More F3IP induced job cuts, and pass through inflation:
Reuters
Dow: Costs Force Job Cuts, Profits Soar
Thursday April 29, 12:59 pm ET
By David Brinkerhoff
NEW YORK (Reuters) - Dow Chemical Co.'s (NYSE:DOW - News) quarterly profit rose sixfold on robust sales of farm chemicals and car plastics, further proof of an industrial recovery that is spurring demand for the company's wide-ranging products.
The No. 1 U.S. chemicals maker, whose products are found in everything from plastic bags to autoparts, also expects to cut about 3,000 jobs this year. The 7 percent work force reduction follows last year's roughly 3,500 job cuts, which helped hold down costs before the economic rebound.
The Midland, Michigan, company blamed the latest cuts on historically high energy costs, which increased $400 million from the fourth quarter, more than Dow expected.
"Feedstock and energy costs continue to remain a critical issue for the chemical industry and for Dow, and managing them successfully is a priority," said J. Pedro Reinhard, Dow's chief financial officer.
DuPont company posted first-quarter net income of $469 million, or 50 cents per share, compared with $76 million, or 8 cents a share, a year earlier.
Revenue rose 15 percent to $9.31 billion as volumes climbed 7 percent. Prices increased 8 percent, more than offsetting a nearly $100 million increase in raw material and energy costs above the very high levels of a year ago.
The big jump in profits echoed the impressive results earlier this week by No. 2 U.S. chemicals maker DuPont Co. (NYSE:DD - News).
Global economic growth has sparked a recovery in chemicals, with increased demand from builders, chipmakers, and auto companies giving producers leverage to raise prices.
"Dow confirms that the industrial recovery is under way," said Michael Barr, analyst with Victory Capital Management, which manages $47 billion in assets, including Dow shares.
The big question is whether Dow's sales volume can continue at its current pace a year from now, further into the expansion, when growth comparisons get tougher, Barr said.
"That's what investors are really going to have to decide on," he said. "These stocks are getting toward the expensive side."
Dow's stock hit a 52-week high of $44.21 on March 1. Early Thursday afternoon, it edged down $1.37, or 3.35 percent, to $39.55 on the New York Stock Exchange (News - Websites) .
In Dow's seeds and farm chemicals division, a strong springtime planting season lifted sales 20 percent, especially in insect control products and herbicides. Volume growth was led by sales in Latin America and Europe.
Sales of plastics for autos, food packaging and other consumer goods increased 17 percent, boosted by car makers in Europe.
"While volume gains make us more confident that industry conditions are improving, one must be mindful that historically high levels of feedstock and energy costs are still an issue," said Dow's Reinhard. |
