Dow earnings hurt by Performance Plastics unit

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MIDLAND, MICH. (Feb. 2, 4 p.m. ET) — Dow Chemical Co. has wrapped up a 2011 financial year in which its company-leading Performance Plastics unit produced mixed results.

The unit - which includes polyethylene and elastomers - saw its sales for 2011 grow almost 7 percent to about $16.3 billion, but pretax profit slipped almost 4 percent to about $3.4 billion. Midland-based Dow reported fourth quarter and full-year financial results Feb. 2.

Performance Plastics was the largest of Dow’s six operating units in 2001 with 27 percent of total sales. The unit’s pretax profit total also was the largest at Dow - and was nearly double that of the next closest unit.

Performance Plastics’ full-year performance was hurt by a fourth quarter in which sales fell about 6 percent and pretax profit tumbled almost 30 percent. In spite of the unit’s overall fourth-quarter performance, officials said in a Feb. 2 news release that its PE business “reported another strong quarter of volume growth” in the Asia Pacific region as it continued to benefit from new capacity in Thailand.

Dow’s Performance Materials unit - which includes polyurethane, epoxies and polymer additives - had a more consistent year in 2011, with sales growing almost 5 percent to $14.6 billion and pretax profit increasing almost 2 percent to more than $1.7 billion. That unit ranked as Dow’s second-largest, with 24 percent of total sales.

Looking ahead to 2012, Chairman and CEO Andrew Liveris was optimistic, especially in the area of feedstocks.

“Dow’s downstream, market-driven businesses are poised to capture value from improving North American feedstock dynamics,” Liveris said in the release. “We maintain our view that ethylene industry operating rates will tighten over the next several years – driving margin expansion.”

Dow already has announced plans to capitalize on new supplies of natural gas - which can be used to make ethylene - that are being developed throughout North America. Last year the firm announced plans to build a new ethylene cracker on the U.S. Gulf Coast, and to enhance existing feedstock plants in Freeport, Texas, and Plaquemine, La. Dow also by the end of 2012 will restart a plastics feedstocks plant in Hahnville, La., that’s been dormant since 2009.

In overall sales, Dow finished 2011 at just under $60 billion - up almost 12 percent vs. 2010. The firm’s profit total of almost $2.8 billion was almost 20 percent ahead of last year’s number.

But a tough fourth quarter - with a $20 million loss replacing a $26 million profit during the same quarter in 2010 - left the firm’s per-share stock price down about 1 percent to $33.60 in late trading Feb. 2.

Liveris, however, remained resolute.

“We will continue to closely monitor global economic trends and expect challenges in Western Europe to persist in the near term,” he said in the release. “We do not anticipate material improvements in market conditions for the first quarter of the year, but do project economic recovery will gain momentum as we move through the second quarter and the remainder of the year.

“Regardless, we will continue to intervene to ensure we deliver against our short- and long-term targets.”

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