The Dow Chemical Company (DOW) reported encouraging results for the fourth quarter and full year 2009. During the fourth quarter EPS was 18 cents, compared to a loss of 63 cents in the same quarter in the previous year. It was above the Zacks Consensus Estimate of 10 cents.
Full-year earnings were 63 cents per share, down from $1.79 in 2008. However, it was more than the Zacks Consensus Estimate of 49 cents.
Sales in the quarter increased 4% to $12.5 billion compared to $12.0 billion in the fourth quarter of 2008. An increase in sales was driven by a 10% increase in volume and 6% decrease in price. Quarterly volume increased 33% year over year in emerging geographies versus the same period last year.
However, full year 2009 sales decreased 29% and reached $46.5 billion, compared to $65.5 billion in 2008. The fall in sales was primarily due to a 13% decrease in sales volume.
Results by Segment
During fourth quarter of 2009, sales in the Electronic and Specialty Materials segment were almost flat, compared to the same period last year. Sales in Coatings and Infrastructure were down 3.4% year over year while sales in the Health and Agricultural Sciences were up 17%.
Performance Systems segmental sales were down 3.3% while Performance Products sales were almost flat compared to the same quarter of 2008. Sales in the Basic Plastics segment were up 17% and sales in the Basic Chemicals segment were up 4.6%. Sales in the Hydrocarbons and Energy and Corporate segment were down 28% and 89.7%, respectively.
During fiscal year 2009, sales in the Electronic and Specialty Materials segment were down 19.5% year over year. Sales in Coatings and Infrastructure were down 23.0% and sales in the Health and Agricultural Sciences were down 1.6%.
Performance Systems segment sales were down 28.9% and Performance Products sales were down 30.5%. Sales in the Basic Plastics segment were down 30.3% and sales in the Basic Chemicals segment were down 42.2%. Sales in the Hydrocarbons and Energy and Corporate segment were down 52.7% and 28.8%, respectively.
Balance Sheet
Dow completed the year ahead of its cost reduction and synergy goals, with an end-of-year run-rate of more than $1.7 billion, over 115% of the company’s goal.
As of the end of the year, Dow reduced its net debt to total capitalization to 48%, reflecting the full repayment of the bridge loan related to the acquisition of Rohm and Haas as well as the full repayment of the outstanding balance of the company’s revolving credit facility.
Rohm & Haas Acquisition
Dow Chemical has become the world’s leading specialty chemicals and advanced materials company after acquiring Rohm & Haas for $16.3 billion. Management intends to place Rohm & Haas, along with some specialty chemical businesses, in a new Advanced Materials division.
This new division expects to achieve annual sales of $14.0 billion and cost synergies of $1.3 billion. The acquisition has broadened Dow’s product range in paints, coatings and electronic materials and increased its position in the specialty chemicals market.
The Rohm & Haas acquisition, a positive for Dow, is expected to consolidate higher margins and fuel a higher growth specialty business and reduce volatility in earnings and cash flow going forward.
Read the full analyst report on “DOW”
Zacks Investment Research
