Midland, MI, April 29--Dow Chemical Co. in the first quarter reported earnings that nearly tripled amid significant price increases and solid volume in all sectors.
Quarterly income rose to $1.35 billion, or $1.39 a share, from $469 million, or 50 cents a share, last year. Earnings for the latest quarter included a gain of 5 cents a share on the sale of the company's stake in its Equate joint venture.
Analysts surveyed by Thomson Financial expected Dow Chemical to earn $1.05 a share on sales of $11.59 billion, and several analysts congratulated the company Thursday during a conference call.
Dow Chemical's sales jumped 25 percent to $11.68 billion from $9.31 billion a year ago. The Midland, Mich.-based company makes plastics, specialty chemicals and agricultural products.
"This was an outstanding quarter for the company," said J. Pedro Reinhard, executive vice president and chief financial officer. Company officials attributed the revenue increase to an emphasis on keeping costs low and prices high -- what Reinhard called "fiscal discipline."
"We're not chasing volume at any price," Kathleen C. Fothergill, corporate director of investor relations, said in the conference call.
Dow said volume was down 1 percent, due to the negative impact of sales of certain businesses in 2004. Excluding those divestitures, volume increased more than 2 percent from last year.
Though volume remained steady, prices jumped in most segments, including as much as 25 and 30 percent in the performance plastics and chemicals sectors.
Dow said its growth spread across all segments and parts of the world. It cited sales of acrylics that were up 50 percent, increased volume of polyurethanes for construction and adhesives in Asia and agricultural sales driven by "robust demand" for cereal herbicides in Europe in North America.
"The recovery in basics continues and we are achieving excellent earnings growth from our performance businesses, clearly demonstrating the benefits of our continued focus on cost control and margin management, as well as the strength of Dow's business and geographic diversity," Reinhard said.
First-quarter sales in the performance plastics segment rose 26 percent to $2.73 billion, with volume up 1 percent. Price increased 25 percent, led by polyurethanes, engineering plastics and epoxy products and intermediates. Earnings before interest, income taxes and minority interest, or EBIT, more than doubled to $478 million in the segment.
Performance chemicals sales rose 25 percent to $1.97 billion, driven by price as volume remained unchanged. Agricultural sciences revenue rose 7 percent to $989 million, with volume up 3 percent and price rising 4 percent. EBIT rose to $394 million from $142 million.
Reinhard said he expects to see year-over-year earnings improvements through 2005, despite increasing costs of some raw materials.
"The trend is good, the trend is healthy," Reinhard said. "With a lot of discipline on your costs, a lot of discipline on margin management, we can have a good quarter."
Analysts are looking for Dow Chemical to earn $4.48 a share on sales of $45.86 billion for 2005.
The company is recovering from poor performances in 2001 and 2002. In 2003 it started a streamlining process that has included cutting about 6,500 jobs globally.
