Dow 1Q Earnings Off 20%
Midland, MI, April 26, 2007--Dow Chemical reported a 20 percent drop in profit during the first quarter, due largely to a drop in plastics licensing revenues from the extremely high levels of a year ago. It also announced a 12 percent increase in future quarterly dividends.
For the three months ended March 31, net income after preferred dividends dipped to $973 million, or $1 per share, from $1.21 billion, or $1.24 per share, a year ago.
Earnings per share matched analyst estimates and the stock rose 26 cents to $45.52 on the New York Stock Exchange. The shares have traded in a 52-week range of $33 to $47.60. Analysts surveyed by Thomson Financial were looking for profit of $1 per share on revenue of $12.01 billion.
Sales at the company, based in Midland, Mich., grew 3 percent to $12.43 billion from $12.02 billion last year, as double-digit sales growth in Europe, Asia Pacific and Latin America more than offset continued weakness in North America, particularly in the housing and automotive sectors.
Slow sales in January and February were followed by a strong March, where a mild spring in Europe created solid demand for agricultural and construction sectors, products. Sales also grew in China, where volume picked up rapidly after the Chinese New Year, said Geoffery E. Merszei, executive vice president and chief financial officer, said during a teleconference with industry analysts.
Prices edged 2 percent higher, with healthy gains across most of the company's performance businesses and in basic plastics, dampened by lower prices in basic chemicals.
The company benefited early in the quarter from a temporary lull in the rising costs of feedstock -- raw materials used in production -- and energy, relieving some margin pressure.
Dow Chemical said it expects solid global demand to continue through 2007, with North America likely to be slower.
The company also said it will raise quarterly dividends from 37.5 cents to 42 cents per share. Payment of the first-quarter dividend Monday, will be at the current rate; future dividends will be at the higher rate.
Earlier this month, The Sunday Express, a British tabloid, reported that a group of Middle Eastern investors and U.S. buyout firms was preparing a bid for Dow Chemical, whose chemicals, plastics and farm products are sold to customers in a range of industries. Dow Chemical denied that it was involved in any such discussions.
On April 16, the company announced that it had fired J. Pedro Reinhard, a senior adviser and former chief financial officer, and Romeo Kreinberg, a divisional executive vice president, accusing the two men of secretly holding leveraged-buyout talks with outside interests. Both have denied any wrongdoing.
Reinhard still is on the company's board because only shareholders, not management, can remove a director from the board. Shareholders will vote at their annual meeting scheduled for May 10 on whether he will remain a director.
"We're moving away from the rumor business and going into the delivery business, and the quarter delivered," said Andrew N. Liveris, the company's chairman and chief executive. "We've got a lot of good things to keep coming out of this company and, frankly, I've stopped reading these newspapers period."
