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Strong Coatings Sales Help Drive Dow’s Q2 Gains

Wednesday, August 4, 2010

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Strong sales gains in both industrial and architectural coatings propelled Dow Coatings Materials to a 16% increase in the second quarter, compared to the same period in 2009, and helped fuel double-digit improvement for Dow Chemical companywide.

The Dow Chemical Company delivered sales of $13.6 billion in the second quarter of 2010, a 26 percent increase compared with the same period last year. Top-line growth was driven by a 7 percent increase in volume and a 19 percent increase in price. Double-digit sales gains were reported in all geographic areas, ranging from 14 percent (Latin America) to 31 percent (North America).

Broad-based price increases were also achieved in all geographic areas, led by North America and Europe, Middle East and Asia (EMEA), which were up 20 and 21 percent, respectively. All operating segments reported double-digit price increases, except Health and Agricultural Sciences (down 5 percent) and Electronic and Specialty Materials (down 1 percent).

At a company level, demand grew 7 percent, led predominantly by the combined Performance segments, which achieved 12 percent volume growth versus the same period last year.

Demand growth continued to be particularly strong in North America and EMEA, where volume was up 11 percent and 8 percent, respectively. Asia Pacific posted gains of 5 percent.

At a company level, EBITDA increased to $1.9 billion, up $327 million versus the same quarter last year, excluding certain items. Improved demand and price gains overcame a $100 million increase in turnaround costs and a $1.6 billion increase in purchased feedstock and energy costs. In addition, unplanned outages impacted the company's ability to meet demand, particularly in the Coatings value chain, resulting in more than $300 million of lost sales.

The company reported earnings of $0.50 per share, or $0.54 per share excluding certain items, compared with a reported loss of $0.47 per share in the second quarter of 2009, or earnings of $0.05 per share excluding certain items and discontinued operations. Sequentially, earnings increased 22 percent from $0.41 per share.

"Dow continued its earnings growth trajectory in the second quarter, with double-digit sales gains, continued progress in growth synergies and above-target structural cost reductions driving higher results," said Andrew N. Liveris, Dow's chairman and chief executive officer.

The integration of Rohm and Haas, and divestment of Styron, also factored in Dow’s gains, the company said. “Dow surpassed its commitments to deliver synergies related to the acquisition of Rohm and Haas and reduce structural costs, with realized savings in the quarter of $325 million, and a run rate of more than $2 billion,” the company said.

Selected segment results include:

Coatings and Infrastructure

Sales in Coatings and Infrastructure were $1.3 billion, up 16 percent compared with the same period last year. Volume rose 5 percent year-over-year, and price was up 11 percent. Volume and price gains were reported in all geographic areas. Dow Coating Materials reported strong sales gains in both architectural and industrial coatings compared with the year-ago period.

In addition, the business expanded margins sequentially due to price increases and lower raw material costs, which partly offset the impact of monomer supply issues in the quarter. The upstream disruptions were addressed, and the business exited the quarter with a much-improved supply position, the company reported.

Dow Building and Construction reported a double-digit sales improvement, driven by volume gains despite continued weakness in residential and commercial construction end-markets. The business' insulation products saw good growth in North America with its differentiated product offerings. Dow Adhesives and Functional Polymers saw double-digit volume growth, with strongest improvement in Asia Pacific, Latin America, and EMEA.

EBITDA for the segment was $207 million, compared with EBITDA of $25 million in the same period last year, which included a one-time increase in cost of sales of $82 million related to the fair value step-up of inventories acquired from Rohm and Haas, and a $171 million restructuring charge.

Performance Systems

Sales in Performance Systems were $1.8 billion, up 23 percent compared with the same quarter last year. Volume increased 13 percent and price was up 10 percent. Volume increased across all geographic areas, as well as in every business unit. Dow Automotive Systems benefited from a strong rebound in automotive end-markets, particularly in Asia Pacific and North America.

Performance Products

Sales in Performance Products were $2.8 billion, up 35 percent compared with the same period last year. Volume rose 12 percent, and price rose 23 percent. Demand growth was reported in most global business units. Polyurethanes reported a strong increase in sales, primarily driven by price gains. Demand growth was recorded in all geographic areas except Asia Pacific, where the business chose to forego lower margin sales.


"With yet another quarter of top- and bottom-line growth across our company, we continue to have confidence that momentum is gradually building, and we have not changed our view of a sustained global recovery led by Asia, slowly helped by the U.S. recovery, but with Europe lagging,” said Liveris.

"Our U.S. macroeconomic view remains guardedly optimistic. We see continued demand growth from business spending improvements and a slow return of the consumer. In other industrialized regions, monetary stimulus continues to provide support against headwinds, such as tighter fiscal policies, particularly in Europe. And in emerging economies, we expect growth to continue, although at a tempered pace.

"Dow has continued to experience high demand for products in downstream, market-driven sectors. Against this backdrop, we remain focused on executing our strategic and financial plan. Our broad geographic and portfolio presence in high-growth sectors such as electronics, water and other infrastructure markets bodes well for our ability to outpace the overall economic recovery.”
Also reporting financial results recently were BASF, DuPont Company, The Sherwin-Williams Company, RPM International Inc., and PPG Industries Inc.


Tagged categories: Architectural coatings; Dow Chemical Company; Earnings reports; Economy; Finance; Protective coatings

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