Dow’s Q2 profit lags behind estimates

04-Aug-10
Q2 profits posted by Dow is lagging behind analysts’ estimates due to reduced demand for crop-chemicals affected by adverse weather, and unexpected shutdowns of polymer plants in Texas and Argentina. Net income was US$651 mln compared with a net loss of US$344 mln a year ago. Dow lost US$300 mln in revenue because of the month long closure of its polyethylene plant in Argentina and disruption to operations at the Deer Park and Oyster Creek plants in Texas. The polyethylene plant in Argentina is Dow’s largest in Latin America, Deer Park makes methyl methacrylate, and Oyster Creeks makes phenol, which is used to make specialty plastics. The basic-chemicals segment posted a US$100 mln profit, after a US$107 mln loss a year earlier, because of rising demand for chlorine, caustic soda and vinyl chloride. Earnings from basic plastics rose 42% to US$696 mln. Earnings rose 5% in the performance-systems unit, which makes materials for autos and packaging, and profit gained 35% in performance products, which makes epoxy and propylene glycol. Dow continued to make significant progress in deleveraging its balance sheet by closing the Styron divestiture, generating over US$600 mln in free cash flow and reducing net debt by US$1.9 bln. Dow surpassed its commitments to deliver synergies related to the acquisition of Rohm and Haas and reduce structural costs, with realized savings in the quarter of US$325 mln, and a run rate of more than US$2 bln. Andrew N. Liveris, Dow's chairman and chief executive officer, stated: "Dow continued its earnings growth trajectory in the second quarter, with double-digit sales gains, continued progress in growth synergies and above-target structural cost reductions driving higher results. Strong demand growth in North America and Europe, combined with continuing demand momentum in emerging economies, drove revenue improvements across all of our operating segments. The power of our new portfolio was clearly evident, with the combined Performance businesses delivering nearly three-quarters of our EBITDA results. Over these last 15 months, we have seamlessly integrated Rohm and Haas, launched our Advanced Materials Division and continue to make progress on our strategic agenda -- the latest example being the signed definitive agreement for our new chlor-alkali joint venture. This bolsters Dow's integration strength for our downstream performance businesses at a lower cost and with less capital outlays. We also completed the divestment of Styron and have now exceeded our goal of divesting $5 billion in non-strategic assets in less than two years. With the proceeds of these divestments and positive operating cash flows, we made further meaningful progress in strengthening our balance sheet. These actions, coupled with our performance over this last quarter, clearly demonstrate that our strategy is on course and continues to deliver results."
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