NEW YORK - Dow Chemical Co posted a 66 percent jump in third-quarter earnings on Thursday to beat Wall Street's expectations, but it warned it does not expect market improvements next year.

Dow sold off $3.4 billion in assets this year to boost its bottom line and reduce debt. The company also cut costs by laying off thousands of workers and shutting several plants.

While sales fell from the same period last year, they rose sequentially due to slow, steady, demand growth, particularly in electronics, plastics and coatings. But the physical volume of chemicals sold, as well as the prices at which they were sold, both fell during the period.

What you see here is a company that has a lot of leverage and that is basically struggling to maintain its financial performance and also to deal with a very difficult global environment, Greenwich Consultants analyst Mike Judd told Reuters.

Despite strength in China and other Asian markets, global market conditions likely will not improve in 2010, Chief Executive Andrew Liveris said.

High unemployment and low consumer spending is also hurting the recovery of the U.S. market, he said.

Dow is somewhat cautious on the outlook and rightfully so, given that in some of the largest markets that it participates in, (namely) construction and autos, the line of sight is still blurry, Morningstar analyst Ben Johnson told Reuters.

CUTS BOOSTING RESULTS

Like many of its peers, Dow relied on aggressive cost cuts to bolster profits, a tactic that makes many on Wall Street anxious.

While the cuts, about $380 million during the period, were necessitated by the recession, Dow's April 1 purchase of specialty chemicals maker Rohm & Haas also contributed.

Now fully integrated into Dow, the loan used to pay for the deal has been repaid, the company said.

For the quarter, the company posted net income of $711 million, or 63 cents per share, up from $428 million, or 46 cents per share, a year earlier.

Excluding one-time items, such as the sale of stakes in a Dutch refinery and a Malaysian petroleum producer, earnings were 24 cents per share.

By that measure, analysts had expected earnings of 10 cents per share, according to Thomson Reuters I/B/E/S estimates.

Revenue fell 22 percent to $12.05 billion, but still beat analysts' expectations of $11.85 billion.

Sales at Dow AgroSciences -- a unit that helped Dow post a first-quarter profit -- dropped sharply due in part to drought and seasonal issues.

Its shares were up 1 percent to $25.79 in early afternoon trading. (Reporting by Ernest Scheyder; Additional reporting by Euan Rocha; Editing by Lisa Von Ahn, Gerald E. McCormick, Dave Zimmerman, Leslie Gevirtz)

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