Dow Chemical Sees Profits from Plastics in First-Quarter 2014, Holds Positive Predictions for Propylene

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Researched by Industrial Info Resources (Sugar Land, Texas)--Leading chemicals producer The Dow Chemical Company (NYSE:DOW) (Midland, Michigan) reported solid overall growth in first-quarter 2014 as the Performance Plastics segment and activity in China and other Asia-Pacific countries more than offset shaky results in North America. Net income was reported to be $964 million, compared with $550 million in first-quarter 2013.

Net sales stood at $14.46 billion, an increase of less than 1% from the same period last year. The Performance Plastics segment took the lead with 6% sales growth, with significant progress in the Asia-Pacific, North American and Latin American regions. Demand in the Asia-Pacific region proved particularly advantageous for the segment's electrical, telecommunications, packaging and specialty plastics businesses. The Coatings and Infrastructure segment also saw strong sales growth, with the coating materials and performance monomers businesses continuing to improve in various regions.

China led Dow's solid growth in emerging countries with a 7% volume increase. In North America, the company saw volume declines from harsh weather conditions and transportation-related problems, which negated gains from stronger pricing.

Capital expenditures in the first quarter were reported to be $672 million, compared with $372 million in the first quarter of 2013. Research and development expenditures fell 10% after Dow narrowed its focus to high-growth markets.

Industrial Info is tracking more than $9.2 billion in active projects involving Dow, including two major projects at the company's Oyster Creek Chemical facility in Freeport, Texas: the $1.7 billion addition of an ethylene unit, and the $1.2 billion addition of a dehydrogenation unit. The ethane-fed ethylene cracker will have a design capacity for 2.6 billion pounds per year of ethylene , and the propane dehydrogenation (PDH) unit will use Honeywell International Incorporated's (NYSE:HON) (Morristown, New Jersey) UOP C3 Oleflex technology to produce an estimated 750,000 tons per year of polymer-grade propylene.

"Our PDH unit in Freeport, Texas represents an important part of our strategy," said Andrew Liveris, the chairman and chief executive officer of Dow, in a conference call. "Once online, this project will improve integration, significantly reduce third-party purchases and improve our raw material costs to Dow's derivative businesses in this value chain. Today, construction on this unit is 20% complete, with approximately 1,600 workers and 90% of the equipment onsite. Mechanical completion is on track for the end of first-quarter 2015, with full run-rate expected by mid-2015."

Liveris said that the U.S. is seeing less propylene availability from its refineries, which will help to strengthen its value and make the PDH unit an attractive investment. He also said that the company has completed more than half of Sadara, its joint venture with Saudi Aramco, which is expected to begin operations in mid-2015.

"Planned turnaround spending will be up approximately $150 million sequentially but essentially flat year over year, with the majority of the expense in Performance Plastics, Performance Materials, and Coatings and Infrastructure [segments]," said William H. Weideman, the executive vice president and chief financial officer of Dow, in the conference call. "Additionally, we expect the higher seasonal turnaround activity will result in a 3 to 4 percentage point sequential reduction in the company's operating rate."

For more information, visit Industrial Info's North American Chemical Processing Project Database.

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Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.