DÜSSELDORF, GERMANY (Nov. 27, 12:05 p.m. EST) — Dow Chemical Co. is growing in the Middle East, China and India — but in no way is the firm forgetting its major presence in North America and Europe.
“We're going to sustain our focus on mature economies,” said Mike Gambrell, executive vice president with Midland, Mich.-based Dow. “Canada, Western Europe and the U.S. are huge franchises for us and we'll protect and defend those franchises,” Gambrell said in a news conference at K 2007, which ran Oct. 24-31 in Dusseldorf.
“We've got annual sales of more than $15 billion there, and a majority of our spending is still in mature geographies,” he said.
Dow expects near-term sales growth of 2 percent in North America and 4 percent in Western Europe. Growth will be higher — roughly four times national gross domestic products — in Brazil, China, Eastern Europe, the Middle East, India and Russia. In 2007, Dow marked its 50th year of doing business in India. Dow's sales in that country are $500 million, but it expects them to grow to $1 billion by 2010.
Gambrell acknowledged, however, that Dow and other plastics and chemicals makers remain challenged with finding ways “to get consistent earnings while dealing with volatility.”
“We have to get consistent earnings over the cycle,” he said. “We have to get to a position where affordability is there. But at the same time, we've earned the right to grow.”
That growth likely will come from Dow's current research and development pipeline of more than 600 new projects and from joint ventures.
“Performance will become a bigger issue, and basic products will increasingly be in joint ventures,” Gambrell said. “That will bring the benefits of our asset-light strategy to our customers.
“It's really about equity participation. Retaining integration is essential to our company's success, and in a JV, we're not giving up integration.”
Jim Fitterling, president of Dow's basic plastics business, said products made by his segment — including polyethylene, polystyrene and polypropylene — “are the backbone and foundation of the Dow Chemical Co.”
The unit ranks as the world's largest maker of PE and PS and is a leader in PP. It has annual sales of $17 billion to 6,000 customers, while employing 5,500 and making 40 billion pounds of product annually at 40 locations.
Dow's basic plastics and chemicals unit also has responded to customer requests in ways that, ironically, lead them to use less Dow material per product.
Dowlex-brand PE has provided customers with 30 percent down-gauging of stretch film since 1998, Fitterling said. Doing so reduces energy use and saves a billion pounds of resin per year. Light-weighting of products using Inspire-brand PP can save up to 12 percent resin, he said.
Using Dow HDPE in milk jugs provides 34 percent less waste, produces 40 percent less greenhouse gases and uses 25 percent less energy than recently introduced jugs made with PLA bio-resin, according to Fitterling.
He added that the global PE market is facing tightness of supply continuing into 2008.
“The amount [of PE capacity] coming on is equal to demand growth, so prices are very likely to go up,” Fitterling said.
Dow officials also are optimistic about its recent venture to develop PE derived from sugar cane in Brazil.
“Sugar is the most energy-efficient feedstock you can find — it's totally different than ethanol from corn,” said Fitterling. “We haven't seen a bioplastic yet that can offer the performance customers want. [Current bioplastics] either can't handle heat or don't process well in machinery.”
Dow was an initial investor in PLA maker NatureWorks LLC in 1997, but sold its stake to partner Cargill Inc. in 2005.
Dow's specialty plastics and elastomers unit, led by business group President George Biltz, recently expanded its polyurethanes business with a new research lab in Egypt, a new PU systems operation in Russia and a new plant in Thailand. The unit, with more than $18 billion in 2006 sales, also recently began making some PU using environmentally friendly soy oil, Biltz said.
In the construction market, Dow's building solutions unit has worked to increase “customer intimacy” because of differences in building codes from country to country, according to Vice President and General Manager Torsten Kraef. The unit's products include Styrofoam-brand PS, Weathermate-brand house wrap, Symmatrix-brand decking and Great Stuff foam sealant.
Dow posted sales of $49.1 billion in 2006, with about 52 percent of that amount coming from its plastics businesses.