Dow Shift to Global Energy Sources Sustains Giant Chemical Firm's Profits
Record 2004 Sales, Profits, Expected to be Announced Despite High Oil Costs
January 1, 2005
By: Dave Rogers
(EDITOR'S NOTE: Increasing globalization of trade has been cited as the main detriment to the industrial enterprises of the tri-county area of Bay, Midland and Saginaw counties. Developments at the nation's largest chemical company, Dow, in Midland, may provide local business leaders and investors with an insight into the causes of this economic problem.)
High costs of oil and natural gas in the U.S. and an anti-drilling culture are changing the way chemical markets are supplied.
But local corporate giant Dow Chemical has surmounted the problem and is expected to announce record sales and earnings later this month.
Outgoing chairman, president and CEO William Stavropolous of The Dow Chemical Company, handled the hardball question from CNBC business editors Larry Kudlow and Jim Cramer earlier this year:
"With oil at $45.50 a barrel, how is Dow able to show monster good profits?"
It was a good question, and drew a quick, sharp answer from the Dow exec:
"We're supplying customers from low-cost sites," said Mr. Stavropolous, adding that prices have been aligned with feedstock costs, in other words raised monthly as costs dictate rather than quarterly as in the past.
"This country supports natural gas usage but not drilling," the Dow chairman commented. U.S. prices on the main feedstock Dow uses, natural gas, have gone up from $2 per MMBtu to $5, Mr. Stavropolous pointed out. (Natural gas closed the year at $6.14 per MMBtu) Thathas helped to wipe out a $16 billion chemical industry trade surplus and led to a deficit situation, he noted, commenting: "We can't use the U.S. Gulf Coast to export, we can only supply local areas. We have moved to low feedstock areas, such as the Middle East and Asia, to supply the growing markets of the world."
He indicated North and South America would continue to be supplied from this country, stating: "The U.S. is not going to be good for exports. We will be supplying the Americas from our manufacturing base here but we will be globally sourcing products."
New factories will be built outside the U.S. where there is a "better energy situation," Mr. Stavropolous said.
Dow has declared a dividend of 33.5 cents per share, payable January 28, 2005, to shareholders of record on December 31, 2004.
For the past 92 years Dow has paid its shareholders cash dividends every quarter without a reduction.
The company had total salesof $32 billion last year and grew at an 18.2 percent annual rate. Dow (NYSE: DOW) will host a live Webcast of its fourth quarter 2004 earnings conference call with securities analysts on Thursday, January 27, at 10:00 a.m. Eastern Time. Dow will issue its fourth quarter earnings release on PR Newswire at approximately 6:30 a.m. Eastern Time that day. Dow stock closed at $49.90 per share on Dec. 30.
Dow management participating on the call will be Andrew N. Liveris, President and Chief Executive Officer and Kathleen C. Fothergill, Corporate Director, Investor Relations. They will discuss Dow's fourth quarter business results and outlook for the company.
Dow provides innovative chemical, plastic and agricultural products and services to many essential consumer markets. With 46,000 employees and annual sales of $33 billion, Dow serves customers in more than 180 countries.###