlook on the ratings of Dow Chemical to positive from stable because of the substantial improvement in the firm’s financial performance in the first quarter, the ratings firm said late on Tuesday.

Expectations that Dow Chemical’s full-year earnings before interest, tax, depreciation and amortisation (EBITDA) will be well above prior projections also boosted its ratings outlook, Moody's said in a note.

“This improved financial forecast indicates that Dow should be able to strengthen its credit metrics to levels that would support a higher rating over the next three to four quarters,” it said.

Moody’s raised the full-year estimate for Dow’s reported EBITDA to over $9bn (€6.21bn), from a previous forecast of $8.3bn, on the back of its record performance in the first quarter of this year, the note added.

Dow Chemical's net profit in the first quarter of 2011 grew by 30.6% year on year to $721m, while reported sales were up by 9.8% at $14.7bn.

“In its first quarter earnings conference call, Dow mentioned that an arbitration settlement with Kuwait might not occur till sometime late in 2011,” the note said, without elaborating further.

“If Dow receives a substantial cash settlement as a result of this arbitration and utilises the funds to reduce its debt, then there could be upward pressure on its Baa3 ratings prior to the end of 2011,” it added.

According to Moody’s, obligations rated Baa are subject to moderate credit risk. In Moody’s ratings, or risk assessments, “1” is the highest and “3” is the lowest investment grade.

($1 = €0.69)

For more on Dow Chemical, visit ICIS company intelligence


By: Nurluqman Suratman



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