Dow AgroSciences LLC, a subsidiary of The Dow Chemical Co. (DOW), announced that it has agreed to invest in the Australian wheat breeding company HRZ Wheats. Financial terms of the deal were not disclosed.
Under the agreement, Dow AgroSciences and HRZ will exchange wheat genetic material and HRZ will get access to breeding services, technologies and funding to help speed up delivery of superior wheat varieties to Australian farmers.
HRZ was established in 2003 to provide wheat farmers in Australia’s high rainfall zone with high yielding, milling quality varieties of wheat.
Through this investment Dow expects to bring better products to the market more often, which will create value for grains industry participants.
In essence, we hope this investment will mean better products coming to the market more often — which will create value for grains industry participants.
In July 2011, Dow released its second quarter 2011 financial results. The company earned 85 cents per share in the second quarter of 2011, ahead of the Zacks Consensus Estimate of 80 cents per share as well as last year’s 54 cents per share. However, including one-time charges, the company earned 84 cents per share compared with 50 cents per share in the year-ago quarter.
Quarterly revenues jumped 17% year over year to $16.0 billion and were above the Zacks Consensus Estimate of $14.7 billion, driven by double-digit gains in all operating segments and geographic areas.
Excluding the impact of divestitures, volume grew 9% with gains in all operating segments but Coatings and Infrastructure, which was flat owing to difficult conditions in construction end-markets, and Chemicals and Energy. Volume increased in all geographic areas, led by Latin America (23%) and Asia Pacific (11%).
Excluding the impact of divestitures, price rose 19%, with double-digit increases in all geographic areas. All operating segments except Electronic and Specialty Materials (up 7%) and Health and Agricultural Sciences (up 5%) reported double-digit price gains. Price gains more than offset an increase of $1.5 billion in purchased feedstock and energy costs.
Sales in the emerging regions reached $4.9 billion, driven by Latin America, which increased more than 35% excluding the impact of divestitures. Volume in the emerging markets increased 14% excluding the impact of divestitures, with double-digit gains in Electronic and Specialty Materials, Health and Agricultural Sciences, and Plastics.
There was no financial guidance from Dow. However, Dow anticipates demand to improve further, especially in Asia with the global economic recovery. The US and European markets have also started showing signs of improvement. Dow is also optimistic on major consumer markets, including electronics, coatings, automotive and packaging. However, construction markets are expected to remain weak.
Dow faces stiff competition from EI DuPont de Nemours & Co. (DD).
Currently, Dow has a short-term (1 to 3 months) Zacks #3 Rank (Hold) and a long- term Neutral recommendation.
