Dow Chemical hikes dividend, triples share buy back plan, resists spin-off pressure

03-Feb-14

Dow Chemical Co hiked its dividend and tripled its share buyback program, but signaled that it was in no hurry to fall in line with activist shareholder Daniel Loeb's demands to spin off its slow-growing petrochemical businesses, as per Reuters. The company also reported a quarterly profit that comfortably beat market expectations, powered by resilient agricultural demand and strong margins at its plastics business. Dow Chemical Chairman and CEO Andrew Liveris defended his strategy of integrating commodity chemicals with specialty products after activist investor Third Point called for the company to spin off its petrochemicals assets. Dow only makes commodity chemicals — such as ethylene and propylene — to provide ingredients for its higher-value products in agriculture, electronics and plastics, Liveris said during the company’s fourth-quarter earnings conference call.“We have a very focused and integrated portfolio, a rising and increasingly growing earnings profile and tremendous financial flexibility,” he said. Third Point, founded by billionaire Dan Loeb, said in a Jan. 21 letter that Dow is its top holding and could add billions of dollars to earnings by spinning off commodity chemicals and plastics. Dow said at the time that it welcomed constructive input and would keep talking with Third Point. Liveris said Wednesday that Dow can realize more from the commodity business with projects such as its $4-billion plan for U.S. gulf coast plants to take advantage of cheap natural gas. The Midland-based company will boost investment in businesses with attractive end markets, such as plastic packaging, and in units such as electronics and agriculture where Dow’s science capabilities give it an advantage, said Liveris. The company will continue to cut costs to improve returns at underperforming units, he said. Recent and planned asset sales show Dow is willing to take the sort of actions advocated by Third Point, Liveris said. It has hired advisers to assist with the previously announced plan to divest as much as $4 billion of operations, including chlorine derivatives, he said. Dow’s plastics unit had earnings before interest, taxes, depreciation and amortization — excluding some items — that jumped 40% in the quarter.