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Does a surge in sales of basic chemicals by The Dow Chemical Company forecast a continually growing U.S. economy?

All Economic Signs Pointing Up for Midland-Based World Chemical Leader

Dow Strengthens Position in Basic Chemicals with Japanese Joint Venture

December 19, 2010       Leave a Comment
By: Dave Rogers

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Does a surge in sales of basic chemicals by The Dow Chemical Company forecast a continually growing U.S. economy?

Some local economists and business watchers are pointing to Dow's third quarter results as a highly positive indicator of the overall economy.

And growth in basic chemical sales and demand has led to a joint venture with a Japanese firm linked to increased production in Dow's Freeport, Texas plant.

Dow President Andrew Liveris announced at the end of Q3 that earnings were more than double those of a year ago, adding the following bullet points:

  • EBITDA (earnings before interest, taxes, depreciation and amortization) reached a level not seen since before the economic crisis.

  • Margins were up significantly.

  • Volume increased double-digits and was up across every single one of our segments and in every geography.

  • Our operating rate surged as we fully met the growth in demand.

  • Equity earnings hit the $1 billion mark on a trailing twelve month basis.

    "Our growth synergies accelerated, reaching nearly $1 billion. We are outperforming on the cost-synergy front, having delivered a run-rate of greater than $2.1 billion exiting the quarter. And, finally, we generated almost $1 billion in cash from operations,"Mr. Liveris said.

    Meanwhile, Dow announced today that Dow and Mitsui & Co., Ltd., of Tokyo, Japan have completed the formation of a previously announced 50:50 manufacturing joint venture to construct, own and operate a new membrane chlor-alkali facility located at Dow's Freeport, Texas, integrated manufacturing complex.

    The companies also announced their appointments to the joint venture management team.

    "By enabling our world-class Basic Chemicals franchise to supply downstream performance businesses at lower cost and with less capital," said Carol Williams, president, Dow Chemicals & Energy Division, adding: "This partnership bolsters our integration strength while liberating capital for investment in businesses that are technology- and customer-driven with higher, more consistent earnings."

    Named Dow-Mitsui Chlor-Alkali LLC, this landmark joint venture combines the strengths of two global companies to build a world-scale chlor-alkali plant on the U.S. Gulf Coast that will drive integration advantage for downstream businesses and customers. Dow will operate and maintain the new facility under contract to the joint venture.

    "Completing the formation of Dow-Mitsui Chlor-Alkali LLC marks another key milestone in Dow's strategic transformation and underscores our commitment to the Company's long-term earnings profile," said Ms. Williams.

    "By enabling our world-class Basic Chemicals franchise to supply downstream performance businesses at lower cost and with less capital, this partnership bolsters our integration strength while liberating capital for investment in businesses that are technology- and customer-driven with higher, more consistent earnings."

    Dow's share of the chlorine produced by Dow-Mitsui Chlor-Alkali LLC will serve the growing feedstock needs of the Company's performance and market-driven businesses with cost-advantaged chlorine supply.

    Dow will market the caustic soda on behalf of the joint venture. Mitsui's share of the chlorine produced by the joint venture will be converted to ethylene dichloride (EDC) by Dow for Mitsui?s use. Mitsui will market the EDC world-wide.

    The new chlor-alkali facility is expected to begin operations in mid-2013, and will have a capacity of approximately 800 kilotons per year. The new plant will create approximately 50 long-term jobs at the Freeport, Texas, location, as well as approximately 500 construction jobs.

    As part of the closing transaction, Dow and Mitsui executives named the joint venture's management team. The Dow-Mitsui Chlor-Alkali LLC Management Team is comprised of:

  • Todd A. Prey, Chief Executive Officer (previously Global Business Director, Dow Automotive Systems)

  • Koichiro Tago, Chief Financial Officer (previously Investment Management Department, Chlor-Alkali Division, Mitsui)

  • Kyle Shelton, Manufacturing Director (previously Production Leader, Chlorine 5, Texas Operations, Dow)

  • Kenta Morii, Supply Chain Director (previously Investment Management Department, Chlor-Alkali Division, Mitsui)

    Joint venture company headquarters will be located in Houston, Texas. ###

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    Dave Rogers

    Dave Rogers is a former editorial writer for the Bay City Times and a widely read,
    respected journalist/writer in and around Bay City.
    (Contact Dave Via Email at carraroe@aol.com)

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