New York: Dow Chemical Co posted a much better-than-expected first-quarter profit on Wednesday as higher pricing and volume pushed revenue up around the globe, and its shares rose nearly 3%.
Sales of commodity chemicals fueled much of the jump after a disastrous 2009, but demand for specialty materials, including products from Rohm & Haas, also spiked during the period.
The results give further credence to Dow’s decision to buy rival Rohm last year as well as its product base that combines commodity products, like plastics, with specialty chemicals, like materials for solar panels and high-end gadgets such as Apple Inc’s iPhone.
Not only did sales jump in Asia, a strong growth area for the entire chemical industry, but they also improved in North America and Europe, two regions that had remained mired in the recession.
Dow said it was seeing a “pronounced increase” in demand for its automotive products, and that the harsh North American winter fueled interest in the company’s de-icing fluids.
Sales of reverse osmosis membranes from Dow’s water unit grew “substantially,” the company said.
“The global economic environment is on a stronger footing, and there are signs that this will continue for the foreseeable future,” chief executive officer Andrew Liveris said in a statement.
He cautioned, though, that Dow was not entirely out of the woods.
“Some challenges remain in areas such as residential and commercial construction in developed economies, inflation concerns in high-growth emerging countries plus sovereign debt issues in southern Europe,” Liveris said.
By the numbers
Net income rose to $466 million, or 41 cents per share, from $24 million, or 3 cents per share, a year earlier.
Excluding costs from the 2009 acquisition of Rohm and restructuring, Dow earned 43 cents per share. By that measure, analysts expected 30 cents, according to Thomson Reuters.
Revenue at largest US chemical maker rose 48.4% to $13.42 billion. Analysts expected $12.93 billion.
Revenue rose in all but one of Dow’s operating units. The health and agricultural unit saw sales slips 8% despite the spring planting season. Dow blamed part of the drop on an oversupply of the week killer glyphosate.
Revenue in the electronic and specialty materials unit, a legacy Rohm division, rose 30%.
Sales of basic plastics and basic chemicals rose 49% and 22%, respectively. Dow has repeatedly said it was interested in spinning off its basic plastics unit into a joint venture akin to 2008’s failed KDow agreement with a Kuwaiti oil company.
Dow boosted pricing by 17%, and volume rose 16% during the quarter.
Midland, Michigan-based Dow bought rival Rohm & Haas last April in a deal that sharply leveraged its balance sheet. Since then, the company has been selling off assets to cut its debt, although a bridge loan used to pay for part of Rohm was repaid in 2009.
Dow agreed to sell its Styron basic plastics business to private equity firm Bain Capital Partners in March for $1.63 billion. It plans to use proceeds to cut debt once the deal closes.
Dow peer DuPont said on Tuesday that first-quarter profit more than doubled.
Shares of Dow rose 2.8% to $30.92 in premarket trading on Wednesday.