Dow Chemical Co posted a higher-than-expected fourth-quarter profit on Tuesday, but said demand in the United States and Europe remained slack, sending its shares down more than 2 percent.

While results were strong in countries like China and India, the largest U.S. chemical maker's prices and volumes fell in North America and Europe, indicating that those regions may not have fully recovered from the recession.

We see demand in emerging geographies continuing to show sustained growth, which bodes well for global growth, Chief Executive Andrew Liveris said in a statement. Growth will continue to lag in the U.S. and Europe, however, as high unemployment persists and questions about the sustainability of government stimulus spending remain.

Shares of Dow were down 2.5 percent at $27.91 in morning trading after rising more than 5 percent on Monday.

I think it's sell on the good news, Greenwich Consultants analyst Mike Judd said. Quite frankly, why wouldn't you take profits here?

Sales rose in four of Dow's seven business units, including basic plastics, which posted a 17 percent jump.

Dow said it had repaid a loan it used to buy rival Rohm & Haas last year and had cut its debt due in 2011 by 80 percent to $2.9 billion. It had $2.8 billion in cash on hand at the end of the quarter.

Not only are they generating cash from their businesses, but also from asset sales, and they're using that cash to pay down debt, Alembic Global Advisors analyst Hassan Ahmed said. I see the quarter as being a handy beat.

BY THE NUMBERS

The company reported net income of $87 million, or 8 cents per share, available to common stockholders, compared with a year-earlier loss of $1.55 billion, or $1.68 per share.

Excluding one-time items, earnings were 18 cents per share. By that measure, analysts had expected 11 cents, according to Thomson Reuters I/B/E/S.

Revenue rose 14.9 percent to $12.47 billion, the Midland, Michigan-based company said. Analysts had expected $11.81 billion.

Earnings from joint ventures, including a 50 percent stake in Dow Corning, jumped to $219 million from a year-earlier loss of $4 million and were nearly in line with pre-recession levels, the company said.

Dow bought rival Rohm & Haas last year for more than $16 billion in a deal that nearly cost the company its investment-grade credit rating, but was necessary, executives said, to boost long-term earnings.

(Reporting by Ernest Scheyder; Editing by Lisa Von Ahn)

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