NEW YORK — Although market conditions will continue to be tough in 1999, Dow Plastics expects its sales to increase 6 percent and its volume to climb 13 percent in that period.
Dow's unflinching optimism comes at the end of a year in which it expects sales to be down 5 percent in spite of a 5 percent jump in volume.
Dow, a global leader in polyethylene and polystyrene production, took time to look back and look ahead at a Dec. 11 media briefing in New York.
Basic plastics — PE, PS and polypropylene — and performance plastics — engineering resins, polyurethanes, epoxy, adhesives, sealants and coatings — account for about 45 percent of sales at Dow Chemical Co. of Midland, Mich. Officials expect those products to bring in about $9 billion in revenue in 1998.
``Without our ability to maintain margins in a year that's clearly approaching the trough in the business cycle, the impact would have been more significant,'' Dow's Anthony Carbone said of the unit's 1998 experience. ``That's reflective of the costs we've taken out. We're a much more efficient company than we were in 1991, 1992 and 1993.''
Dow has cut personnel by about 30 percent since 1992 and continues to carry out plans to remove another $1 billion in company costs.
Carbone, Dow Plastics' executive vice president of plastics, hydrocarbons and energy, described the 10 percent swing between volume growth and revenue growth as ``huge and disappointing.'' He said Dow anticipates 1999 to be a trough year, with business conditions improving in 2000. Another possible scenario has 1999 and 2000 combining to form ``a flat spot'' in the global market.
``Whether we take our licks in one year or in equal installments in two years, the net loss in profit and revenue will be about the same,'' Carbone said.
Polyethylene took the biggest hit for Dow in 1998, with prices dropping an average of 10 cents per pound through October. The plunge was tied in to industry overcapacity as well as a severe drop in demand to Asia.
Through September, North American exports of linear low density PE had dropped more than 18 percent, according to the Society of the Plastics Industry Inc. in Washington. Dow is the world's largest LLDPE maker.
Dow's double-digit volume growth in 1999 will be achieved partially through new capacity additions in Europe and Canada. In 1998, the company added significant PE capacity in Fort Saskatchewan, Ontario, and opened its first PP plant in Schkopau, Germany.
Dow, which introduced its new metallocene-based Index copolymers at the Dec. 11 briefing, said it would continue to focus on science and technology in 1999.
``The chemical industry has basically gone soft on growth,'' Carbone said. ``It's so caught up in productivity it's forgotten how to grow.
``Those prophets who said there are no new polymers to be discovered have started to convert others, but we don't feel that's the case.''