UpdatePositive economic trends in key markets lift Dow Q4 net income

29 January 2014 13:51  [Source: ICIS news]

(adds sector detail, updates throughout)

LONDON (ICIS)--US-based Dow Chemical said on Wednesday its net income for the fourth quarter of 2013 had jumped to $963m compared to a $716m net loss during the same period the previous year, buoyed by gains from almost every operating segment.

The figure is also a 41% increase on the $685m net income generated in the third quarter of 2013, the company added.

Adjusted earnings before interest, taxes, debt and amortisation (EBITDA) for the quarter increased 31% year on year to $2.1bn, while sales were up 3% year on year at $14.4bn, with sales increasing in all divisions aside from feedstocks and energy.

Prices and volumes also increased overall during the quarter, Dow added. The fourth-quarter 2012 loss had been driven by restructuring costs as volatile economic conditions pushed the company to reduce costs and streamline operations, with nearly 30 facility closures announced during the year.

Company CEO Andrew Liveris said: “We generated significant earnings growth, margin expansion and return on capital improvement through Dow-specific actions that gained momentum throughout 2013.”

“We also made consistent strides against our aggressive portfolio targets, illustrated by $850m in proceeds from divestitures in 2013, coupled with the announced carve-out of $5bn of commodity chemicals businesses,” he added.

Performance plastics, one of Dow’s key divisions, generated a 40% year-on-year increase in adjusted EBITDA for the quarter at $1.2bn driven by pricing gains across all geographies. Packaging and specialty plastics sales improved in all regions except for Europe, which were hit by the closure of its plant in Tessenderlo, Belgium.

Adjusted EBITDA for Dow’s performance materials division was $421m compared to $267m during the fourth quarter of 2012, with the polyols, surfactants and fluids business marking double-digit sales growth. Propylene oxide and propylene glycol sales also improved on healthy demand in home and personal care products, and additional production capacity in the Asia Pacific region.

Coatings and infrastructure solutions adjusted EBITDA rose 34% year on year to $173m on the back of cost-cutting and improved market fundamentals, Dow said, with demand increasing from the construction sector, along with architectural and industrial coatings clients.

Agricultural sciences adjusted EBITDA was up 13% year on year at $177m, buoyed by increased herbicide sales in the Americas and higher insecticide sales in Latin America.

Feedstocks and energy division adjusted EBITDA increased to $217m during the quarter from $193m in the same period in 2012, despite lower sales and volumes as a result of lower aromatics prices.

Full-year net income for 2013 was $4.4bn compared to $842m in 2012, while sales rose slightly year on year to $57.1bn compared with $56.8bn in 2012.

Liveris added that 2014 has been marked by strengthening conditions in key economies, but that a level of uncertainty still exists over the sustainability of those recoveries.

“While we are seeing positive trends in major economies as we enter 2014, global growth remains tentative, continuing to drive business uncertainty. Against this backdrop, we believe we are in a strong position to further enhance shareholder value,” he said.

“We will continue to allocate our capital carefully, focusing on highly-accretive growth projects, such as our new product launches in Dow AgroSciences, as well as investments on the US Gulf Coast and in our Sadara joint venture,” he added.

The hiving off of Dow’s commodity chemicals business is part of a drive to separate out less profitable assets from the main group, but the company has been facing calls from activist investor Daniel Loeb to spin off the whole petrochemicals business.

Loeb, whose hedge fund Third Point acquired a $1.3bn stake in the company last week, has argued a standalone petrochemicals operation could generate significantly higher EBITDA, and would also be beneficial for the specialty-focused parent.

By: Tom Brown
+44 208 652 3214

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