UpdatePlastics slump hits US Dow Chemical in fourth quarter

02 February 2012 13:26  [Source: ICIS news]

Dow headquarters in MichiganLONDON (ICIS)--A much-reduced operating rate and steep earnings declines in plastics, materials and electronics helped drive Dow Chemical to a net loss of $20m (€15m) in the fourth quarter of 2011, the US company said on Thursday.

Dow’s fourth-quarter operating rate was down by 9 percentage points year on year to 72% as it faced headwinds in all of its businesses segments, apart from agriculture.

Earnings before interest, tax, depreciation and amortisation (EBITDA) for the quarter were down by 30% in plastics, 23% in materials and 16% in electronics, the company said. Group EBITDA before special items in the quarter were 17% lower at $1.6bn.

Fourth quarter group sales were up 2% at $14.1bn, or up 5% excluding the impact of divestments. Sales volumes were down by 5% in Europe and 2% lower in the US but up by 12% in China, Dow said.

Dow benefited from its geographic footprint as it faced a deteriorating macro-economic environment from the middle of the quarter, CEO Andrew Liveris said. Record sales in emerging markets had balanced what Liveris called “considerable weakness in western Europe”.

“In addition, our significant US market and feedstock advantage positioned us for success in the quarter and will continue to provide substantial value moving forward,” he added.

“Times like these demand a focused approach and strong resolve, and Dow’s firm operating discipline, cost control and productivity will continue throughout 2012.”

Dow’s fourth-quarter results had come in well below analysts’ estimates, which themselves had been lowered in recent weeks.

The company reported  a loss of $0.02/share, or earnings of $0.25/share excluding certain items. The most recent consensus estimate was close to $0.32/ share. Earnings in the 2010 fourth quarter were $0.37/share.

Dow expects the difficult operating environment in western Europe to persist, Liveris said.

“We do not anticipate material improvements in market conditions for the first quarter of the year, but do project economic recovery will gain momentum as we move through the second quarter and the remainder of the year.

“Dow’s downstream, market-driven businesses are poised to capture value from improving North American feedstock dynamics. We maintain our view that ethylene industry operating rates will tighten over the next several years – driving margin expansion,” he said.

For the whole of 2011, Dow’s net income grew 22% to $2.40bn from 2010, while its net sales rose 12% year on year to $59.99bn.

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($1 = €0.76)

By: Nigel Davis
+44 20 8652 3214

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