31 January 2013 17:09 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS)--Dow Chemical has to restructure further in Europe to deliver stronger margins in a slow growth and high cost naphtha feedstock environment, CEO Andrew Liveris said on Thursday.
“Europe needs more rationalisation, more margin improvement, more restructuring as time goes by," he said in a conference call following the release of the US chemical major’s fourth-quarter and full-year 2012 financial results. "We will manage that with our portfolio management process."
Dow is in the midst of a $2.5bn (€1.9bn) cost reduction and cash flow improvement programme designed to position the company better to tackle an expected slower global growth environment. Capital and research spending is being prioritised and the divestment of non-core operations planned.
Liveris spoke of the significant, naphtha-based margin decline in Europe and in Asia in the second half of 2012 and the prospect of slow growth in Europe this year.
The company’s performance plastics segment businesses experienced “trough-like conditions in Asia and Europe”, in the fourth quarter, he said. Liveris called 2012 “a challenging year”.
The stabilisation of demand growth in Asia and the Americas in the fourth quarter for Dow offset declines in Europe.
“Volume was flat for the [fourth] quarter, as a 5% decline in western Europe offset volume growth in Asia Pacific (up 5%) and North America and Latin America (each up 1%), Dow said on Thursday in its earnings release.
“Excluding Dow’s Feedstocks and Energy operating segment, volume in North America increased 7%, reflecting improving demand,” it added.
Dow expects “continuing challenges” in Europe this year while it has higher hopes for a stronger macroeconomic performance in North America and in China, Liveris said.
The outlook in China is getting brighter, he added, with Dow expecting China GDP growth in 2013 of 7%.
Dow expects global GDP to grow closer to 2.5% in 2013 than 2.0%. “We are more confident in the macros that our market planning suggests,” the CEO suggested.
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