Dow’s Q3 performance has been driven by sequential price increases, volume growth in Electronic and Specialty Materials and Coatings and Infrastructure (Advanced Materials), Performance Products and Performance Systems, as well as the Company's actions to reduce cost and capture acquisition-related synergies.
-- Sales versus the prior quarter increased 6% due to price, more than offsetting a greater than US$600 million increase in purchased feedstock and energy costs. Excluding Dow AgroSciences, which is a seasonal business, volume increased more than 3% versus the prior
quarter. Sales declined 32% versus pro forma sales for the same period last year, with a 23% decrease in price and a 9% decline in volume.
-- Structural cost reductions are ahead of Company goals, with cost savings of more than US$380 mln in the quarter and over US$1 bln year-to-date. The Company has already achieved more than 110% of the 12-month cost synergy run-rate goal for the integration of Rohm and Haas, which began just six months ago.
-- Equity earnings were US$224 mln in the quarter, up US$102 million, or 84% over the prior quarter, driven primarily by improvements in Dow Corning and EQUATE.
-- The divestitures of ownership stakes in Total Raffinaderij Nederland N.V. and the OPTIMAL Group of Companies were completed in the quarter, enabling the Company to pay down the bridge loan related to the
acquisition of Rohm and Haas.
Andrew N. Liveris, Dow's chairman and chief executive officer, stated: "Dow once again delivered stronger sequential earnings due to our focus on aggressive price/volume management, accelerating cost reductions, especially with the Rohm and Haas integration, plus benefiting from our global presence with volume gains in emerging geographies. In addition, we are seeing pockets of volume growth in certain businesses versus the prior quarter, primarily in Advanced Materials, Performance Products and Performance Systems, which have benefited from the beginnings of a global economic recovery. Consistent with our focus on execution, immediately following the close of the quarter we also accomplished a key objective by completing the sale of Morton Salt and fully paying off our bridge loan related to the Rohm and Haas acquisition well ahead of schedule, improving the Company's financial flexibility and further deleveraging our balance sheet."
Dow reported sales of US$12 bln for Q3-09, down 22% from reported sales in the same period last year, and 32% lower than the pro forma sales for the same period last year. Sales improved 6% from the prior quarter. Net income from continuing operations for the quarter was US$799 mln. This compares with net income from continuing operations of US$440 mln in Q3-08. Company results also benefited from a lower tax rate in the quarter primarily due to a significant improvement in equity earnings versus the prior quarter.
Sales in the Basic Plastics segment were US$2.6 bln, down 32% from the same quarter last year, as volume increased 1% and price fell 33%. Double-digit price declines were reported in all geographic areas. Polyethylene volume increased from year-ago levels, due to double-digit gains in Latin America, Asia Pacific and IMEA. Relatively low production costs in North America resulted in export opportunities, which enabled the business to achieve double-digit volume growth in developing regions such as Asia Pacific and Latin America. Polypropylene volume rose slightly, primarily due to good demand and tight propylene supply in Europe, which partially offset weakness in North America where customers delayed purchases due to volatile propylene prices. Styrenics reported double-digit price and volume declines driven by lower raw material costs and weak year-over-year demand in automotive, appliance and construction applications. Equity earnings were US$55 mln in the third quarter, down US$7 mln from the year-ago period as improved results from Equipolymers and Siam Polyethylene were more than offset by lower earnings from EQUATE. Basic Plastics EBITDA was $590 million in the third quarter. This compares with US$650 mln in the year-ago period, which was reduced by US$13 mln of hurricane-related costs. On a sequential basis, sales in the Basic Plastics segment rose 11%, as a 2% decline in volume was more than offset by a 13% increase in price. Polyethylene reported strong price increases in all geographic areas, led by Europe, which raised prices significantly to match rising feedstock costs and recover margins. Polyethylene reported volume growth on a global basis versus the prior quarter, due to strong sales into faster growing regions, such as Asia Pacific, where imports from North America occurred. These gains more than offset declines in North America and Europe. Polypropylene sales rose sequentially as a decline in volume was more than offset by a steep rise in price, as propylene prices surged in the quarter. While volatile propylene prices led to weak demand in North America, Europe reported volume growth as demand held up in the quarter and industry outages resulted in tight supply. Styrenics reported a drop in volume, which was more than offset by higher price. Equity earnings were US$55 mln in the third quarter, up US$20 mln on improved results from EQUATE. EBITDA for Basic Plastics was US$590 mln, up from US$405 mln in the second quarter of 2009. Commenting on the Company's outlook, Liveris said: “The economic outlook for the rest of 2009 appears to be stabilizing with strong growth in Asia Pacific, especially China, and other emerging geographies. The global economy is now on firmer footing, and, in our view, the United States economy is beginning a slow and tenuous recovery, with unemployment continuing to be a drag on consumer spending. Therefore, our 2009/2010 operating plans do not count on material improvements in market conditions, and we remain tightly focused on those factors we can control, such as costs, capital and cash flow management. Dow has already begun to benefit from the smooth integration of Rohm and Haas and the decisive actions we took to accelerate our restructuring efforts and cost synergies. We have also made significant improvements to our balance sheet, strengthening our financial structure and providing more flexibility in how we execute any further divestitures, which will be made on a timely and strategic basis. Going forward, we will continue to manage our business with the same dedicated focus in the quarters ahead and are confident that we are firmly on track to position Dow as an earnings growth company."