Dow Chemical profit, revenue spike; shares jump

Dow Chemical Co posted a stronger than expected first-quarter profit on Wednesday as higher pricing and volume pushed revenue up around the globe, news that lifted shares more than 5 percent.

Sales of commodity chemicals fueled much of the jump for the No. 1 U.S. chemical maker after a disastrous 2009, but demand for specialty materials, including products from Rohm & Haas, also spiked during the period.

The results give further credence to Dow's decision to buy rival Rohm last year, as well as its move toward a product base that combines commodity products, like plastics, with specialty chemicals, like materials for solar panels and high-end gadgets such as Apple Inc's iPhone.

Not only did sales jump in Asia, a strong growth area for the entire chemical industry, but they also improved in North America and Europe, two regions that had remained mired in the recession.

The Midland, Michigan-based company boosted pricing by 17 percent, and volume rose 16 percent during the quarter.

It was a very solid quarter, Alembic Global Advisors Hassan Ahmed said. The (specialty materials) units started showing signs of improvement.

Dow said it was seeing a pronounced increase in demand for its automotive products, and that the harsh North American winter fueled interest in the company's de-icing fluids.

Sales of reverse osmosis membranes from Dow's water unit grew substantially, the company said.

The global economic environment is on a stronger footing, and there are signs that this will continue for the foreseeable future, Chief Executive Officer Andrew Liveris said.

He cautioned, though, that Dow was not entirely out of the woods.

Some challenges remain in areas such as residential and commercial construction in developed economies, inflation concerns in high-growth emerging countries plus sovereign debt issues in southern Europe, Liveris said.

SAUDI PROJECT

On a conference call with investors, Liveris said the company's joint venture project at Ras Tanura, Saudi Arabia, with that nation's oil producer is critical to Dow's growth.

However, Liveris hinted that parts of the project could change, and told investors he would update them within a few months.

Dow plans to move the project to Jubail, Saudi Arabia, further delaying construction, sources have told Reuters. [ID:nLDE6301SI]. Dow has not commented.

Ali Al-Naimi, the Saudi Arabia minister of petroleum and mineral resources, said on Wednesday at the U.S.-Saudi Opportunities Forum in Chicago that his country is proceeding with plans to build a mega-petrochemical project with Dow.

BY THE NUMBERS

Net income rose to $466 million, or 41 cents per share, from $24 million, or 3 cents per share, a year earlier.

Excluding costs from the 2009 acquisition of Rohm and restructuring, Dow earned 43 cents per share. By that measure, analysts expected 30 cents, according to Thomson Reuters
I/B/E/S.

Revenue rose 48.4 percent to $13.42 billion. Analysts expected $12.93 billion.

Earnings from Dow's stake in several affiliates, including Dow Corning, jumped to $304 million from $65 million. Morgan Stanley analyst Paul Mann, who believes Dow is the best positioned U.S. chemical company to benefit from an economic recovery, said the Dow Corning earnings could rise still and the unit remains an underappreciated asset.

Revenue rose in all but one of Dow's operating units. The health and agricultural unit saw sales slips 8 percent despite the spring planting season. Dow blamed part of the drop on an oversupply of the week killer glyphosate.

Revenue in the electronic and specialty materials unit, a legacy Rohm division, rose 30 percent.

Sales of basic plastics and basic chemicals rose 49 percent and 22 percent, respectively. Dow has repeatedly said it was interested in spinning off its basic plastics unit into a joint venture akin to 2008's failed KDow agreement with a Kuwaiti oil company.

Dow bought rival Rohm & Haas last April in a deal that sharply leveraged its balance sheet. Since then, the company has been selling off assets to cut its debt, although a bridge loan used to pay for part of Rohm was repaid in 2009.

Dow agreed to sell its Styron basic plastics business to private equity firm Bain Capital Partners in March for $1.63 billion. It plans to use proceeds to cut debt once the deal closes.

Dow peer DuPont