Africa - April 21, 2008
2007 was an eventful year for the chemical industry. It will be remembered for huge deals; rocketing oil prices and for effectively beginning an economic slump. Dow proved itself worthy of being recognized for what it has accomplished. Chemical and Engineering News‘ Company of the year certainly made strides as it embarked on some of the most dramatic changes in its illustrious 110-year history.
Early in the year, Dow’s intentions were clear as it established several ventures with companies that have access to low-cost hydrocarbons and are eager to grow in petrochemicals. The objective being to lower production costs while redirecting itself to more value-added specialty chemicals businesses.
Dow then went on to launch a plan with Saudi Arabian state oil company Saudi Aramco for the largest petrochemical project in history. This also made Dow the first Western company to plan a major chemical investment in Libya.
Some of Dow’s highlights for 2007 include the development of alternative feedstocks; a feasibility study with Chinese mining firm Shenhua for a complex that would convert coal into chemicals and an agreement with Brazil's Crystalsev to build a polyethylene plant based on ethylene derived from sugarcane-based ethanol.
Dow saved its biggest deals for year end. In November, the company agreed to develop natural-gas-based raw materials with Gazprom, the state-owned Russian firm that controls 20% of the world's natural gas production. The companies have been discussing chemical projects in Russia and Germany. In December, it announced plans to sell 50% of its polyethylene, ethyleneamines, ethanolamines, and polycarbonate businesses to Petrochemical Industries Co. of Kuwait (PIC), a subsidiary of Kuwait Petroleum, for $9.5 billion.
The deal is aimed at making Dow's earnings less volatile by ensuring that its profits are not dependant on petrochemical business cycles.
"Dow's transaction with PIC of Kuwait to form a joint venture in commodities has significance on all fronts—not only for Dow but for the entire chemicals industry," said Citigroup chemical analyst P. J. Juvekar, in a note to clients regarding the transaction.
The transaction also sets the stage for more Dow purchases. Liveris confirmed that Dow is on the hunt for acquisitions and analysts see it buying a large specialty chemicals company such as Ciba Specialty Chemicals, Cognis, or Cytec Industries. With $7 billion in cash from Kuwait secured, few companies are out of Dow's price range.
"We said 2007 would be a transformational year. We meant it," Liveris told analysts in December. He insisted that the company will still be "hard at work" in 2008, closing the deal with PIC and then focusing on the questions, "How will we acquire? How will we invest? And how will we reward our shareholders?" Depending on its answers, Dow could very well be chemical company of the year again in 2008.
About Dow
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Doritha Erwee
The Dow Chemical Company
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