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Dow Reports 2003 ResultsPosts Substantially Higher Earnings and Record Sales for the Year Midland, MI - January 29, 2004 Fourth Quarter of 2003 Highlights
2003 Highlights
See “Supplemental Information” at the end of this release for additional information regarding certain items affecting results in 2003 and 2002. Review of Fourth Quarter Results The Dow Chemical Company today announced that sales for the Company in the fourth quarter were $8.3 billion, compared with $7.0 billion a year ago, an increase of 20 percent. Net income was $929 million, compared with a loss of $809 million a year ago. Earnings per share were $0.99, compared with a loss of $0.89 per share a year ago. After-tax earnings in the fourth quarter of 2003 included tax benefits related to the utilization of foreign tax credits and operating loss carryforwards. The tax benefits totaled $454 million, or $0.49 per share. A 12 percent increase in prices, and an 8 percent increase in volume, helped to offset a 15 percent increase in feedstock and energy costs compared with the same quarter of last year. Price increases were recorded in all geographic areas and in all segments, with double-digit increases recorded in the basics segments. Volume was up in all segments, except for Agricultural Sciences which was flat. On a geographic basis, volume growth was strongest in Asia Pacific and Latin America. “We are pleased with our quarterly results, especially in this environment of high and volatile feedstock and energy costs. Dow’s results benefited from a strengthening global economy and, more importantly, from Dow’s focus on price/volume management and productivity improvements,” said William S. Stavropoulos, Dow’s Chairman of the Board and Chief Executive Officer. “Employees continued their year-long, dedicated discipline on cost control throughout the fourth quarter, reducing Selling, Administrative, and Research and Development Expenses by 14 percent, compared with the same quarter last year. Additionally, we were encouraged by the broad-based volume growth in the quarter, which was the highest increase we’ve seen in over a year. Strong results at many joint ventures also contributed to the earnings improvement.” Performance Plastics and Performance Chemicals both showed significantly better results compared with the same quarter last year. Performance Plastics EBIT(a) increased by more than 150 percent, as significant improvements in both price and volume more than offset the impact of higher feedstock and energy costs. Strong volume gains were recorded in most businesses, led by Engineering Plastics, Epoxy Products & Intermediates, and Polyurethanes, due to increased demand for materials for the electronics industry, industrial coatings and furniture applications. Fabricated Products volume growth benefited from an extended building season in North America and early signs of a recovery in commercial construction. Performance Chemicals EBIT improved 23 percent, compared with the same quarter last year, as rising feedstock and energy costs were offset by higher prices. Oxide Derivatives, Industrial Chemicals and Water Soluble Polymers experienced solid volume growth in a broad range of end-use applications including personal care products, cleaning products and construction materials. Agricultural Sciences recorded another strong quarter, with increased sales and EBIT, compared with a year ago. Overall prices improved and volume was flat. While there was less pre-season buying in North America and Europe compared with the fourth quarter of 2002, volume increases were recorded in Latin America due to strong herbicide sales. Spinosad insect control products also continued to show substantial growth, particularly in Asia Pacific and Brazil. Prices were flat in the United States, but increased in all other geographic areas. Overall EBIT in the basics segments for the fourth quarter was substantially better than a year ago, as improvements in volume and price, coupled with cost reduction efforts, more than offset significantly higher feedstock and energy costs. In the Plastics segment, polyethylene and polypropylene posted significant volume gains in North America compared with a year ago, while European PET volume growth exceeded 10 percent. In Plastics, price improvements were achieved in all geographic areas. In the Chemicals segment, ethylene glycol volume rose 20 percent, compared with a year ago, with strong gains in Asia Pacific, Latin America and Europe. Organics, Intermediates, Solvents and Monomers also recorded double-digit volume gains. Compared with a year ago, higher prices for caustic soda, vinyl chloride monomer and ethylene glycol offset substantial cost increases in feedstock and energy. Net income in the fourth quarter was also impacted by tax rate adjustments for 2003. For the full year, the tax rate was lower than originally anticipated as a result of strong financial performance by a number of joint ventures, higher than expected U.S. income and improved tax planning. As a result, Dow’s reported tax rate for the full year was 21 percent, excluding the $454 million tax benefits described earlier. An adjustment to achieve this full-year tax rate was reflected in fourth quarter results. Going forward, Dow expects the long-term tax rate to be between 28 and 30 percent. “The tax benefits should not obscure the fact that the operating results in the fourth quarter improved substantially,” said Stavropoulos. Review of Results for 2003 Dow reported annual 2003 sales of $32.6 billion, compared with 2002 sales of $27.6 billion, an increase of 18 percent and a new sales record for the Company. Net income was $1.7 billion, compared with a loss of $338 million a year ago. Earnings per share were $1.87, compared with a loss of $0.37 per share a year ago. Overall volume increased 4 percent and prices increased 14 percent, offsetting a $2.7 billion increase in feedstock and energy costs, compared with 2002. As a result, gross margins began to improve from the trough levels of recent years. Most operating segments posted significantly higher sales and EBIT for the year, compared with 2002, with Agricultural Sciences reporting record earnings in 2003. Commenting on the Company’s results, Stavropoulos said, “Despite extended trough conditions in the chemical industry, and continued high feedstock and energy costs, Dow employees took strong action to turn our financial performance around in 2003. We reduced our structural costs by more than $600 million, compared with 2002, exceeding our goal of a $400 million reduction. We improved our working capital management substantially and held capital spending to $1.1 billion. As a result, Dow’s free cash flow(b) improved by more than $2 billion, compared with 2002. “Looking into 2004, we expect that stronger global economic growth will improve chemical industry demand, tightening industry supply/demand balances,” said Stavropoulos. “However, there is still uncertainty due to feedstock and energy costs which remain high and volatile. Throughout this year, Dow employees will take 2004 one quarter at a time, continuing the focus on improving our earnings and financial strength.” (a)Earnings before Interest, Income Taxes and Minority Interests (“EBIT”) (b)Free cash flow is cash provided by operating activities minus capital expenditures and dividends paid to stockholders. Upcoming Webcast Dow will host a live Webcast of its fourth quarter earnings conference call with investors to discuss its results, business outlook and other matters today at 10 a.m. EST on www.dow.com. About Dow Dow is a leader in science and technology, providing innovative chemical, plastic and agricultural products and services to many essential consumer markets. With annual sales of $33 billion, Dow serves customers in more than 180 countries and a wide range of markets that are vital to human progress, including food, transportation, health and medicine, personal and home care, and building and construction, among others. Committed to the principles of sustainable development, Dow and its approximately 46,000 employees seek to balance economic, environmental and social responsibilities. References to “Dow” or the “Company” mean The Dow Chemical Company and its consolidated subsidiaries unless otherwise expressly noted. Note: The forward-looking statements contained in this document involve risks and uncertainties that may affect the Company’s operations, markets, products, services, prices and other factors as discussed in filings with the Securities and Exchange Commission. These risks and uncertainties include, but are not limited to, economic, competitive, legal, governmental and technological factors. Accordingly, there is no assurance that the Company’s expectations will be realized. The Company assumes no obligation to provide revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws. For complete report, please contact Dow representatives listed below. For Editorial Information:
Cindy Newman
Doug Warner |
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