Sale Of Businesses Boosts Dow Earnings

MIDLAND — Dow Chemical Co. (NYSE: DOW) reported net income of $3.53 billion or $2.94 a share in the fourth quarter ended Dec. 31, up from $734 million or 63 cents a share a year earlier. Revenue was $11.46 billion, down from $14.38 billion a year earlier.

The company also reported fourth quarter net income “excluding certain items” of $1.06 billion or 93 cents a share, up from $992 million or 85 cents a share a year earlier. Those “certain items” primarily consisted of a gain of $2.22 billion ($1.96 a share after taxes) on the divestiture of Dow Chlorine Products, and a gain of $723 million (52 cents a share after taxes) on the sale of Dow’s ownership in the glycol manufacturer MEGlobal.

For the full year, Dow posted net income of $7.35 billion or $6.15 a share, up from $3.43 billion or $2.87 a share. Revenue was $48.78 billion, down from $58.17 billion a year earlier.

The decline in revenue for both periods was largely a product of the sale of Dow’s chlorine and glycol businesses, along with local market price declines, a stronger U.S. dollar, and a huge decline in oil prices — 45 percent year over year. Sales volume, excluding the impact of divestitures and acquisitions, rose 4 percent in the quarter.

For the quarter, volume gains were reported in all geographies, led by Asia Pacific (up 8 percent) and North America (up 6 percent). Volume grew 5 percent in emerging regions, led by Greater China (up 10 percent).

The major Dow news during the quarter was a merger agreement with DuPont that will create three independent publicly owned companies, as well as an agreement to restructure Dow Corning’s ownership.

In a press release, Dow chairman and CEO Andrew N. Liveris said: “Dow continues to deliver, with this last quarter being the thirteenth in a row of operating EPS and operating EBITDA margin increases – and, excluding the impact from divestitures, realized once again a significant expansion in operating EBITDA – due to disciplined and focused execution in a chronically volatile macroeconomic environment. We delivered $7.5 billion in cash flow from operations, an increase of $1 billion versus 2014, and returned $4.6 billion to our owners through paid dividends and share repurchases. Our exceptional financial performance demonstrated the strength and resiliency of our core businesses, which have been built to generate earnings and cash flow by capturing demand in key end markets and geographies. The benefits of our integrated portfolio, global reach and technology solutions can clearly be seen in our performance, and we continue to deliver on our commitments.”

Dow said it expanded its profit margin before interest, taxes, depreciation and amortization by more than 3.6 percent year over year to 19.7 percent, the highest level in more than a decade, with increases reported in all operating segments. Margin expansion was led by performance plastics, performance materials and chemicals, and consumer solutions, thanks to increased demand, price and volume management, innovation and productivity improvements.

The company cut research and development and selling, general and administrative expenses $90 million quarter over quarter, driven by divestitures and cost cuts.

Agricultural Sciences reported fourth quarter sales of $1.6 billion, down from $1.9 billion in the year-ago period. Sales were impacted by continued lower crop commodity prices across all geographic areas, high channel inventories and significant currency headwinds. The segment posted a loss for the quarter of $17 million, vs. earnings of $1 million in the same quarter last year.

Consumer Solutions reported fourth quarter sales of $1.05 billion, down from $1.12 billion in the year-ago period. Higher demand in the automotive, pharmaceutical, personal care and semiconductor sectors was more than offset by price pressures and currency translation. Equity earnings for the segment were $38 million, or $30 million on an operating basis. This compares to equity earnings of $196 million, which included Dow Corning Corp.’s adjustment of its breast implant liability, or $41 million on an operating basis, in the same quarter last year.

Infrastructure Solutions reported fourth quarter sales of $1.7 billion, down from $2 billion in the year-ago period, as price pressures from lower raw material costs and currency translation more than offset volume gains in nearly all businesses. quity earnings for the segment were $67 million, or $55 million on an operating basis. This compares to a loss of $178 million in the same quarter last year which included Dow Corning’s adjustment of its breast implant liability and an asset abandonment charge, or a gain of $70 million on an operating basis.

Performance Materials & Chemicals reported fourth quarter sales of $2.4 billion, down from $3.9 billion in the year-ago period, reflecting the impact of the split-off of Dow Chlorine Products, the Angus Chemical Co. divestiture and significant price and currency challenges.

Equity losses for the segment were $6 million, down from equity earnings of $54 million in the same quarter last year, on lower monoethylene glycol prices and increases in Sadara spending ahead of unit start-ups.

Performance Plastics reported fourth quarter sales of $4.6 billion, down from $5.5 billion in the year-ago period. Sales were lower as double-digit volume growth was more than offset by price pressures from lower input costs and by-product sales, in addition to currency plastics. Equity earnings for the segment were $46 million, down from $57 million in the same quarter last year.

Dow also announced the appointment of James R. Fitterling as president and COO. Fitterling, who has worked with Dow for 32 years, previously held the position of vice chairman and COO. In his new role, he will continue to have executive accountability for all of Dow’s businesses excluding Dow AgroSciences.

More at www.dow.com.

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