Dow Chemical’s 2Q surprises and shares jump 7 pct
DENVER — Dow Chemical Co. posted a second-quarter loss Thursday on charges related to the buyout of a smaller rival and dismal sales, yet the company turned an unexpected profit excluding one-time charges. Shares rose more than 7 percent.
Executives with the Midland, Mich.-based company, which makes chemicals used in everything from plastic bags to automobiles, said there are signs that the economy has begun to improve.
“In our view, the United States economy has found bottom but will be slow in recovering as unemployment continues to be a drag on consumer spending,” Andrew Liveris, chairman and CEO, said in a statement.
Dow Chemical said it lost $486 million, or 47 cents per share, compared with earnings of $762 million, or 81 cents per share during the same period last year.
Dow completed a contentious $16.5 billion buyout of specialty chemicals manufacturer Rohm & Haas in April and it has aggressively tried to reduce its debt since. It has shed assets, announced about 10,000 job cuts and said it would close 20 factories.
The quarterly results included charges related to adjusting values for Rohm and Haas inventories, restructuring, other acquisition costs and discontinued operations. Excluding one-time items, Dow reported adjusted earnings of 5 cents per share.
While the cost cuts have helped, the worst recession in at least a generation has decimated sales. Dow’s revenue fell 31 percent to $11.32 billion from the same period last year, far below Wall Street expectations.
Analysts polled by Thomson Reuters forecast, on average, a net loss of 8 cents per share and revenue of $13 billion. Analysts typically exclude one-time items.
Dow was upgraded by Citi Investment Research analyst P.J. Juvekar, who said that in the current economic climate, any improvement from the first quarter matters more than how the company performed during the same period last year.
Dow’s volumes improved 5 percent from the first quarter, though prices did fall, he said in a note to clients.
Shares of Dow Chemical rose $1.26, or 6.2 percent, to close at $21.53.
The company continues to raise cash and on Thursday it announced plans to sell its Malaysian-based Optimal business to Petronas for $660 million. The deal is expected to close at the end of the third quarter.
Liveris noted strong growth in sales in the Asian Pacific, especially China, where the domestic stimulus programs are boosting demand.
The global economic downturn has been particularly tough for the entire sector because chemicals are used in so many consumer goods. Companies and consumers have slashed spending wherever the can, which cuts directly into sales for companies like Dow, DuPont, and German chemical company BASF SE.
BASF said Thursday that its second-quarter net profit plummeted nearly 74 percent to 373 million euros ($526.1 million).
Sales for BASF, the world’s largest chemical company by revenue, fell 23.3 percent.
Associated Press Business Writer Deborah Jian Lee in New York contributed to this report.
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