Severe hikes in cost of energy and raw materials has affected bottom line at Dow Chemical Co - the world's second-largest chemical company. Despite record sales and two double-digit price increases announced in Q2, profit for the period fell 27%. Dow's net income for quarter ended June 30 was US$762 mln, as against US$1.04 bln in the same period last year. Revenues rose 23% to a record US$16.38 bln. The company's costs for energy and raw materials surged 42%, US$2.4 bln, when compared with Q2-07, the largest year-over-year increase in its history. Dow spent US$1 bln more on oil-related costs in Q2 than in Q1-08.
In its performance plastics segment, Q2 sales of US$4.4 bln represented an 18% increase over the same period last year. Sales of performance chemicals were US$2.5 bln for the quarter, a gain of 20%. Both commodity and performance plastics performed below company forecasts as did basic chemicals.
Dow also expects the US economy to weaken for the rest of the year while the outlook for the global economy remains uncertain. The decision to transform Dow into a more global and diverse company through acquisitions and joint ventures has allowed it to fare better during times of weaker U.S. demand. The performance portfolio of the company is delivering the growth needed to transform the company through bolt-on acquisitions, increased R&D spending and more marketing of sales resources.