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Dow Reports Record Sales for Second Quarter of 2004

Published on 2004-07-30. Author : SpecialChem

 

Second Quarter of 2004 Highlights

  • Sales were $9.8 billion, 19 percent higher than the second quarter of 2003 and a new quarterly record, reflecting an 11 percent increase in volume and an 8 percent increase in price.
  • Net income of $685 million was 74 percent higher than the same period last year.
  • Earnings per share were $0.72, a 67 percent improvement compared with the $0.43 per share reported for the same quarter in 2003.
  • Purchased feedstock and energy costs rose more than $600 million compared with the second quarter of 2003, continuing to exert margin pressure.

Review of Second Quarter Results

The Dow Chemical Company (NYSE: DOW) reported record sales of $9.8 billion for the second quarter of 2004, 19 percent higher than the same period in 2003. Net income rose 74 percent to $685 million, and earnings per share were $0.72, an increase of 67 percent compared with $0.43 per share for the same quarter last year.

Volume improved significantly with increases in all operating segments, except for Hydrocarbons and Energy, and across all geographic areas, with particularly strong growth in Asia Pacific and Latin America. Overall volume improved 11 percent, compared with the second quarter of 2003, while prices also strengthened - up 8 percent overall, with improvement in all segments and geographic areas.

During the quarter the Company recorded a net pretax gain from restructuring of $20 million - equivalent to $0.01 per share. This included gains of $563 million from asset divestitures associated with the formation of two new joint ventures, MEGlobal and Equipolymers. These were largely offset by restructuring charges totaling $543 million. (See "Supplemental Information" at the end of this release for additional information regarding these items.)

"Improving global economic conditions generated significant volume increases this quarter," said J. Pedro Reinhard, executive vice president and chief financial officer. "Dow saw further steep rises in feedstock and energy costs - which climbed 21 percent, or more than $600 million compared with the same period in 2003. But improving industry fundamentals allowed for broad-based price increases, leading to modest margin expansion. Favorable business results, combined with a strong performance by Dow's joint ventures, led to a significant improvement in earnings."

In the Performance Plastics segment, sales increased 20 percent with strong growth across all businesses. Volume rose 17 percent, with gains in excess of 25 percent in both Latin America and Asia Pacific, while price increased 3 percent. Thermoset Systems continued to deliver solid results, with a double-digit increase in volume driven by the rising demand for coatings and appliances. Epoxy Products and Intermediates also reported substantial volume growth in all geographic areas and across most products, reflecting improved demand for electrical laminates and coatings. EBIT* for the Performance Plastics segment was $268 million, an increase of 64 percent compared with the same quarter of 2003.

Sales in Performance Chemicals increased 16 percent, with volume up 12 percent and price up 4 percent compared with the same period in 2003. Acrylics and Oxide Derivatives reported a rise in sales of more than 30 percent, compared with the second quarter last year, partially due to the successful integration of the acrylates business acquired from Celanese in February this year. Strong volume improvements were seen in a number of businesses, including UCAR Emulsion Systems and Methocel cellulose ethers, spurred by healthy demand from the construction sector. Performance Chemicals reported EBIT of $113 million for the quarter, which included the negative impact of $89 million in charges for restructuring-related activities. Excluding these charges, EBIT improved 9 percent compared with the second quarter of 2003.

The Agricultural Sciences segment recorded an all-time quarterly sales record of more than $1 billion, an increase of 11 percent compared with the second quarter of 2003. Reflecting improved agricultural industry conditions worldwide, volume grew in all geographic areas, up 9 percent overall compared with the same period last year. Price rose 2 percent year over year. In the herbicide portfolio, fluroxypyr saw exceptional volume growth with the launch of a new formulation in the United States, while favorable weather conditions in Europe resulted in increased sales of several cereal herbicides. Insecticide growth was led by spinosad insect control products. EBIT of $271 million was a new record for the Agricultural Sciences segment and was 16 percent higher than the same period last year.

Plastics sales increased 24 percent, compared with second quarter last year, due to a volume increase of 14 percent and a price increase of 10 percent. Polyethylene demand increased significantly across all geographic areas, while price improvements kept pace with rising feedstock costs. Polystyrene sales were strong, with the business reporting double-digit increases in both volume and price compared with the second quarter of 2003. However, margins were compressed due principally to the sharp rise in benzene costs during the quarter. EBIT for the Plastics segment was $399 million, which included a positive impact of $124 million from asset divestitures associated with the formation of Equipolymers. Excluding the gain from these divestitures, EBIT was 73 percent higher than the second quarter of 2003.

Chemicals sales rose 31 percent compared with the same quarter in 2003, with volume up 17 percent and price up 14 percent. The improvement was led by ethylene glycol, which reported greater than 30 percent increases in both volume and price compared with the same period last year. Caustic soda demand improved in most geographic areas. Although caustic soda prices were down year over year, pricing momentum turned favorable late in the quarter. Industry fundamentals continued to improve for vinyl chloride monomer, driven by strong demand for polyvinyl chloride in both North America and Europe. The Chemicals segment reported EBIT for the quarter of $726 million, which included a positive impact of $439 million from asset divestitures associated with the formation of MEGlobal. Excluding the gain from these divestitures, EBIT was up 184 percent compared with the same period last year.

"The global economic recovery that began in the second half of 2003 appears to be firmly established, and Dow is seeing continued improvement in industry supply/demand balances in many product areas. But high and volatile feedstock and energy costs continue to be a source of uncertainty and, thus far, have prevented margins from reaching reinvestment levels," said Reinhard. "Moving forward, therefore, Dow will maintain a sharp focus on controlling costs, improving productivity and restoring margins. The Company is well-positioned to benefit from stronger global economic conditions and improving industry fundamentals, and expects to see financial performance improve through the remainder of 2004 compared with last year."

Source: Dow


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