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Dow Reports Strong First Quarter Results

Published on 2011-05-03. Author : SpecialChem

The Dow Chemical Company achieved sales of $14.7 billion in the first quarter of 2011, a 20 percent increase compared with the same period last year. Top-line growth was driven by an 8 percent increase in volume and a 12 percent increase in price. All operating segments and geographic areas reported double-digit sales increases.

At a Company level, volume grew 8 percent, with gains in all operating segments. Double-digit volume growth was reported in Health and Agricultural Sciences (14 percent) and Electronic and Specialty Materials (11 percent). On a geographic basis, volume growth was reported in all geographic areas, with the largest gains in Europe, Middle East, and Africa (EMEA) (15 percent) and Asia Pacific (8 percent).

Price rose 12 percent at a Company level. Price gains were broad-based, with double-digit increases in all geographic areas. All operating segments reported double-digit price increases, with the exception of Electronic and Specialty Materials and Health and Agricultural Sciences (each up 3 percent). Price gains more than offset a $700 million increase in purchased feedstock and energy costs.

At a Company level, EBITDA rose $622 million, or 34 percent, to $2.4 billion. This represents the second highest quarterly EBITDA on record for the Company. Performance Products and Chemicals and Energy each posted EBITDA increases in excess of 50 percent, and Coatings and Infrastructure EBITDA increased more than 30 percent. Health and Agricultural Sciences EBITDA reached a new quarterly record of $406 million and Plastics EBITDA exceeded $800 million.

At a Company level, EBITDA margin expanded 300 basis points versus the same period last year. This represents the eighth consecutive quarter of year-over-year margin expansion. Margins expanded in Chemicals and Energy and Plastics as the Company benefited from U.S. Gulf Coast feedstock and energy fundamentals. Performance Products and Coatings and Infrastructure also drove margin gains in the quarter.

Reported earnings for the quarter were $0.54 per share, compared with $0.41 per share in the same period last year. The Company earned $0.82 per share in the quarter, excluding certain items. This compares with earnings of $0.43 per share in the same quarter last year, excluding certain items. Certain items in the current quarter consisted of a loss on the early extinguishment of debt of $0.26 per share, and Rohm and Haas acquisition-related integration costs of $0.02 per share, both reflected in Corporate.

Dow's global operating rate was 83 percent, flat with the same year ago period. Sequentially, the Company's operating rate rose 2 percentage points.

Research and Development (R&D) expenses declined slightly (2 percent) versus the same period last year. The Company continued to invest in its technology-intensive segments, particularly Health and Agricultural Sciences, which increased its R&D investment by 10 percent, and Electronic and Specialty Materials, which was up 7 percent.

Selling, General and Administrative (SG&A) expenses rose 6 percent versus the year-ago period, primarily driven by increased spending in Health and Agricultural Sciences (up 14 percent) and Electronic and Specialty Materials (up 19 percent) in support of product launches and growth initiatives.

Equity earnings were $298 million, led by strong performance from Dow Corning, MEGlobal and the Company's joint ventures in Kuwait.

The Company continued to surpass its growth synergy targets, delivering $1.2 billion in sales on a run-rate basis. Sequentially, the Company's run-rate grew 10 percent.

Coatings and Infrastructure

Coatings and Infrastructure sales were $1.4 billion, up 16 percent compared with the same period last year. Volume rose 3 percent versus the year-ago period, and price was up 13 percent. Volume gains were reported in Dow Adhesives and Functional Polymers and Dow Building and Construction, while volume fell slightly in Dow Coating Materials due to soft demand from architectural end-markets in developed regions and constrained supply for industrial coatings raw materials.

Dow Adhesives and Functional Polymers reported volume growth in all geographic areas, with the largest gain in Latin America. The business drove a double-digit price increase in response to high raw material costs. Robust growth for thermal paper and pressure sensitive adhesives applications continued in the quarter, as well as positive trends toward solventless packaging solutions. Dow Building and Construction reported double-digit demand growth, as robust volume gains in fast-growing regions such as Asia Pacific and Latin America outpaced tepid growth in North America. Results for the business were partly impacted by ongoing investment in the DOW™ POWERHOUSE™ solar shingle. Dow Coating Materials reported sales gains across all geographic areas in both architectural and industrial coatings. Industrial coatings volume was impacted by tight raw material availability, which allowed for strong pricing gains and margin expansion. The architectural coatings business reported double-digit demand growth in Asia Pacific and Latin America, while industry conditions in EMEA and North America remained soft. The business achieved double-digit price increases in all geographic areas in architectural coatings, in response to significant raw material cost increases.

EBITDA for the segment was $188 million. This compares with EBITDA of $143 million in the same period last year, which excluded a $5 million restructuring charge.

Performance Products

Sales in Performance Products were $2.9 billion, up 18 percent compared with the year-ago period. Volume rose 2 percent and price increased 16 percent. Volume growth in North America and EMEA was partially offset by reduced volume in Asia Pacific, where businesses implemented price gains to recapture margin. The Epoxy business continued to report strong year-over-year sales growth, with volume gains of more than 50 percent, led by EMEA and North America. Market fundamentals for phenol remained healthy, driven by downstream polycarbonate demand for automobile, optical media and consumer electronics applications. Polyglycols, Surfactants and Fluids also reported volume growth, led by North America and EMEA. Harsh and prolonged winter conditions in North America led to significant demand for de-icers. Demand was also particularly strong for lubricants, driven by uses in steel and automotive industries. Sales in Amines and Oxygenated Solvents were impacted by production outages in North America in January; however, both businesses more than offset volume declines with double-digit price increases. Underlying demand remained strong for key Oxygenated Solvents end-markets, such as electronics, health and nutrition, oil additives, de-icers and refrigerants. Polyurethanes sales growth was driven by double-digit price gains in all geographic areas. The business continued its focus on margin management, particularly in Asia Pacific, where Polyurethanes achieved the highest price gains while foregoing low-margin volume.

EBITDA for Performance Products was $456 million. This compares with EBITDA of $291 million for the year-ago period, which excluded a $3 million restructuring charge.

About Dow

Dow combines the power of science and technology with the "Human Element" to passionately innovate what is essential to human progress. The Company connects chemistry and innovation with the principles of sustainability to help address many of the world's most challenging problems such as the need for clean water, renewable energy generation and conservation, and increasing agricultural productivity. Dow's diversified industry-leading portfolio of specialty chemical, advanced materials, agrosciences and plastics businesses delivers a broad range of technology-based products and solutions to customers in approximately 160 countries and in high growth sectors such as electronics, water, energy, coatings and agriculture. In 2010, Dow had annual sales of $53.7 billion and employed approximately 50,000 people worldwide. The Company's more than 5,000 products are manufactured at 188 sites in 35 countries across the globe.

Source: Dow


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