Dow Earnings Top Estimates on Chemicals, Plastics

Dow Chemical Co., the largest U.S. chemical maker, posted fourth-quarter earnings that rose more than analysts estimated amid increasing profit from caustic soda and plastics.

Net income almost tripled to $511 million, or 37 cents a share, from $172 million, or 8 cents, a year earlier, Midland, Michigan-based Dow said today in a statement. Profit excluding one-time items, which include asset-impairment and integration costs, was 47 cents a share, topping the 35-cent average estimate of 13 analysts in a Bloomberg survey.

Chief Executive Officer Andrew Liveris is expanding in developing markets even as Dow’s U.S. plants benefit from low natural-gas prices relative to oil. Profit in the basic- chemicals unit jumped eightfold to $173 million on rising prices for chlorine and caustic soda, known collectively as chlor- alkali. Plastics earnings gained 40 percent to $765 million.

“We expect growth will continue, driven by a broad range of leading end-markets in emerging geographies such as China, India, Eastern Europe and Brazil,” Liveris said in the statement. “The world continues to recover to pre-recession levels.”

Dow increased $1.06, or 2.9 percent, to $37.70 at 7:40 a.m. before the start of regular New York Stock Exchange trading. The shares gained 33 percent in the 12 months before today.

‘Strong Volume’

Revenue rose 10 percent to $13.8 billion from $12.5 billion. The average of 11 analysts estimates in a Bloomberg survey was for sales of $12.5 billion. Sales volumes gained 12 percent and average prices for Dow’s products advanced 10 percent. Sales to emerging markets climbed to a record $4.5 billion, Dow said.

“It was a very clean beat coming from the basics and performance businesses and supported by strong volume growth led by the emerging markets,” Hassan Ahmed, a New York-based analyst at Alembic Global Advisors who recommends buying the shares, said in a telephone interview. “They had substantial margin expansion across all segments.”

Dow generated $1.8 billion in cash from operations during the quarter, ending 2010 with $7.04 billion in cash and cash equivalents. Net debt fell to 42.6 percent of Dow’s market capitalization, beating the company’s year-end goal of 45 percent, Dow said.

Liveris said signs of improvement in North American and European business-to-business markets give him “optimism” that growth in developed markets will continue.

“With inflation concerns in emerging geographies, lingering unemployment issues in the U.S. and sovereign debt issues in Europe, we remain prepared for a reversal in momentum,” he said.

Chlorine, which is used to make vinyl products such as siding and PVC pipe, is produced in tandem with caustic soda, which used to make pulp, paper and soap.

To contact the reporter on this story: Jack Kaskey in New York at jkaskey@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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