Dow Chemical Profit Soars, Shares Trade Higher
Dow Chemical Co. said Wednesday that its profit in the first quarter increased on the strong demand for its products and price increases, as the company beat Wall Street estimates for both earnings and revenue.
Net income rose to $551 million, or 41 cents a share, from $24 million, or 3 cents, a year earlier, Midland, Michigan-based Dow said today in a statement. Profit excluding some items was 43 cents, topping the 30-cent average estimate of 11 analysts in a Bloomberg survey. Sales rose 48 percent to $13.4 billion.
Chief Executive Officer Andrew Liveris is selling assets after cutting workers and shutting plants last year to boost profit and pay off debt. Earnings jumped fourfold in units that supply makers of electronics, and profit from basic plastics, including polyethylene, increased more than fivefold. Sales volumes rose 11 percent in North America and Europe.
“One of the star performers was the recovery in autos, housing and electronics,” Hassan Ahmed, a New York-based analyst at Alembic Global Advisors, said today in an interview. “Basic plastics were even better than most were forecasting.” He rates the shares “overweight.”
Dow rose $1.39, or 4.6 percent, to $31.46 at 9:49 a.m. in New York Stock Exchange composite trading. The shares climbed 8.8 percent this year before today.
Excluding acquisitions and divestitures, sales increased 33 percent, with almost equal gains in volume and price, the company said. Dow’s factories ran at 83 percent of capacity, a 7 percentage-point increase from the final three months of 2009 and a level last seen in the second quarter of 2008.
Gains were led by the Asia Pacific region, where revenue excluding acquisitions and divestitures rose 51 percent. Sales on that basis increased 27 percent in North America and 35 percent in Europe.
Liveris said he is growing confident in “a sustainable upturn,” while he remains concerned about construction markets in developed economies, inflation in emerging nations and sovereign debt issues in southern Europe.
“Our double-digit volume improvements in North America and Europe are positive signs that demand growth is returning to developed markets,” Liveris said in the statement. “Strengthening consumer spending in areas such as electronics, appliances and automotive, combined with strong growth in emerging geographies, are driving broad-based manufacturing momentum.”
Profit surged to $718 million from $122 million in the basic-plastics segment, the world’s largest producer of polyethylene used in bags and packaging. Dow’s plastics benefited as costs for natural gas, a key raw material in the U.S., were lower relative to oil, the ingredient used in Europe and Asia, said P.J. Juvekar, a New York-based analyst at Citigroup Global Markets.
