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Members of Congress tell Dow, Face Up to Your Bhopal Liabilities
US Congressional Letter to Dow 18jul03
NEW YORK—Dow Chemical Co., the largest U.S. chemicals maker, on Thursday said second-quarter profit jumped 65 percent as cost-cutting and price increases overcame surging energy expenses, sending its shares sharply higher.
The Midland, Michigan-based company has countered record prices for natural gas with layoffs and plant closures.
Dow DOW.N said net income rose to $393 million, or 43 cents a share, from $238 million, or 26 cents a share, a year earlier.
Revenue rose 14 percent to $8.2 billion on stronger prices for plastics and basic chemicals like chloride monomer. A 5 percent rise in agricultural product sales also helped.
"It looks like they've executed an excellent quarter," said Gene Pisale, senior investment officer at Wilmington Trust Co. in Delaware, which says it holds a "moderate" amount of Dow shares.
Dow suffered a $700 million spike in energy and raw material costs during the quarter. Natural gas prices peaked in late February and have remained high since.
Overall prices rose 16 percent while volumes eased 2 percent, failing to show their usual improvement for this time of year due to the stagnant global economy, Dow said.
Raw material costs also hurt chemical maker and refiner Lyondell Chemical Co. LYO.N , which reported on Thursday that it swung to a quarterly loss from a year-earlier profit.
PUSHING PRICES
"(Dow's) trying to fight the same battles as other companies, pushing prices through as much as they can, and they did," Pisale said, "That's very positive in terms of momentum going forward."
In agriculture, strong sales were led by insecticides needed to protect plants during an unusually damp spring in the United States.
In performance plastics and performance chemicals -- two of Dow's biggest businesses -- earnings rose 12 percent as price increases made up for sluggish demand from North American construction companies and automakers. Dow also wrested higher prices from the paper coating industry.
Sales of other plastics jumped 11 percent, with price increases compensating for lower volumes of North American polyethylene, the raw material for plastics.
Dow has imposed cost cuts during the past year. In January it announced plans to cut up to 4,000 jobs, or 8 percent of its work force, in 2003 through asset sales, plant closures, attrition and job elimination. In June it mothballed a large petrochemical plant in Texas.
Chief Financial Officer J. Pedro Reinhard said, "Excellent progress has been made on expense reduction, working capital management and capital spending control."
Dow shares were up $1.92, or 6 percent, to $33.87 in morning trade on the New York Stock Exchange. During the second quarter, the shares rose 12 percent, outperforming the Standard & Poor's Chemicals Index, which increased nearly 3 percent.
Dow Chemical Co. - Midland, Mich.
2nd Quar June 30:
2003 2002
Sales $8,242,000,000 $7,259,000,000
Net income 393,000,000 a 238,000,000
Avg shrs (diluted) 921,900,000 919,300,000
Shr earns
Net income .43 a .26
a. Includes merger-related expenses of $7 million and a restructuring charge of $7 million.
Excluding these items, earnings were 28 cents a share.
Dow Chemical Co. (DOW) said it remains committed to controlling costs,
capital spending and working capital, and is working toward improving its
third-quarter financial performance compared with last year.
For the year-ago third quarter, the company reported net income of $128 million,
or 14 cents a share, on revenue of $7.04 billion. Excluding items, earnings were
$148 million, or 16 cents a share.
Wall Street expects the company to post third-quarter earnings of 28 cents a
share on revenue of $7.24 billion, according to mean estimates compiled by
Thomson First Call.
Dow Chemical is set to Webcast a conference call at 10 a.m. EDT Thursday.
Company Web site: http://www.dow.com
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