DOW Dow Inc

The largest U.S. chemicals manufacturer, The Dow Chemical Company (DOW) and Mitsui & Co., Ltd., of Japan, completed their previously announced 50:50 joint venture in Brazil after securing all necessary governmental and regulatory approvals. The makes Mitsui a 50% equity partner in Dow's operation in Santa Vitoria, Minas Gerais, Brazil.

The initial scope of the joint venture includes production of sugar cane-derived ethanol for use as a renewable feedstock source, bringing new, biomass-based feedstocks to Dow while diversifying the raw material streams from traditional fossil fuels.

The close of this transaction follows Dow’s July 19 announcement of plans to form the new joint venture and of the execution of a Memorandum of Understanding (MoU) with Mitsui aimed at providing innovative and sustainable product solutions for global flexible packaging, hygiene and medical applications.

This represents the world’s largest biopolymers play and Dow’s largest investment in Brazil, a country in which Dow has operated successfully for more than 50 years.

Engineering and equipment fabrication for a new sugarcane-to-ethanol production facility in Santa Vitoria accelerated in the third quarter of 2011 and is proceeding according to schedule, with operations expected to commence in the second quarter of 2013.

Mitsui expects the joint venture to further enhance the development of important opportunities in securing sugar cane based resources for Mitsui's green chemical business.

Furthermore, Mitsui envisages developing a biomass-derived chemicals and biopolymers business through alliances with potential partners such as Dow with advanced technologies to utilize sugar cane based resources to create further value.

This investment also illustrates Dow’s commitment to investing for growth in high-value, innovation-rich sectors through strategic partnerships. The project aligns with Dow's goal of developing low carbon solutions to meet the world's pressing energy and climate change challenges.

Recently, Dow earned 69 cents per share in the third quarter of 2011, ahead of the Zacks Consensus Estimate of 64 cents as well as last year’s 45 cents. However, including one-time charges, the company earned 62 cents per share compared with 54 cents in the year-ago quarter.

Quarterly revenues jumped 17% year over year to $15.1 billion and were above the Zacks Consensus Estimate of $14.7 billion, driven by double-digit gains in all operating segments and geographic areas, with the largest growth in Latin America (21%) and Europe, Middle East and Africa (EMEA) (19%). In emerging geographies, sales reached $5 billion, a new quarterly record for the company.

Dow did not provide any financial guidance. 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 #3 Rank (Hold) and a long- term Neutral recommendation.

 
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