Company Delivers Quarterly Sales Record, Volume Gain of Five Percent and
Record Performance from Dow AgroSciences
MIDLAND, Mich., July 24 /PRNewswire-FirstCall/ --
Second Quarter 2008 Highlights
- Sales for the second quarter set another Company record, rising 23
percent from the same period last year to $16.4 billion. Double-digit price
increases were recorded in all operating segments and all geographic areas.
- Volume grew 5 percent, with 12 percent growth in geographic areas
outside of North America, including an 11 percent volume increase in
Europe.
- Earnings for the quarter were $0.81 per share, compared with earnings
per share of $1.07 in the same quarter last year.
- Purchased feedstock and energy costs surged 42 percent, or $2.4
billion, compared with the same quarter last year, the largest
year-over-year increase in the Company's history.
- EBIT(1) in the combined Performance segments rose compared with the
same period last year despite substantial increases in raw material and
supply chain costs.
- Agricultural Sciences set a new quarterly record for both sales and
EBIT. Sales rose 25 percent, and EBIT grew more than 60 percent versus the
same period last year.
- Equity earnings were $251 million for the quarter, once again
demonstrating consistent contributions from joint ventures to the Company's
results.
Comment
Andrew N. Liveris, Dow's chairman and chief executive officer, stated:
"The surge in oil prices from first to second quarter added another $1
billion of cost sequentially, and we reacted quickly by announcing two
broad- based price increase initiatives, adjusting plant operating rates
and implementing additional cost-cutting measures. The fast implementation
of these price increases limited margin compression over our hydrocarbon
and energy costs to approximately $130 million in the quarter. This is a
remarkable performance when you consider that this is only 1 to 2 percent
of our total quarterly hydrocarbon and energy costs.
"These short-term actions, in addition to key elements of Dow's
strategy, such as our large global footprint, our investments in
Performance businesses and our asset light ventures, enabled us to weather
unparalleled increases in hydrocarbons, supply chain and other costs."
3 Months 6 Months
Ended Ended
June 30 June 30
(In millions, except for 2008 2007 2008 2007
per share amounts)
Net Sales $16,380 $13,265 $31,204 $25,697
Net Income $762 $1,039 $1,703 $2,012
Earnings per Common Share $0.81 $1.07 $1.80 $2.07
Review of Second Quarter Results
The Dow Chemical Company (NYSE: DOW) reported sales of $16.4 billion
for the second quarter of 2008, 23 percent higher than the same period last
year, setting another quarterly sales record.
Net income for the quarter was $762 million. This compares with net
income of $1,039 million in the second quarter of 2007. Dow reported
earnings for the current quarter of $0.81 per share versus earnings of
$1.07 per share in the second quarter of 2007.
Price was 18 percent higher than the same quarter last year, with
double-digit increases in all operating segments and all geographic areas.
These price gains offset significant increases in purchased feedstock and
energy costs, which were $2.4 billion higher than the same period last
year. However, these price increases were not enough to cover higher total
raw material and supply chain costs.
Year over year, volume was up 5 percent, matching the highest quarterly
increase since 2004. In the combined Performance segments, volume increased
7 percent. Growth in emerging geographies of 12 percent, and 11 percent
growth in Europe, more than offset economic weakness in North America.
Volume in North America was also impacted by various asset shutdowns,
business exits and the formation of Americas Styrenics, a new joint venture
between Dow and Chevron Phillips Chemical Company.
Equity earnings were $251 million for the quarter, once again
demonstrating strong and consistent contributions from joint ventures to
the Company's results.
"The surge in oil prices from first to second quarter added another $1
billion of cost sequentially, and we reacted quickly by announcing two
broad-based price increase initiatives, adjusting plant operating rates and
implementing additional cost-cutting measures," said Andrew N. Liveris,
chairman and chief executive officer. "The fast implementation of these
price increases limited margin compression to approximately $130 million in
the quarter. This is a remarkable performance when you consider that this
is only 1 to 2 percent of our total quarterly hydrocarbon and energy costs.
"These short-term actions, in addition to key elements of Dow's
strategy, such as our large global footprint, our investments in
Performance businesses and our asset light ventures, enabled us to weather
unparalleled increases in hydrocarbons, supply chain and other costs."
Performance Plastics
In the Performance Plastics segment, second quarter sales of $4.4
billion represented an 18 percent increase over the same period last year.
Price increased 11 percent, with gains in all geographic areas. Volume rose
7 percent, with particular strength in Europe and Asia Pacific. Despite
robust price gains across the segment, selling prices continued to lag
significant increases in raw material and supply chain costs. Recent
acquisitions contributed to double-digit volume growth in Polyurethane
Systems, as demand increased in applications such as insulation for oil and
gas pipelines and refrigerated transport. Dow Wire and Cable reported
strong demand in medium voltage cabling, as the pace of electrical
infrastructure replacement in major cities increased and demand from
emerging geographies grew due to construction of new electrical grids. Dow
Epoxy Systems sales continued to ramp up, however, margins declined for
epoxy intermediates in the face of rising raw material costs and additional
industry capacity. The North American automotive and housing industries
continued to decline, and negatively impacted results in a number of
business units such as Dow Automotive, Dow Building Solutions, and
Specialty Plastics and Elastomers. Second quarter EBIT for Performance
Plastics was $268 million, compared with $382 million in the second quarter
of 2007.
Performance Chemicals
Sales in Performance Chemicals were $2.5 billion for the quarter, a
gain of 20 percent compared with $2.1 billion posted in the same period
last year. Globally, price was up 14 percent while volume increased 6
percent. Price increased in all geographic areas, and strong volume gains
were reported in Europe, Latin America and the India, Middle East, and
Africa region. Designed Polymers posted price and volume gains in all
geographic areas, due in part to growth in pharmaceutical and oil and gas
applications in Dow Wolff Cellulosics and strong demand for poultry food
additives in its Specialty Polymers unit. Dow Water Solutions reported
growing demand for FILMTEC(TM) reverse osmosis membranes, as more world
scale desalination projects utilizing Dow technology were announced. The
significant contraction in the U.S. housing industry dampened results for
Dow Latex in paint applications. Equity earnings in the segment were $119
million, up $15 million on better results from Dow Corning and OPTIMAL.
Performance Chemicals reported EBIT of $290 million for the quarter,
compared with $294 million for the same period last year.
Agricultural Sciences
The Agricultural Sciences segment posted record sales of $1.4 billion,
25 percent higher than the same period last year. All geographic areas
posted double-digit increases in sales, reflecting organic growth and
growth from recent acquisitions. Dow AgroSciences' broad portfolio of both
agricultural chemicals and seeds benefited from rising prices and low
global inventories of farm commodities. Price was up 12 percent, with
strong increases in all geographic areas. Volume was up 13 percent compared
with the same period last year, with double-digit increases in North
America, Europe, Latin America and Asia Pacific. Ag chemicals showed
particular strength. Sales were up sharply for new cereal and rice
herbicides, and for spinetoram insecticide, which continued its successful
launch in the United States. Seeds and traits continued to benefit from a
strong ag economy with global demand for agricultural output at record
levels. The recent acquisitions of Agromen, MTI and Duo Maize continue to
perform well, and the integration of newly acquired Triumph Seeds is
progressing. Second quarter EBIT for Agricultural Sciences was $335
million, compared with $208 million in the year ago period.
Basic Plastics
In the Basic Plastics segment, sales rose 19 percent to $3.8 billion,
up from $3.2 billion in the same period last year. Price increased 22
percent, and was up in all businesses and in all geographic areas. Volume
decreased 3 percent, due in part to the shutdown of polypropylene capacity
in St. Charles, Louisiana in the fourth quarter of 2007, the sale of
polyethylene assets in Cubatao, Brazil in the second quarter of 2007, and
the formation of Americas Styrenics, a new polystyrene joint venture
between Dow and Chevron Phillips Chemical Company. Polyethylene showed
particular strength, with volume gains in all geographic areas. Margin
compression occurred, however, as costs rose faster than selling prices.
Demand for polypropylene was down globally, due to lower consumer spending
and slowdowns in the housing and automotive sectors in North America.
Equity earnings were $33 million, down $15 million as higher earnings at
EQUATE were more than offset by decreases at Equipolymers and Siam
Polyethylene. EBIT for Basic Plastics was $388 million compared with $529
million in the same period last year.
Basic Chemicals
Basic Chemicals sales for the quarter increased 13 percent year over
year to $1.6 billion, compared with $1.5 billion in the same period last
year. The segment recorded a 20 percent gain in price, and a 7 percent
decline in volume. Volumes were negatively impacted by the sale of the
caustic soda business in Western Canada in December 2007. Caustic soda
benefited from ongoing favorable industry supply/demand fundamentals, but
demand for vinyl chloride monomer used in polyvinylchloride ("PVC")
production continued to decline as end-use applications for PVC, namely
residential building and construction applications, remained soft. Results
for the Chlor-Vinyls business were also impacted by an unplanned outage at
the Company's Freeport, Texas facility. Volumes were off substantially in
the Ethylene Oxide/Ethylene Glycol ("EO/EG") business, due to weak industry
fundamentals caused by the restart of a competitor's production capacity,
new capacity from Middle Eastern suppliers, and a decline in polyester
fiber demand in Asia Pacific. Results for EO/EG were also impacted by an
extended plant turnaround in Plaquemine, Louisiana, and by reduced
operations at other facilities to bring inventory levels in line with lower
industry demand. Equity earnings in Basic Chemicals were $71 million,
versus $80 million in the year ago period due to lower results at MEGlobal.
EBIT was $29 million, compared with $165 million in the second quarter of
2007.
Outlook
Commenting on the Company's outlook, Liveris said: "The surge in oil
prices, which has further weakened the U.S. economy, has created new
uncertainties in demand around the world. We believe the U.S. economy will
continue to weaken for the rest of 2008, and that the outlook for the
global economy will remain uncertain. Despite this, our results have
demonstrated that our strategy for diversification on a global and end-use
market basis has allowed us to manage through these challenging times.
"In addition, we remain committed to furthering our transformation, and
to changing the earnings profile of our company. Two recent announcements
speak well to this commitment. First, the announcement of our acquisition
of Rohm and Haas, which will create the leading specialty chemicals and
advanced materials company in the world. And second, the selection of the
CEO and headquarters location for K-Dow Petrochemicals, our new joint
venture with Petrochemical Industries Company of Kuwait, which we expect to
close by the end of this year. These actions show our determination, and
the progress we are making toward transforming Dow into an earnings growth
company."
Dow will host a live Webcast of its second quarter earnings conference
call with investors to discuss its results, business outlook and other
matters today at 10:00 a.m. ET on http://www.dow.com
(1) Earnings before interest, income taxes and minority interests
("EBIT"). A reconciliation of EBIT to "Net Income Available for
Common Stockholders" is provided following the Operating Segments
table.
(R)(TM) Trademark of The Dow Chemical Company or an affiliated company of
Dow.
About Dow
With annual sales of $54 billion and 46,000 employees worldwide, Dow is
a diversified chemical company that combines the power of science and
technology with the "Human Element" to constantly improve what is essential
to human progress. The Company delivers a broad range of products and
services to customers in around 160 countries, connecting chemistry and
innovation with the principles of sustainability to help provide everything
from fresh water, food and pharmaceuticals to paints, packaging and
personal care products. References to "Dow" or the "Company" mean The Dow
Chemical Company and its consolidated subsidiaries unless otherwise
expressly noted. More information about Dow can be found at http://www.dow.com
Note: The forward-looking statements contained in this document involve
risks and uncertainties that may affect the Company's operations, markets,
products, services, prices and other factors as discussed in filings with
the Securities and Exchange Commission. These risks and uncertainties
include, but are not limited to, economic, competitive, legal, governmental
and technological factors. Accordingly, there is no assurance that the
Company's expectations will be realized. The Company assumes no obligation
to provide revisions to any forward-looking statements should circumstances
change, except as otherwise required by securities and other applicable
laws.
Financial Statements (Note A)
The Dow Chemical Company and Subsidiaries
Consolidated Statements of Income
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
In millions, except per share
amounts (Unaudited) 2008 2007 2008 2007
Net Sales $16,380 $13,265 $31,204 $25,697
Cost of sales 14,643 11,398 27,551 22,003
Research and development
expenses 335 320 666 622
Selling, general and
administrative expenses 515 477 1,013 895
Amortization of intangibles 25 18 47 29
Restructuring credit - 4 - 4
Equity in earnings of
nonconsolidated affiliates 251 258 525 532
Sundry income - net 37 123 83 192
Interest income 25 33 49 73
Interest expense and
amortization of debt
discount 151 129 296 275
Income before Income Taxes and
Minority Interests 1,024 1,341 2,288 2,674
Provision for income taxes 243 277 542 612
Minority interests' share in
income 19 25 43 50
Net Income Available for Common
Stockholders $762 $1,039 $1,703 $2,012
Share Data
Earnings per common share -
basic $0.82 $1.09 $1.82 $2.10
Earnings per common share -
diluted $0.81 $1.07 $1.80 $2.07
Common stock dividends
declared per share of common
stock $0.42 $0.42 $0.84 $0.795
Weighted-average common
shares outstanding - basic 929.8 954.8 936.0 959.0
Weighted-average common
shares outstanding - diluted 939.4 968.0 945.5 971.7
Depreciation $497 $474 $992 $940
Capital Expenditures $597 $462 $956 $792
Notes to the Consolidated Financial Statements:
Note A: The unaudited interim consolidated financial statements reflect
all adjustments which, in the opinion of management, are
considered necessary for a fair presentation of the results for
the periods covered. These statements should be read in
conjunction with the audited consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-K
for the year ended December 31, 2007. Except as otherwise
indicated by the context, the terms "Company" and "Dow" as used
herein mean The Dow Chemical Company and its consolidated
subsidiaries.
The Dow Chemical Company and Subsidiaries
Consolidated Balance Sheets
June 30, Dec. 31,
In millions (Unaudited) 2008 2007
Assets
Current Assets
Cash and cash equivalents $2,111 $1,736
Marketable securities and
interest-bearing deposits 2 1
Accounts and notes receivable:
Trade (net of allowance for
doubtful receivables - 2008:
$128; 2007: $118) 7,133 5,944
Other 4,223 3,740
Inventories 7,690 6,885
Deferred income tax assets -
current 172 348
Total current assets 21,331 18,654
Investments
Investment in nonconsolidated
affiliates 3,242 3,089
Other investments 2,393 2,489
Noncurrent receivables 373 385
Total investments 6,008 5,963
Property
Property 49,273 47,708
Less accumulated depreciation 34,649 33,320
Net property 14,624 14,388
Other Assets
Goodwill 3,617 3,572
Other intangible assets (net of
accumulated amortization - 2008:
$776; 2007: $721) 794 781
Deferred income tax assets -
noncurrent 2,283 2,126
Asbestos-related insurance
receivables - noncurrent 681 696
Deferred charges and other assets 2,815 2,621
Total other assets 10,190 9,796
Total Assets $52,153 $48,801
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable $2,225 $1,548
Long-term debt due within one year 1,051 586
Accounts payable:
Trade 5,493 4,555
Other 2,344 1,981
Income taxes payable 494 728
Deferred income tax liabilities -
current 132 117
Dividends payable 411 418
Accrued and other current
liabilities 2,237 2,512
Total current liabilities 14,387 12,445
Long-Term Debt 8,116 7,581
Other Noncurrent Liabilities
Deferred income tax liabilities -
noncurrent 899 854
Pension and other postretirement
benefits - noncurrent 3,109 3,014
Asbestos-related liabilities -
noncurrent 925 1,001
Other noncurrent obligations 3,347 3,103
Total other noncurrent liabilities 8,280 7,972
Minority Interest in Subsidiaries 237 414
Preferred Securities of Subsidiaries 1,000 1,000
Stockholders' Equity
Common stock 2,453 2,453
Additional paid-in capital 804 902
Retained earnings 18,919 18,004
Accumulated other comprehensive
income (loss) 374 (170)
Treasury stock at cost (2,417) (1,800)
Net stockholders' equity 20,133 19,389
Total Liabilities and Stockholders'
Equity $52,153 $48,801
See Notes to the Consolidated Financial Statements.
The Dow Chemical Company and Subsidiaries
Operating Segments
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
In millions (Unaudited) 2008 2007 2008 2007
Sales by operating segment
Performance Plastics $4,418 $3,742 $8,381 $7,271
Performance Chemicals 2,476 2,071 4,799 4,073
Agricultural Sciences 1,360 1,091 2,674 2,127
Basic Plastics 3,780 3,180 7,272 6,074
Basic Chemicals 1,642 1,455 3,201 2,726
Hydrocarbons and Energy 2,618 1,623 4,783 3,235
Unallocated and Other 86 103 94 191
Total $16,380 $13,265 $31,204 $25,697
EBIT (1) by operating segment
Performance Plastics $268 $382 $597 $823
Performance Chemicals 290 294 561 606
Agricultural Sciences 335 208 666 490
Basic Plastics 388 529 815 1,056
Basic Chemicals 29 165 188 299
Hydrocarbons and Energy - (1) - (1)
Unallocated and Other (160) (140) (292) (397)
Total $1,150 $1,437 $2,535 $2,876
Equity in earnings (losses) of
nonconsolidated affiliates by
operating segment (included in EBIT)
Performance Plastics $12 $14 $30 $40
Performance Chemicals 119 104 214 209
Agricultural Sciences 1 - 2 -
Basic Plastics 33 48 75 102
Basic Chemicals 71 80 168 155
Hydrocarbons and Energy 16 12 38 27
Unallocated and Other (1) - (2) (1)
Total $251 $258 $525 $532
(1) The Company uses EBIT (which Dow defines as earnings before
interest, income taxes and minority interests) as its measure of
profit/loss for segment reporting purposes. EBIT includes all
operating items related to the businesses and excludes items that
principally apply to the Company as a whole. A reconciliation of
EBIT to "Net Income Available for Common Stockholders" is provided
below:
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
EBIT $1,150 $1,437 $2,535 $2,876
+ Interest income 25 33 49 73
- Interest expense and
amortization of debt discount 151 129 296 275
- Provision for income taxes 243 277 542 612
- Minority interests' share in
income 19 25 43 50
Net Income Available for Common
Stockholders $762 $1,039 $1,703 $2,012
Sales Volume and Price by Operating Segment
Three Months Ended Six Months Ended
June 30, 2008 June 30, 2008
Percentage change from prior year Volume Price Total Volume Price Total
Operating segments
Performance Plastics 7% 11% 18% 5% 10% 15%
Performance Chemicals 6% 14% 20% 6% 12% 18%
Agricultural Sciences 13% 12% 25% 13% 13% 26%
Basic Plastics (3)% 22% 19% (3)% 23% 20%
Basic Chemicals (7)% 20% 13% (6)% 23% 17%
Hydrocarbons and Energy 19% 42% 61% 10% 38% 48%
Total 5% 18% 23% 3% 18% 21%
The Dow Chemical Company and Subsidiaries
Sales by Geographic Area
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
In millions (Unaudited) 2008 2007 2008 2007
Sales by geographic area
North America $5,968 $5,418 $11,254 $10,039
Europe 6,347 4,674 12,205 9,475
Asia Pacific 1,913 1,543 3,622 2,947
Latin America 1,665 1,334 3,234 2,622
India, Middle East and Africa 487 296 889 614
Total $16,380 $13,265 $31,204 $25,697
Sales Volume and Price by Geographic Area
Three Months Ended Six Months Ended
June 30, 2008 June 30, 2008
Percentage change from prior year Volume Price Total Volume Price Total
Geographic areas
North America (6)% 16% 10% (4)% 16% 12%
Europe 11% 25% 36% 5% 24% 29%
Asia Pacific 12% 12% 24% 11% 12% 23%
Latin America 5% 20% 25% 4% 19% 23%
India, Middle East and Africa 47% 18% 65% 29% 16% 45%
Total 5% 18% 23% 3% 18% 21%
SOURCE The Dow Chemical Company
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CONTACT:
Media, Bob Plishka, +1-989-638-2288;
Analysts, Jeff Tate, +1-989-636-1375, both of The Dow Chemical
Company
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