MOSCOW (MRC) -- Dow Chemical Co. reported stronger-than-expected fourth-quarter earnings, as higher volumes across the board offset price declines in Western Europe related to the impact of the strong dollar, said The Wall Street Journal.
Falling oil prices have sparked investor concerns about Dow and other petrochemical manufacturers in the U.S. Profit margins are bolstered in North America by cheap natural gas and other fuels that Dow and its peers use to make plastics and consumer goods, while foreign competitors tend to run plants on higher-priced oil-based feedstocks. Now that oil prices have fallen, some analysts have questioned whether Dow’s competitive edge may be fading.
But Chief Executive Andrew N. Liveris said falling prices are good for the company. "We believe lower oil prices are a relative positive for Dow and a boost for the global economy," he said. He said the company’s global-cost positions helps it use assets more effectively and sell into higher-value sectors. In addition, the company’s differentiated technologies help it maximize returns in sectors less susceptible to pricing volatility.
Overall, Dow’s profit fell to USD819 million, or 63 cents a share from USD1.05 billion, or 79 cents a share, a year earlier. Revenue was flat at USD14.38 billion, as volume gains in emerging areas were offset by a 14% price declines in Western Europe, including currency headwinds.
The company had expanded volume in most segments, led by a 9% increase in agriculture sciences. Performance materials saw a 7% increase while performance plastics was up 3%.
In recent quarters, Dow has been trying to sell lower-margin business lines to raise USD3.2 billion to USD4.7 billion by the end of this year.
Due to these restructuring efforts, selling and administrative expenses, together with research and development expenses, fell by USD64 million from the year before.
Dow recently faced pressure from activist investor Daniel Loeb of hedge fund Third Point LLC to split off its petrochemicals business from its specialty-chemicals business. In November, Dow agreed to add two directors proposed by Third Point to its board to appease the activist investor.
As MRC wrote before, Dow Chemical signed a long-term ethylene off-take agreement with a new Japanese joint venture that will allow the chemical producer to enhance its performance plastics franchise. The joint venture is being formed between Japanese companies Idemitsu Kosan and Mitsui & Co. to construct and operate a Linear Alpha Olefins unit on the U.S. Gulf Coast.
The Dow Chemical Company is an American multinational chemical corporation headquartered in Midland, Michigan, United States. Dow is a large producer of plastics, including polystyrene (PS), polyurethane, polyethylene (PE), polypropylene (PP), and synthetic rubber.