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Dow Sticks to $10 Billion Profit Target as Economies Slow

Dow Sticks to $10 Billion Profit Target
The Dow Chemical Co. logo is displayed on the company's headquarters in Midland, Michigan. Photographer:Frank Polich/Bloomberg

Oct. 4 (Bloomberg) -- Dow Chemical Co., the biggest U.S. chemical maker, said slowing economies in Western Europe and the U.S. won’t prevent earnings from rising about 16 percent to the company’s near-term goal.

Earnings before interest, taxes, depreciation and amortization will climb to $10 billion in the next one to two years, from $8.6 billion in the 12 months ended June 30, Chief Executive Officer Andrew Liveris said today in New York. The forecast assumes zero to 1 percent economic growth in developed Western economies and continued “robust” growth in China and other developing countries, he said.

Liveris, who advises President Barack Obama as co-chair of the Advanced Manufacturing Partnership and a member of the President’s Export Council, said Western European economies may not grow for one or two quarters. U.S. expansion also may falter while global growth will continue, he said. Midland, Michigan-based Dow will enact $475 million of cost cuts next year that don’t involve firings to bolster earnings, he said.

“The U.S. and Europe together growing slowly and potentially going to zero growth, I think there is a decent chance of that,” Liveris said in an interview on Bloomberg Television. Continued growth in emerging markets would make Europe’s economic decline “shallow,” and passing Obama’s jobs bill would help maintain some growth in the U.S., he said.

Dow said in November it had a target of $10 billion Ebitda in the “near term.”


Selling assets, acquisitions and the availability of cheaper U.S. natural gas has made Dow better able to cope with a recession as severe as the one sparked by the 2008 financial crisis, Liveris said. While Dow doesn’t expect such a contraction to recur, if there was one, the company’s Ebitda would be $2 billion more than the $5.5 billion seen in the last recession, he said.

“We are much more recession-resistant than before,” Liveris said in the interview.

Goldman Sachs Group Inc. economists Jan Hatzius and Dominic Wilson wrote in a report yesterday that there will be recessions in France and Germany.

“The pace of economic recovery will continue to be jagged,” Liveris said.

Demand continues to grow in agriculture, food and health-care markets globally, while electronics, consumer goods and industrial markets are scarcely growing anywhere except China, Liveris said. Transportation growth is almost flat globally, and construction in Western Europe is contracting, according to a presentation Dow provided to investors.

U.S. Expansion

Dow will continue to fund its expansion on the U.S. Gulf Coast and its Sadara project in Saudi Arabia even in an economic decline, he said. The Gulf Coast investments will create production capacity for ethylene and propylene and low-cost raw materials derived from shale gas, adding at least $2 billion a year to Ebitda by 2017, the company said.

Dow isn’t pursuing any major acquisitions, Liveris said. The company will use excess cash to pay down debt, remunerate shareholders, and invest in growth projects, he said. Dow directors plan to raise the dividend from 25 cents a quarter as earnings increase, the CEO said.

Dow rose $1.29, or 6 percent, to $22.80 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have declined 33 percent this year.

To contact the reporters on this story: Jack Kaskey in Houston at; Julie Hyman in New York at

To contact the editor responsible for this story: Simon Casey at

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