Dow Chemical Benefits from Demand, Selloffs in First Quarter, Sets 2015 Capex at $3.9 Billion

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Dow Chemical Company (NYSE:DOW) (Midland, Michigan) reported overall profit gains for first-quarter 2015, as demand growth across all geographic regions and a pair of major selloffs offset a steep decline in prices, which was driven by crude-oil values and the strengthening U.S. dollar. Net income was reported to be $1.39 billion, a 44.5% increase from the first quarter of 2014.

Industrial Info is tracking $9.87 billion in active projects involving Dow, including $180 million in upgrades and expansions at an ethylene facility in Plaquemine, Louisiana. Dow plans to increase the capacity of a light hydrocarbons unit that currently produces 1.6 billion pounds per year of ethylene; plans include the replacement of five ethylene and propylene compressors.

Net sales stood at $12.37 billion, a 14.46% decrease from the same period last year. Globally, Dow was hindered by a strengthening U.S. dollar, which, along with crude oil values, negatively affected its international portfolio and sent prices down 12%. Weak oil and gas markets also pummeled Dow's Hydrocarbons & Energy sales, while currency issues diminished growth in the Agricultural Sciences and Performance Materials & Chemicals segments. Demand for agricultural products and construction services were particularly weak in Europe.

On the plus side, the construction business saw stronger sales in North America, as did the automotive systems and pharmaceutical applications businesses. Dow's bottom line was boosted significantly by its sale of the ANGUS Chemical Company and Sodium Borohydride businesses, which resulted in a $688 million pre-tax benefit.

Capital expenditures were reported to be $903 million, compared with $672 million in first-quarter 2014.

"We are proud of the performance the Company delivered in the face of a 49% year-over-year drop in oil price, combined with a 15% year-over-year Euro headwind," said Howard Ungerleider, executive vice president and chief financial officer of Dow, in a conference call. "It is clear that this is not the commodity-driven Dow Chemical from a decade ago."

Dow executives expect capital expenditures to total roughly $3.9 billion for the full year.

Regardless of whatever direction the oil markets take, executives expect to see global economic uncertainty persist for the remainder of the year. On the heels of the ANGUS and Sodium Borohydride selloffs, Dow signed a definitive agreement to sell much of its chlorine value chain to Olin Corporation (NYSE:OLN) (Clayton, Missouri) for the taxable equivalent value of $8 billion. Dow also anticipates startups at large properties in Saudi Arabia and the U.S. Gulf Coast later this year.

"We expect year-over-year demand growth in most businesses, with pricing momentum building through the year," Ungerleider said in the conference call. "We expect raw material costs to remain favorable year-over-year, with stable natural gas, though oil-based costs may rise."

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