Dow Chemical Co. (DOW), the largest U.S. chemical maker by sales, will cut about 2,400 jobs and shut 20 manufacturing plants to reduce annual costs by $500 million in the face of slow global economic growth.
The facilities to be closed are in the U.S., Belgium, the Netherlands, Spain, the U.K. and Japan, the Midland, Michigan- based company said in a statement released after it inadvertently e-mailed a draft copy to Bloomberg News earlier yesterday. An additional $500 million will be saved by cutting capital spending and curtailing some investments, Dow said.
The job cuts, which amount to 5 percent of Dow’s global workforce, follow DuPont Co.’s announcement yesterday that it’s eliminating 1,500 jobs in part because of declining demand for paint pigment and solar cells, and come even as Dow reported third-quarter earnings that exceeded analysts’ estimates. Chief Executive Officer Andrew Liveris said in July the company is operating in the worst conditions since 2009.
“Chemicals are a very economically sensitive industry,” Jake Dollarhide, CEO of Tulsa, Oklahoma-based Longbow Asset Management, said in a phone interview. “Economic growth in 2012 has slowed to a trickle, and that has spooked a lot of people.”
The job cuts announced by the two largest U.S. chemical makers are a reflection of a global economy still struggling to fully recover from recession, said Dollarhide, who helps manage $60 million including DuPont shares. DuPont is the largest U.S. chemical company by market valuation.
Dow fell 0.7 percent to $28.35 at 5:14 p.m. in New York, after the close of regular trading. DuPont fell 9.1 percent to $45.25 yesterday, the biggest decline since December 2008.
“The reality is we are operating in a slow-growth environment in the near-term,” Liveris said in the statement. “While these actions are difficult, they demonstrate our resolve to tightly manage operations — particularly in Europe – - and mitigate the impact of current market dynamics.”
Annual costs savings should be realized by the end of 2014, Dow said. Fourth-quarter earnings will be reduced by 50 cents to 60 cents a share for expenses related to asset impairments, write-offs, severance and other costs, the company said.
Dow’s third-quarter net income fell to $582 million, or 42 cents a share, from $900 million, or 69 cents, a year earlier, as plastics production benefited from low-cost natural gas, according to a statement dated today. That exceeded the 37-cent average of 16 estimates compiled by Bloomberg. Revenue dropped to $13.6 billion from $15.1 billion.
The reductions won’t affect plans for new factories on the U.S. Gulf Coast and in Saudi Arabia, or opportunities in the agriculture and electronics units, the company said.
The facilities to be shutdown over the next two years include a polyethylene plastics plant in Belgium, a factory that makes diesel-particulate filters for autos in Michigan and an epoxy resins plant in Japan.
Also closing are factories in Spain, the U.K. and Ohio, that are part of the formulated systems unit, which makes polyurethane foams and epoxy products. A plant in the Netherlands also will close.
Dow plans to write down the assets of Dow Kokam LLC, a joint venture, because of low demand globally for lithium-ion batteries. It also will consolidate assets in its oxygenated solvents business and shut a number of other small facilities.