By Angela Chen
Dow Chemical Co. on Thursday 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.
Shares climbed 4% in premarket trading
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 $819 million, or 63 cents a share
from $1.05 billion, or 79 cents a share, a year earlier. Excluding
one-time items, earnings were 85 cents a share, up from 79 cents in
the prior-year period.
Revenue was flat at $14.38 billion, as volume gains in emerging
areas were offset by a 14% price declines in Western Europe,
including currency headwinds.
Analysts surveyed by Thomson Reuters had projected 69 cents a
share in earnings and $14.48 billion in revenue.
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 $3.2 billion to $4.7 billion by the end of
this year.
Due to these restructuring efforts, selling and administrative
expenses, together with research and development expenses, fell by
$64 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.
The company's shares are off about 4% in the past 12 months
through Wednesday's close.
Write to Angela Chen at angela.chen@wsj.com
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