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Dow Chemical Financials Continue to Roar Back on Global Sales, High Profits

Midland-Based Firm Seen Continuing High Growth on Synergy from Rohm & Haas

February 4, 2011       Leave a Comment
By: Dave Rogers

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A surge in sales of agricultural chemicals based on need to bolster food supplies worldwide is expected to continue growth of The Dow Chemical Company.

Food shortages predicted across the globe are seen benefiting Dow and other agricultural chemical manufacturers.

Dow achieved its synergy commitments related to the acquisition of Rohm and Haas and reduced structural costs a full quarter ahead of schedule, with realized savings of $2.4 billion and an annual run-rate of $2.5 billion, according to company sources.

Andrew N. Liveris, (Pictured at Right) Dow's chairman and chief executive officer, stated:

"This was a strong quarter for Dow and marked another significant milestone for our Company as we continued to deliver earnings growth. Broad-based sales increases and robust volume gains across the globe reflected the strength of our transformed business portfolio and wide geographic presence.

"We delivered record sales for both the quarter and the year in emerging markets, while our leadership positions in North America and Europe enabled us to capitalize on the economic recovery that appears to be gaining traction in those economies.

"We are extremely pleased that we have achieved our seventh consecutive quarter of year-on-year margin expansion. This, coupled with record levels of equity earnings and $1.8 billion in cash from operations, demonstrates that Dow is firmly on its trajectory for earnings growth."

In the fourth quarter of 2010, Dow reported sales gains of more than 20 percent, double-digit volume growth, margin expansion and record equity earnings.

The Company reported earnings of $0.37 per share, or $0.47 per share excluding certain items.(2) This compares with earnings of $0.08 per share in the year-ago period, or $0.18 per share excluding certain items.

Sales of $13.8 billion rose 22 percent versus the same quarter last year. Sales increased double-digits in all geographic areas and in all operating segments except Coatings and Infrastructure, which rose 6 percent.

Sequentially, sales rose 7 percent with increases in all geographic areas. Volume was up 3 percent and price rose 4 percent. Volume gains were led by Asia Pacific (8 percent) and Latin America (6 percent).

At a Company level, volume increased 12 percent versus the same quarter last year, with gains across all geographic areas and led by North America and Europe.

Health and Agricultural Sciences posted record fourth quarter sales of $1.3 billion. Volume grew 20 percent with gains in every geographic area, led by 35 percent growth in Latin America.

Price was up 10 percent, more than offsetting a $685 million increase in purchased feedstock and energy costs.

Sales from emerging regions were $4.5 billion, reaching a new quarterly record for the Company. This was driven by volume growth in Thailand (33 percent), India (31 percent), Russia (30 percent), and Brazil (14 percent).

Net debt(3) to total capitalization declined to 42.6 percent, 240 basis points below the Company?s year-end goal. This was primarily due to $1.8 billion of cash flow from operating activities.

Equity earnings reached an all-time quarterly record of $313 million. EBITDA(4) was $1.9 billion, an increase of 30 percent versus the year-ago period. At the Company level, EBITDA margin expanded more than 200 basis points, representing the seventh consecutive quarter of year-over-year margin expansion. Margin expanded in Plastics by 520 basis points. And Performance Products and Performance Systems together expanded margin by more than 230 basis points.

The Company continued to capture its growth synergies, delivering $1.1 billion in sales on a run-rate basis, more than double the Company's year-end target of $500 million.

?Dow reported full-year 2010 earnings of $1.72 per share, or $1.97 per share excluding certain items. This compared to prior-year earnings of $0.32 per share, or $0.63 per share excluding certain items and discontinued operations.

  • Sales were $53.7 billion, up 26 percent versus the prior year, with sequential sales gains throughout the year.

  • Sales in the emerging geographies were $16 billion in the year, a record for the Company.

  • Sales in Asia Pacific exceeded $9 billion in the year for the first time in the Company's history, and were up 25 percent. Dow continued to expand its presence in Asia Pacific during the year, with investments announced in Thailand, Korea, China and Vietnam.

  • Volume rose 12 percent at the Company level, with gains reported in all operating segments and across all geographic areas.

  • Price was up 14 percent, with notable gains in the Basics segments and in Performance Products. Price gains more than offset a $5 billion increase in purchased feedstock and energy costs.
  • EBITDA totaled $7.5 billion, a 36 percent increase versus 2009 EBITDA on a pro forma basis.(5) For the full year, the Company expanded EBITDA margin more than 200 basis points. All operating segments reported year-over-year margin expansion except Coatings and Infrastructure, which was impacted by continued weakness in the construction industry.

  • Equity earnings totaled more than $1.1 billion, matching the Company's 2007 record performance.

  • The Company delivered more than $4 billion of cash from operating activities, nearly double that of 2009, and reduced Dow's net debt to total capitalization ratio 540 basis points below year-end 2009. @@@

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    Dave Rogers

    Dave Rogers is a former editorial writer for the Bay City Times and a widely read,
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