Modest gains in Coatings and Infrastructure and record sales in emerging regions helped propel The Dow Chemical Co. to double-digit growth for both the fourth quarter and full year of 2010.
Full-year sales were $53.7 billion, up 26% over the prior year, while fourth-quarter sales rose 22% over Q4 2009, to $13.8 billion. Sales increased by double digits in all geographic areas and in all operating segments except Coatings and Infrastructure, which rose 6%.
‘Another Significant Milestone’
“This was a strong quarter for Dow and marked another significant milestone for our company as we continued to deliver earnings growth,” said Andrew N. Liveris, Dow’s chairman and chief executive officer.
The company saw “broad-based sales increases and robust volume gains across the globe,” record sales in emerging markets, and gains from the economic recovery in North America and Europe, Liveris said.
Dow reported full-year 2010 earnings of $1.72 per share ($1.97 per share, excluding certain items), compared to prior-year earnings of $0.32 per share ($0.63 per share, excluding certain items). Fourth-quarter earnings were $0.37 per share ($0.47 per share, excluding certain items), compared with $0.08 per share ($0.18 per share, excluding certain items) in the year-ago period.
Fourth-quarter earnings before interest, income taxes, depreciation and amortization (EBITDA) was $1.9 billion, up 30% versus the year-ago period.
At the company level, EBITDA margin (EBITDA as a percentage of reported sales) expanded more than 200 basis points, representing the seventh consecutive quarter of year-over-year margin expansion.
For the full year, EBITDA totaled $7.5 billion, a 36% increase over 2009 on a pro forma basis. All operating segments reported year-over-year EBITDA margin expansion except Coatings and Infrastructure, which was impacted by continued weakness in the construction industry.
“We are extremely pleased that we have achieved our seventh consecutive quarter of year-on-year margin expansion,” said Liveris. “This, coupled with record levels of equity earnings and $1.8 billion in cash from operations, demonstrates that Dow is firmly on its trajectory for earnings growth.”
Fourth-quarter sales from emerging regions were $4.5 billion—a new quarterly record for the company—driven by volume growth in Thailand (33%), India (31%), Russia (30%), and Brazil (14%). Sales in the emerging geographies were $16 billion for the year—also a company record.
The year’s sales in Asia Pacific were up 25%, topping $9 billion for the first time in the company’s history. Dow continued to expand its presence in the region during the year, with investments in Thailand, Korea, China and Vietnam.
At a company level, fourth-quarter volume grew 12%, with gains reported in all operating segments except Coatings and Infrastructure (down 1%) and Chemicals and Energy (down 3%). For the year, however, volume rose 12% at the company level, with gains reported in all operating segments and across all geographic areas.
Price was up 14% for the full year and 10% for the fourth quarter.
Coatings and Infrastructure
Sales in Coatings and Infrastructure were $1.2 billion, up 6% compared with the same period last year. Volume fell 1% year-over-year, and price was up 7%. Volume gains in Dow Adhesives and Functional Polymers and Dow Building and Construction were not enough to offset a decline in Dow Coating Materials, which was impacted by a decrease in industrial coatings volume as the business focused on pricing in the epoxy envelope.
Dow Adhesives and Functional Polymers reported the largest demand growth in Latin America and Asia Pacific, due in part to strong demand for pressure-sensitive adhesives. Dow Building and Construction reported double-digit demand growth in all geographic areas except North America, where end-market conditions remain sluggish. Construction chemicals continued to benefit from trends toward remodeling, with year-over-year growth exceeding 20%.
In Asia Pacific, Dow Coating Materials reported sales gains in both architectural and industrial coatings, particularly in industrial coatings where favorable supply/demand fundamentals in epoxy are driving pricing trends.
In architectural coatings, volume gains were reported in Asia Pacific and North America, where the business benefited from new products for residential paint end-markets. In industrial coatings, a decline in volume was more than offset by double-digit price increases.
EBITDA for the segment was $128 million, which compares with EBITDA of $123 million in the same period last year.
Selected Segment Results
Sales in Electronic and Specialty Materials were $1.3 billion, up 13% from the same quarter last year. Sales in Specialty Materials rose 8% versus the same period last year, with volume gains in all global business units and demand growth all geographic areas.
Sales in Performance Systems were $1.6 billion, up 17% from the same quarter last year. Volume increased in all geographic areas and in all businesses. Dow Automotive Systems reported a double-digit improvement in volume, led by strong demand in North America, and a demand increase of more than 20% for its polyurethane foams and systems formulations
Dow Formulated Systems reported sales gains in all geographic areas, including demand for wind energy applications. A significant rebound in road and bridge protection applications helped drive the expansion in North America.
Sales in Performance Products were $2.7 billion, up 23% compared with the same period last year. Epoxy, polyurethanes and oxygenated solvents reported strong upturns in sales.
Sales in Chemicals and Energy were $932 million, up 13% from the same year-ago period. Vinyl chloride monomer (VCM) sales benefited from significant U.S. polyvinyl chloride (PVC) export demand that offset continued weakness in construction end-markets in the United States.
Liveris said the company was “well-positioned for the improving economic climate” and would continue to benefit from emerging markets and growth in high-margin sectors, such as electronics and packaging.
“We have delivered a transformed portfolio that is increasingly targeted towards growth geographies, sectors and markets, while remaining well-balanced to mitigate against uncertainty,” he said.