DOW UPBEAT: Despite Tough 2012, Chemical Firm Sees Green in Agri-Business

May 19, 2013
By: Dave Rogers

THE WORD FROM DOW: "The world continued its rocky recovery in 2012, with volatility and uncertainty proving to be the new normal. Persistent weakness in Europe was a continued drag on global GDP growth, while dramatic declines in China, Brazil and other emerging geographies introduced new risks to a sustained recovery."

The Dow Chemical Company has reported record 2012 sales of $6.4 billion in agricultural sciences products -- the greenest spot in a profit landscape that has wilted a little.

But environmentalist resistance to genetically altered corn and soybeans still is plaguing the firm.

Prices fell and Dow Corning's polysilicon business was hit by Chinese competition among other problems, according to news media and firm reported.

"Although we course-corrected aggressively and remained firmly on strategy, our results in the calendar year were clearly not where we wanted them to be," lamented the firm in its annual report issued last week.

Dow's sales in agri-business were given a boost last year when fruit and vegetable growers and canners dropped opposition to genetically engineered crops resistant to the Dow herbicide 2,4-D.

The Save Our Crops Coalition eased off when Dow Agrosciences agreed to reduce factors that cause damage to fruits and vegetables.

Enlist, a new formulation of 2,4-D is said not as likely to drift and vaporize, thereby lessening potential damage to sensitive crops.

However, the federal approval of the controversial new biotech corn will be delayed at least another year under renewed opposition from farmers, consumers and public health officials.

Dow AgroSciences officials now expect the first sales of Enlist for planting in 2014. Previously officials had set the 2013 planting season as a target.

Monsanto's genetically altered Roundup Ready corn and soybeans now dominate the U.S. corn and soybean market.

Dow's substantial cost and cash savings in 2012 did not make up for a dramatic decline in price power -- $1.3 billion of lost price in the second half alone.

This was coupled by an acute drop in equity earnings, due in large part to a severe deterioration in Dow Corning's polysilicon business.

CEO Andres Liveris stated: "Notwithstanding these headwinds, the Dow team demonstrated our ability to control the controllable:

"We delivered against near-term cash flow targets.

"We paid down debt. Importantly, we also maintained our commitment of continually seeking to reward shareholders."

The reported noted the highlights:

Continued to harness the power of our innovation portfolio in Agricultural Sciences, realizing record sales of $6.4 billion and record EBITDA of $977 million;

Generated $8 billion in cash from operations in the two-year period ended December 31, 2012;

Finalized the K-Dow arbitration, with a $2.16 billion award issued by the International Chamber of Commerce (not including interest and costs);

Launched $2.5 billion of cost and cash flow actions;

Further paid down debt, with a $613 million decrease in gross debt;

Increased dividends declared per share in 2012 by 34 percent versus 2011;

Achieved significant milestones with game-changing, enterprise growth projects such as our investments on the U.S. Gulf Coast and our Sadara joint venture in the Middle East; and

Made continuous progress toward our vision of zero accidents and injuries, evidenced by a 36 percent improvement in our illness and injury rate versus 2011.

The report summarized: "In summary, 2012 was a year in which Dow employees maintained focus and discipline in the midst of significantly volatile market conditions.

Importantly, we delivered these accomplishments while maintaining our high standards for ethics and environment, health and safety."