One-Time Gain Last Year Results In Dow Profit Drop

MIDLAND — Michigan’s chemical industry giant, Dow Chemical Co. (NYSE:DOW) Thursday reported lower fourth quarter and full-year net income, but that’s because of a one-time gains last year, including a huge lawsuit settlement.

The Midland-based company repoted net income of $734 million or 63 cents a share in the fourth quarter, vs. $963 million or 60 cents a share in the fourth quarter of 2013. Revenue was $14.38 billion, unchanged from a year earlier.

For the full year, Dow reported net income of $3.43 billion or $2.91 a share, down from $4.45 billion or $3.72 a share in 2013. Revenue was $58.17 billion, up from $57.08 billion a year earlier.

Last year’s results were helped by a $2.55 billion in one-time “sundry income,” including a $2.19 billion settlement for the cancellation of a joint venture with the Kuwaiti government more than five.

Dow also reported “adjusted net income” excluding the one-time gains — as well one-tmie losses surrounding Dow’s exit from the chlorine business last year — of $992 million or 85 cents a share in the fourth quarter, up from $793 million or 65 cents a share in the fourth quarter of 2013. Fior the full year, adjusted net income was $3.71 billion or $3.11 a share, up from $2.98 billion or $2.48 a share a year earlier.

Earnnigs before interest, taxes, depreciation and amortization, commonly known as cash flow, grew in every operating segment, led by agricultural sciences (up 40 percent), performance materials and chemicals (up 18 percent) and performance plastics (up 6 percent).

Sales volume increased in both developed geographies (up 4 percent) as well as emerging geographies (up 5 percent). Volume gains were offset by price declines driven primarily by Western Europe (down 14 percent), which included less favorable rates of foreign currency adjustments to the U.S. dollar.

Dow expanded volume in most segments — led by agricultural sciences (up 9 percent). Double-digit increases in epoxy and polyurethanes drove volume gains in performance materials and chemicals (up 7 percent). Demand also rose in performance plastics (up 3 percent).

Dow reported an operating rate of 86 percent for the quarter, up 4 percentage points vs. the year-ago period – representing the fifth consecutive quarter of year-over-year operating rate increases. Gains were driven primarily by strong demand in performance plastics, coupled with ongoing productivity improvements in performance materials and chemicals.

Cash flow from operations was $2.8 billion for the quarter – an increase of more than $500 million versus the year-ago period. Dow also returned $1.6 billion to shareholders in the quarter through declared dividends and repurchases, and completing its $4.5 billion share repurchase program in the period. This quarter, the Company announced a 14 percent dividend increase and expanded its share buyback program by an additional $5 billion.

“Dow achieved a record end to a strong year, with another quarter of year-over-year operating EPS, EBITDA and EBITDA margin growth,” said Dow chairman, president and CEO Andrew Liveris. “This is nine quarters in a row of these metrics increasing year over year. Our operating model of integration with geographic and market diversification showed its superiority during volatile commodity environments, as evidenced by demand growth in most segments. Our strategic decisions continued to drive long-term value across Dow’s integrated, diversified portfolio, while our self-help and productivity measures are firmly delivering cash and lowering costs. We are delivering on the commitments we have made — even as we ramped up the pace of investment in our long-term growth projects. In addition, we announced two significant transactions in the quarter in our drive toward delivering our target of $7 billion to $8.5 billion of released value through aggressive portfolio management measures. Collectively, these achievements underscore Dow’s fundamental drive to maximize shareholder value-creation at every turn.”

Agricultural Sciences reported record fourth quarter sales of $1.9 billion, up 5 percent versus the year-ago period. Sales gains were broad-based across all geographies, led by growth in Latin America. The segment reported record full-year sales of $7.3 billion, up 2 percent versus the year-ago period driven by the introduction and ramp up of new products and technologies.

Consumer Solutions reported fourth quarter sales of $1.1 billion, flat versus the year-ago period. Double-digit sales gains in North America were offset by sales declines in other geographic areas.

Infrastructure Solutions reported fourth quarter sales of $2 billion, down 4 percent versus the year-ago period, driven by declines in Europe, Middle East, Africa & India.

Performance Materials & Chemicals reported fourth quarter sales of $3.9 billion, up 5 percent versus the year-ago period, with gains in all geographic regions.

Performance Plastics reported fourth quarter sales of $5.5 billion, down 3 percent versus the year-ago period, primarily due to declines in Hydrocarbons and Energy. Excluding Hydrocarbons and Energy, sales were down 1 percent versus the same quarter last year. On the same basis, sales increases in North America and Latin America were more than offset by declines in Asia Pacific and EMEAI.

Commenting on the Company’s outlook, Liveris said: “Against the backdrop of ongoing macroeconomic, currency and energy market uncertainty, we continue to see positive underlying demand fundamentals. Dow is well positioned to continue to optimize returns in this environment: Our advantaged global cost positions are enabling us to increase asset utilization, while selling into higher value sectors. Tightening supply and demand is acting to offset some of the challenges that are a result of falling oil prices.”

To view a recording of a conference call discussing these results, visit www.dow.com.

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