Dow Reports Record Sales And Substantial Earnings Growth for Third Quarter of 2004 |
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Third Quarter of 2004 Highlights
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Review of Third Quarter Results |
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| The Dow Chemical Company (NYSE: DOW) reported sales of $10.1 billion for the third quarter of 2004, a 26 percent increase compared with the same period of 2003 and above $10 billion for the first time in the Company's history. Net income rose to $617 million while earnings per share were $0.65, both more than 80 percent higher than the third quarter last year. |
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| Across the Company as a whole, strong demand supported healthy price increases, enabling Dow to report the seventh consecutive quarter of margin recovery, despite an unprecedented $1.2 billion escalation in feedstock and energy costs compared with the third quarter of 2003. |
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| "Solid worldwide economic growth continued in the third quarter, stimulating a further positive shift in chemical industry fundamentals," said J. Pedro Reinhard, executive vice president and chief financial officer. "Supply/demand balances tightened across many of Dow's products and in all geographic areas, with operating rates improving through the period. Against this backdrop, pricing momentum continued, enabling Dow to absorb an unprecedented quarterly increase in feedstock and energy costs and partially restore margins." |
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| In the Performance Plastics segment, sales for the third quarter of 2004 were $2.4 billion, an increase of 23 percent compared with the same period in 2003, with volume up 12 percent and price up 11 percent. Engineering Plastics reported sales that were more than 30 percent higher than the same quarter last year, with significant demand growth in Europe and the United States. Epoxy Products & Intermediates also reported a strong increase in volume, with little sign of the traditional European summer slowdown. In Polyurethanes, MDI recorded a double-digit price increase within the context of tight global markets, driven by solid demand in the construction sector worldwide, while Thermoset Systems also recorded year-over-year sales improvements for the quarter, with good volume and clear indications that price increases were finding traction. EBIT* for the Performance Plastics segment was $238 million, an increase of 20 percent compared with the same quarter of 2003, as strong volume, higher operating rates and price increases offset the rise in raw material costs. |
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| Sales in Performance Chemicals rose to $1.7 billion for the third quarter of 2004, an increase of 21 percent compared with the same period last year, with volume and price up 12 percent and 9 percent respectively. Sales of Acrylics and Oxide Derivatives were more than 50 percent higher than the third quarter of 2003, driven by substantial volume increases arising from the successful integration of the acrylates business acquired from Celanese AG earlier this year. The quarter also saw a marked increase in sales of Emulsion Polymers, led by strong demand from the coated paper industry in Europe and Asia Pacific. Escalating benzene costs prompted the business to announce a number of substantial price increases during the period - although a lag between cost and price increases led to margin compression in the quarter. Performance Chemicals reported EBIT of $162 million for the quarter, 30 percent lower than the third quarter of 2003 which included a gain of $47 million related to an asset divestiture. Excluding the 2003 gain, EBIT was down 13 percent, principally due to a significant increase in feedstock costs and expenses related to previously announced plant closures. |
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| The Agricultural Sciences segment posted a new third quarter sales record of $657 million, 5 percent higher than the same period of 2003, with a 4 percent increase in volume spurred by further growth in spinosad insect control products and soybean fungicides. Price increased by 1 percent. Fungicide demand was strongest in Latin America, where the Company increased its share of the soybean rust control business and benefited from additional planted acres. Third quarter sales of spinosad insect control products rose by more than 25 percent compared with the same period last year, with significant volume growth resulting from the ramp-up of products for use on cotton in Asia Pacific. EBIT of $43 million was slightly higher than the same period last year, setting a new third quarter record. |
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| Plastics sales climbed to $2.6 billion for the third quarter, 38 percent higher than the same period last year, driven by a 31 percent increase in price. Volume for the quarter grew by 7 percent year-over-year, despite the divestiture of the Company's PET business related to the formation of the Equipolymers joint venture in the second quarter. Polyethylene demand was strong across all geographic areas, including Europe, where volume remained uncharacteristically high through the traditionally slow summer months. Double-digit price increases in every geographic area reflected solid worldwide polyethylene demand, particularly for packaging and stretch film applications. Polystyrene continued to face a substantial challenge from escalating raw materials costs; despite healthy volume increases in most geographic areas and price more than 40 percent higher overall than the same period last year, polystyrene margins remained severely compressed. EBIT for the Plastics segment more than doubled compared with the third quarter of 2003, rising to $428 million from $155 million in the same quarter last year, as higher selling prices, volume growth and improved earnings from joint ventures exceeded substantial increases in feedstock costs. |
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| Chemicals sales rose to $1.3 billion. Price increased 22 percent compared with the same quarter of 2003 while volume remained flat, principally due to the formation of MEGlobal, a 50:50 joint venture, in the second quarter. Chlorine and caustic soda industry operating rates were high worldwide, with continuing strong demand and low inventories. Vinyl chloride monomer sales were strong in the quarter with revenues up more than 40 percent compared with a year ago, driven primarily by price, as robust demand from the PVC industry in both North America and Europe continued through the summer months. Caustic soda demand has also remained strong and a number of significant price increases were announced during the third quarter. Ethylene glycol margins continued to expand due to high industry operating rates and improved pricing. The Chemicals segment reported EBIT for the quarter of $292 million, over three times the same period last year, as improved pricing in all businesses and higher earnings from joint ventures more than offset increased feedstock and energy costs. |
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| "The chemical industry is now in a strengthening volume and price environment, and Dow continues to see improvements in product supply/demand balances across most businesses and in all geographic areas. For the seventh consecutive quarter, sales in each of the Company's operating segments have risen when compared with the same quarter of the previous year," said Reinhard. "Solid economic growth continues, and although demand remains vulnerable to uncertainties around oil and natural gas, we are increasingly confident that the chemical industry upturn is a reality. |
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| "However, despite solid volume growth and increased pricing, high and volatile feedstock and energy costs have kept margins from reaching reinvestment levels. As the Company moves forward through the remainder of the year and into 2005, it will maintain a sharp focus on improving productivity and on restoring margins," he concluded. |
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| * Earnings before interest, income taxes and minority interests ("EBIT"). Reconciliation of EBIT to "Net Income Available for Common Stockholders" is provided following the Operating Segments and Geographic Areas table. |
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| Upcoming Webcast | |||
| Dow will host a live Webcast of its third quarter earnings conference call with investors to discuss its results, business outlook and other matters today at 10 a.m. EDT on www.dow.com. |
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| 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. |
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| 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. |
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| Download Third Quarter 2004 Financial Statements in PDF format (241KB PDF) |
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3rd Quarter 2004 Earnings Statement
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