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Coating Declines Drag Down Dow’s Q4

Tuesday, February 7, 2012

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A widespread slump in coatings demand and Europe’s economic uncertainty dealt a sharp blow to Dow Chemical’s fourth quarter, with profit plunging by 47% to 25 cents a share.

Both quarterly profit and revenue fell short of Wall Street’s expectations, with the company posting a net loss of $2 million in the fourth quarter, compared to the year-ago period, Dow reported last week.

 Dow Chemical

 Photos: Dow Chemical

Dow Chemical is one of the world’s biggest suppliers of raw materials for industrial coatings.

A vast and diverse supplier of raw materials for the global coatings and construction markets, Dow also cut production capacity in Europe, where demand for its products is weakest, said chairman and CEO Andrew Liveris.

‘Persistent Headwinds’

For the full year of 2011, sales volumes in Dow’s Coatings and Infrastructure Solutions unit declined 1 percent “due to continued construction industry weakness,” reported the $54 billion global specialty chemical, advanced materials, agrosciences and plastics company based in Midland, MI.

Price increases struggled to compensate for declining volumes.

“Coatings and Infrastructure Solutions reported a decline in volume due to persistent headwinds in the construction industry,” Dow Chief Financial Officer William H. Weideman told reporters in a conference call.

“Results in Dow Coating Materials reflected weak demand in architectural and industrial sectors, as volume declined in all geographic areas.”

Fourth-Quarter Highlights

Dow reported a fourth-quarter loss of $0.02 per share, or earnings of $0.25 per share excluding certain items, compared to $0.47 per share in the year-ago period.

Fourth-quarter sales were up 2 percent overall, to $14.1 billion, with sales in emerging geographies reaching a new quarterly record of $5 billion—35 percent of Dow’s global sales.

Excluding the impact of divestitures, volume in emerging geographies grew 7 percent, led by China, offsetting a 5 percent decline in Western Europe and a 2 percent decline in the United States, the company said.

Liveris attributed the losses to “deterioration in the macro environment mid-quarter” and said the company had “purposefully intervened.”

The company “derived strong benefit from our geographic footprint,” which allowed it to balance “considerable weakness in Western Europe,” Liveris said.

Full-Year Highlights

Dow reported full-year 2011 earnings of $2.05 per share, up 19 percent versus prior-year earnings of $1.72 per share. Excluding certain items, Dow’s full-year 2011 earnings were $2.54 per share, up 29 percent.

Sales reached $60 billion, up 12 percent versus the prior year and a record for the company. Prices, however, were up 13 percent.

Sales in emerging geographies surpassed $19 billion for the year, achieving a new company record, with sales in Asia Pacific topping $10 billion for the first time in the company’s history.

Volume was down 1 percent. R&D expenses declined 2 percent.

Coatings Segment Results

Sales in Coatings and Infrastructure Solutions were $1.6 billion, up 1 percent compared with the year-ago period. Volume decreased 5 percent, while prices rose 6 percent.

The Building and Construction unit reported increased sales in all geographic areas, led by Latin America and Asia Pacific. Higher prices helped offset continued soft demand in construction end-markets, particularly in developed regions, the company said.

 Dow CEO Andrew Liveris
“Times like these demand a focused approach and strong resolve,” said CEO Andrew Liveris.

Demand increased in Construction Chemicals, driven by acrylic products in North America.

Coating Materials reported sales declines in both industrial and architectural coatings due to lower demand globally, partly offset by pricing gains. Sales in Performance Monomers business also declined, due to reduced demand from the durable goods industry.

Performance Materials Segment Results

Quarterly sales in Performance Materials were $3.6 billion, up 4 percent, due to price increases. Volume was flat, as gains in Asia Pacific and EMEA offset declines in Latin America and North America.

One bright spot: Polyurethanes reported a double-digit increase in sales, due mainly to double-digit volume gains in all geographic areas except Latin America


Liveris predicted no significant changes in the economic landscape soon. Dow expects “challenges in Western Europe to persist in the near term” and does not “anticipate material improvements in market conditions for the first quarter of the year,” he said.

Economic recovery should “gain momentum as we move through the second quarter and the remainder of the year,” Liveris said.

He added: “Times like these demand a focused approach and strong resolve, and Dow’s firm operating discipline, cost control and productivity will continue throughout 2012.”


Tagged categories: Architectural coatings; Dow Chemical Company; Earnings reports; Economy; High-performance coatings; Market forecasts; Raw materials

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