By Alison Sider
Dow Chemical Co. profits rose 41% in the first quarter, but the
company could have made more if falling crude-oil prices and the
strength of the U.S. dollar compared with global currencies hadn't
cut into sales.
The chemical maker beat analyst expectations when it reported a
profit of $1.48 billion, or $1.18 a share, up from $1.05 billion,
or 79 cents a share, in the prior-year period. Results were buoyed
by Dow's sale of its Angus Chemical company and its sodium
borohydride business. Revenue decreased 14% to $12.4 billion.
Excluding asset-sales gains and other one-time items, per-share
earnings were 84 cents for the quarter. Analysts polled by Thomson
Reuters expected per-share profit of 76 cents. Dow shares rose 1.2%
to $50.62 in midday trading.
The price of oil has fallen by half since its June peak, which
is a mixed blessing for Dow.
The company has benefited in recent years from high oil prices
and cheap North American natural gas. Dow Chemical uses cheaper
U.S. gas to make plastics and consumer goods, while its competitors
rely on pricier oil-based fuels, cutting into their profits.
Andrew Liveris, chief executive of Dow, said plunging oil prices
would ultimately work to the company's advantage by stimulating the
global economy and demand for its products. During the first
quarter, the company reported higher sales volumes in most of its
divisions except agricultural chemicals.
"We see good demand growth," Mr. Liveris said Thursday in an
interview with The Wall Street Journal. "It's not gangbuster
growth, but targeted growth."
Dow reported its highest profit margins in a decade, driven by a
segment that includes packaging and plastics. Oil prices are also
less critical today to the company than they have been in the past,
because Dow has pivoted toward different, more profitable products,
Mr. Liveris said.
"There's no way the Dow of old would have obtained these
results," he said.
But lower fuel costs helped boost Dow's results, which may not
be fully sustainable if energy prices rise, warned Cowen & Co.
analyst Charles Neivert.
"The theme for the results centered on margin gain through lower
raw material costs that more than offset pricing declines and
currency headwinds," he said in a note to clients.
Dow, based in Midland, Mich., recently agreed to spin off a
significant portion of its chlorine business to smaller
chemical-maker Olin Corp. in a cash-and-stock deal valued at $5
billion, as part of its effort to shift toward making higher-profit
chemicals and products. That deal is expected to close by the end
of the year.
Tess Stynes contributed to this article.
Write to Alison Sider at alison.sider@wsj.com
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