Dow Chemical Co plans to pass along higher energy prices to its customers in 2011, as strong demand for some products and fixed-cost Middle East supplies set it apart from rivals.

The largest U.S. chemical maker posted better-than-expected fourth-quarter profit on Thursday as a 10 percent price increase helped offset a $685 million jump in costs for crude oil and other raw materials.

Dow also raised prices for highly sought-after products in tight supply, including polyethylene and caustic soda.

Both trends should continue this year, said the company, which expects first-quarter energy costs to increase $500 million.

Dow's Kuwait-based MEGlobal and Equate joint ventures guarantee fixed costs for some of its raw material supply. Even as energy prices rise around the world, Dow's costs remain relatively low.

The pricing is being set by the higher-cost crude oil link. Dow's feedstock costs are flat in these low-cost areas and crude oil prices are ripping, Alembic Global Advisors analyst Hassan Ahmed said. That stands to benefit them.

Fourth-quarter operating profit in Dow's plastics business, which relies heavily on crude supplies, jumped 40 percent to $765 million.

Dow's resilience in the face of high prices stands in contrast to rival DuPont Co

, whose quarterly profit was dented by higher raw material costs.

Andrew Liveris, Dow's chief executive, said his company will focus on building plants in South Korea, Thailand, Brazil and other emerging economies as it expands production of elastomers, photovoltaics, and other products.

UNIT STRENGTH

Dow's quarterly results also got a boost from brisk agricultural and automotive sales.

Dow's electronic and specialty materials unit saw sales jump 13 percent to $1.28 billion. The unit supplies films, display chemicals and circuit board parts for most smartphones, including Apple Inc's iPhone.

The high demand from that sector lets Dow easily pass along supply cost increases.

Latin American buyers gobbled up much of Dow's fungicides, pesticides and genetically modified seeds, sending sales in that unit up 19 percent and volume up 20 percent.

Sales in the coatings and infrastructure unit slipped 3 percent due in part to sagging construction activity around the globe.

The automotive industry continued to buy Dow's polyurethane and other products that reduce a car's weight and increase fuel efficiency. Dow Automotive Systems saw double-digit volume growth, the company said.

U.S. industrywide auto sales rose 20 percent last month, top automakers reported.

QUARTERLY RESULTS BEAT STREET

Net income rose to $426 million, or 37 cents per share, from $87 million, or 8 cents per share, in the year-earlier period.

Excluding costs related to Dow's 2009 acquisition of rival Rohm & Haas and other one-time items, the company posted profit of 47 cents per share. By that measure, analysts expected 35 cents, according to Thomson Reuters I/B/E/S.

Revenue rose 11 percent to $13.77 billion. Analysts expected $12.48 billion.

Dow's earnings from joint ventures jumped to $313 million from $219 million a year earlier. It was the highest quarterly earnings from joint ventures in the company's history, Dow said.

The company had roughly $7 billion in cash on hand at the end of the quarter. Executives said they plan to cut that down to $2.5 billion in 2011 as they take significant action to reduce Dow's $20.61 billion debt load.

Dow said much of its growth will continue to come from countries like China and India, though it noted United States results are improving.

With inflation concerns in emerging geographies, lingering unemployment issues in the United States, and sovereign debt issues in Europe, we remain prepared for a reversal in momentum, Liveris said in a statement.

Dow shares were up 1 cent at $36.65 on Thursday afternoon after rising as much as 2.3 percent earlier in the day. The broader market was down on inflationary concerns.

Dow's stock has traded between $22.42 and $36.78 in the past 52 weeks.

Also on Thursday, Arch Chemicals Inc and PolyOne Corp

reported higher fourth-quarter profit.

(Reporting by Ernest Scheyder; Editing by Derek Caney, Dave Zimmerman and Matthew Lewis)

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