Dow Chemical profit tops estimates on plastics and corn seed

By Jack Kaskey
Bloomberg News

Dow Chemical Co., the largest U.S. chemical maker by sales, posted first-quarter profit that beat analysts’ estimates as corn-seed sales rose and lower prices for natural gas boosted earnings from plastics.

Net income climbed 28 percent to $635 million, or 46 cents a share, from $497 million, or 35 cents, a year earlier, Midland, Michigan-based Dow said today in a statement. Profit excluding a tax charge and other one-time items was 69 cents a share, topping the 61-cent average of 16 estimates compiled by Bloomberg. Sales declined 2.3 percent to $14.4 billion, missing the $14.9 billion average of 12 estimates.

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Chairman and Chief Executive Officer Andrew Liveris is selling Dow’s least profitable units, cutting jobs, closing plants and deferring investments to counter slower global economic growth. Lower costs for raw materials derived from gas and oil helped increased profit in performance plastics, Dow’s largest business, Liveris said today in a telephone interview, and the agriculture unit posted record earnings.

“They beat primarily because of continuing trends in agriculture and performance plastics,” Hassan Ahmed, a New York-based analyst at Alembic Global Advisors who recommends buying Dow shares, said by phone today. “There are some early signs of recovery in electronics as well.”

‘Aggressive Measures’

Dow rose 4 percent to $33.47 at 9:31 a.m. in New York. The shares have gained 3.6 percent this year.

The company continues to plan for no “material macroeconomic improvements” globally this year and is “focused on driving aggressive measures,” Liveris said in the statement.

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Dow said it increased average prices by 1 percent in the quarter, while sales volumes declined 3 percent. The average operating rate at the company’s plants worldwide rose to 82 percent from 78 percent in the fourth quarter.

Price “momentum” is continuing in April, even though oil costs have fallen, Liveris said in the interview.

“It’s a Herculean effort to get price increase in this sort of environment,” Liveris said in a separate interview on Bloomberg Television’s “In the Loop with Betty Liu.”

Latin America led sales gains, rising 7.6 percent, followed by a 0.9 percent gain in North America. Asia-Pacific revenue fell 2.1 percent, and lower sales volumes were responsible for an 8.4 percent drop in the region encompassing Europe, the Middle East and Africa.

China Recovery

China is showing signs of recovery and will become less focused on exports, Liveris said. Austerity measures in Europe are preventing a recovery in Europe, he said.

“These austerity budgets are really proving to be a recipe for disaster,” Liveris said on “In the Loop.”

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The agriculture unit posted earnings of $484 million as SmartStax corn seed, co-developed with Monsanto Co. to tolerate multiple herbicides and kill insects, drove a 37 percent sales gain in seeds and genetic traits, Dow said.

Plastics earnings rose 33 percent to $952 million as profit margins expanded 7.2 percent on lower costs for raw materials naphtha and ethane, Liveris said.

Electronic-materials profit rose 5 percent to $273 million as Dow gained market share in pads used to polish semiconductors and boosted Asian revenue 5 percent on new product sales, Liveris said. Dow has focused the unit on materials and technologies used in display panels, he said.