25 July 2011 21:42 [Source: ICIS news]
HOUSTON (ICIS)--US-based Dow Chemical expects its joint venture with Saudi Aramco, Sadara Chemical, to report $10bn/year in revenue and reach the break-even point within five years of start-up, the company said on Monday.
After the massive $20bn (€14bn) manufacturing complex goes completely on line by 2016, the company should provide Dow Chemical and Saudi Aramco each an average of $500m/year in earnings before interest, taxes, depreciation and amortisation (EBITDA) of 40%, the company said during a conference call on Monday.
"We anticipate Dow will reach cash-flow break-even within five years of start-up," said Dow's chief financial officer William Weideman. "We will additionally benefit from marketing fees and licensing royalties."
Dow Chemical and Saudi Aramco plan to finance 35% the project through equity investments and an initial public offering (IPO). The remaining 65% will be financed through debt.
"Dow has already contributed a majority of our equity through front-end engineering and project design investments with very limited cash contributions expected over the next several years," Weideman said. "We don't think this project will have an impact on our ability to continue to reduce debt, enumerate shareholders and fund innovation."
Dow Chemical CEO Andrew Liveris said Sadara was created with four key principles in mind.
First, Sadara is an advantaged play with world-scale operations backed by highly advantaged feedstocks.
Second, Sadara's product mix has been specifically designed to address high-growth technology-rich sectors, such as electronics, coatings, adhesives and food packaging.
Third, Sadara is uniquely located to target high-margin end-markets in the Middle East, Asia Pacific and eastern Europe.
Fourth, it is value enhancing in terms of contributions Dow will receive once the complex comes on line.
($1 = €0.70)
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