DOW Dow Inc

The world's second-largest chemicals company by revenue The Dow Chemical Company (DOW) reaffirmed its profit goals that were laid out in November 2009. The company also revealed its priorities and financial profiles for its new operating segments.

Dow Chemical expects its EBITDA, or earnings before interest, income taxes, depreciation and amortization, to reach nearly $10 billion in the near term and $15 billion by the middle of the decade.

The Michigan-based company will continue to use its cash to slash its $18.51 billion debt load and is looking at raising its annual dividend of $1.00. Efficiency for Growth is expected to deliver cash flows of more than $2 billion by 2015 and $450 million in cost savings by 2012.

Dow's solar shingle product, which is designed for installation on roofs like ordinary shingles and can generate electricity from sunlight, will officially hit the market this month as part of a partnership with homebuilder D.R. Horton Inc. Dow expects the product to generate $1 billion in annual revenue by 2015.

Dow plans to open its own ethylene plant on the U.S. Gulf Coast by 2017 and expand its production of the chemical at other sites. Dow has not yet decided where to build the plant. U.S. Gulf Coast investments in ethylene and propylene integration, coupled with growing benefits from shale gas dynamics, are expected to deliver at least $2 billion in EBITDA by 2017.

The plan for Dow will be to use that ethylene in specialty products that will help it beat downturns in the commodity chemical cycle, which ebbs and flows roughly every five years and tends to sharply affect stock prices.

The company also plans to form a joint venture with Occidental Chemical Corp. to make a new chlorocarbon solution used in climate-friendly refrigerants, initially for automobile air conditioning systems.

Dow Chemical also signed a memorandum of understanding with the U.S. Department of Energy's Argonne National Laboratory for a collaboration to develop the next generation of materials for advanced battery technologies.

The company also announced that  it formed an LED technologies business segment to help answer demand for light-emitting diodes in the market for solid state lighting.

Also, Dow announced plans to open offices in Algeria and Ghana as part of a broader push into Africa. It currently has offices in Egypt, South Africa and Kenya.

In July 2011, Dow released its second quarter 2011 financial results. The company earned 85 cents per share in the second quarter of 2011, ahead of the Zacks Consensus Estimate of 80 cents per share as well as last year’s 54 cents per share. However, including one-time charges, the company earned 84 cents per share compared with 50 cents per share in the year-ago quarter.

Quarterly revenues jumped 17% year over year to $16.0 billion and were above the Zacks Consensus Estimate of $14.7 billion, driven by double-digit gains in all operating segments and geographic areas.

Excluding the impact of divestitures, volume grew 9% with gains in all operating segments but Coatings and Infrastructure, which was flat owing to difficult conditions in construction end-markets, and Chemicals and Energy.  Volume increased in all geographic areas, led by Latin America (23%) and Asia Pacific (11%).

Excluding the impact of divestitures, price rose 19%, with double-digit increases in all geographic areas. All operating segments except Electronic and Specialty Materials (up 7%) and Health and Agricultural Sciences (up 5%) reported double-digit price gains. Price gains more than offset an increase of $1.5 billion in purchased feedstock and energy costs.

Sales in the emerging regions reached $4.9 billion, driven by Latin America, which increased more than 35% excluding the impact of divestitures. Volume in the emerging markets increased 14% excluding the impact of divestitures, with double-digit gains in Electronic and Specialty Materials, Health and Agricultural Sciences, and Plastics.

There was no financial guidance from Dow. However, Dow anticipates demand to improve further, especially in Asia with the global economic recovery. The US and European markets have also started showing signs of improvement. Dow is also optimistic on major consumer markets, including electronics, coatings, automotive and packaging. However, construction markets are expected to remain weak.

Dow faces stiff competition from EI DuPont de Nemours & Co. (DD).

Currently, Dow has a short-term (1 to 3 months) Zacks #4 Rank (Sell) and a long- term Neutral recommendation.

 
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