By Alison Sider
Dow Chemical Co. beat market expectations Thursday when it
reported stronger-than-expected fourth-quarter sales and
profits.
The petrochemical maker said robust growth for its plastics and
other industrial products offset price declines in western Europe
largely related to the impact of the strong dollar.
Languishing oil prices haven't yet cut into Dow's earnings, but
the company isn't immune to fuel-price swings or unfavorable
exchange rates, said Howard Ungerleider, chief financial
officer.
The company's shares were up sharply at midday, trading nearly
5% higher at $44.89.
Some analysts have questioned whether lower oil prices would cut
into Dow's competitive advantage and margins. The company and other
U.S. petrochemical manufacturers in the U.S. run their plants on
feedstocks derived from cheap natural gas, while overseas
competitors use oil-based fuels. High oil prices gave Dow a
significant edge over many foreign rivals, but its low-cost
advantage is being threatened.
"Let me be clear, I'm not here to state that there'll be no
challenges from lower oil," said Andrew Liveris, chief executive of
Dow. But he added that the company's integrated and global business
model makes it flexible and gives it a buffer to volatile oil and
gas prices.
Dow operates some plants overseas that are directly benefiting
from lower crude-oil prices, Mr. Liveris said. And lower oil prices
should also spur overall economic growth that will raise demand for
many of Dow's chemicals.
"We'll work those businesses that are demand-centric and are
growing," Mr. Liveris said in an interview with The Wall Street
Journal on Thursday.
The company's performance at the end of the year demonstrated
that some of its more specialized product lines are in good shape,
said Cooley May, an analyst at Macquarie.
"I think you're going to see cash flow off these businesses much
higher than most investors think," Mr. May said.
Mr. Liveris has long defended Dow's structure from critics,
including activist hedge fund Third Point LLC, which has pressured
Dow to break apart its petrochemicals business from its specialty
chemicals segment. Dow agreed in November to appease the firm by
adding two directors to its board who were proposed by Third Point,
along with two other independent directors who were favored by
Dow.
Dow's fourth-quarter profit, excluding one-time items, was 85
cents a share, up from 65 cents a share in the prior-year period.
Fourth-quarter revenue was flat at $14.38 billion. Analysts
surveyed by Thomson Reuters had projected earnings of 69 cents a
share.
Rival DuPont Co. warned earlier this week that its profit this
year will take a substantial hit because of the dollar's strength
relative to the euro.
Angela Chen contributed to this article.
Corrections & Amplifications
An earlier version of this story misstated the previous
quarter's earnings excluding one-time items.
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