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Released July 29, 2019 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--Dow Incorporated (NYSE:DOW) (Midland, Michigan) will cut its planned capital expenditures (capex) for 2019 by $500 million, citing slower global growth.
"Looking ahead, we still see global growth, but the pace of that expansion has slowed, as buying patterns remain cautious due to ongoing trade and geopolitical uncertainties," said Chief Executive Officer Jim Fitterling in the chemical industry giant's second-quarter 2019 earnings release last week. "In this environment, we will maintain cost and operating discipline by continuing cost synergy and stranded cost removal actions, by reducing our planned capital expenditures for the year from $2.5 billion to $2 billion, without sacrificing high-return growth projects, and by continuing with disciplined margin management. These near-term steps are responsive to the current market environment."
Industrial Info is tracking more than $2 billion worth of active Dow projects, including more than $1.5 billion in North America.
Click on the image at right for a map showing the location of Dow projects in the U.S.
Dow reported last week that its second-quarter 2019 operating earnings before interest and taxes were $1.1 billion, down 35% compared with pro forma results a year earlier. The company cited price margin compression in polyethylene, isocyanates and siloxanes, as well as lower equity earnings. Net sales were $11 billion, down 14% from a year earlier.
"It was a quarter that proved to be more challenging than many of us in the industry expected," Fitterling said during the company's earnings conference call last week with industry analysts.
Fitterling said geopolitical volatility and the ongoing trade negotiations between the U.S. and China have resulted in a cautious global market.
"Bottom line, today we still see the global economy expanding, but the pace of growth is slower, particularly in Europe and in China," he said. "The U.S. remains fairly robust in consumer non-durable sectors. However, spending on big-ticket items like home builds, autos, durable goods, and consumer electronics remains tepid globally. And we are closely watching consumer confidence measures, which showed some softness during the second quarter."
The 2019 capex reduction "gives us time to slow down some investments that require more market visibility while maintaining our asset base, improving reliability, and preserving our ability to invest in quick-win, incremental expansions to deliver value growth even in the current business environment," he continued. "In our view, this is not the time to invest in a major greenfield project."
Among other things, the company has postponed the advancement of a feasibility study for a new world-scale siloxanes plant, and also is postponing a 450,000-ton-per-year polyolefins expansion in Europe, Fitterling said.
Dow completed its split this year from DowDuPont, which was reformed into three separate companies. For more information, see February 14, 2019, article - DowDuPont to Maintain 2019 Capex at 2018 Level as it Approaches Three-Way Split.
In the U.S., construction continues on Dow's Ethylene LHC-9 (Texas 9) Unit Expansion at its Oyster Creek chemical site in Freeport, Texas. The project will expand the plant's ethylene capacity by 1.1 million pounds per year with the installation of two steam cracking furnaces. Cajun Constructors (La Porte, Texas) is providing construction services on the project. Completion is planned for the end of 2019. For more information, see Industrial Info's project report.
Dow isn't the only global chemical giant feeling the impact of lower earnings. BASF (Ludwigshafen, Germany) recently reported second-quarter earnings before interest and taxes fell by 1.35 billion euros ($1.5 billion) to 548 million euros ($609 million) in comparison with earnings in second-quarter 2018. The company's chemical segment saw a drop in sales volumes as a result of scheduled turnarounds at its steam crackers in Antwerp, Belgium, and Port Arthur, Texas.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
"Looking ahead, we still see global growth, but the pace of that expansion has slowed, as buying patterns remain cautious due to ongoing trade and geopolitical uncertainties," said Chief Executive Officer Jim Fitterling in the chemical industry giant's second-quarter 2019 earnings release last week. "In this environment, we will maintain cost and operating discipline by continuing cost synergy and stranded cost removal actions, by reducing our planned capital expenditures for the year from $2.5 billion to $2 billion, without sacrificing high-return growth projects, and by continuing with disciplined margin management. These near-term steps are responsive to the current market environment."
Industrial Info is tracking more than $2 billion worth of active Dow projects, including more than $1.5 billion in North America.
Dow reported last week that its second-quarter 2019 operating earnings before interest and taxes were $1.1 billion, down 35% compared with pro forma results a year earlier. The company cited price margin compression in polyethylene, isocyanates and siloxanes, as well as lower equity earnings. Net sales were $11 billion, down 14% from a year earlier.
"It was a quarter that proved to be more challenging than many of us in the industry expected," Fitterling said during the company's earnings conference call last week with industry analysts.
Fitterling said geopolitical volatility and the ongoing trade negotiations between the U.S. and China have resulted in a cautious global market.
"Bottom line, today we still see the global economy expanding, but the pace of growth is slower, particularly in Europe and in China," he said. "The U.S. remains fairly robust in consumer non-durable sectors. However, spending on big-ticket items like home builds, autos, durable goods, and consumer electronics remains tepid globally. And we are closely watching consumer confidence measures, which showed some softness during the second quarter."
The 2019 capex reduction "gives us time to slow down some investments that require more market visibility while maintaining our asset base, improving reliability, and preserving our ability to invest in quick-win, incremental expansions to deliver value growth even in the current business environment," he continued. "In our view, this is not the time to invest in a major greenfield project."
Among other things, the company has postponed the advancement of a feasibility study for a new world-scale siloxanes plant, and also is postponing a 450,000-ton-per-year polyolefins expansion in Europe, Fitterling said.
Dow completed its split this year from DowDuPont, which was reformed into three separate companies. For more information, see February 14, 2019, article - DowDuPont to Maintain 2019 Capex at 2018 Level as it Approaches Three-Way Split.
In the U.S., construction continues on Dow's Ethylene LHC-9 (Texas 9) Unit Expansion at its Oyster Creek chemical site in Freeport, Texas. The project will expand the plant's ethylene capacity by 1.1 million pounds per year with the installation of two steam cracking furnaces. Cajun Constructors (La Porte, Texas) is providing construction services on the project. Completion is planned for the end of 2019. For more information, see Industrial Info's project report.
Dow isn't the only global chemical giant feeling the impact of lower earnings. BASF (Ludwigshafen, Germany) recently reported second-quarter earnings before interest and taxes fell by 1.35 billion euros ($1.5 billion) to 548 million euros ($609 million) in comparison with earnings in second-quarter 2018. The company's chemical segment saw a drop in sales volumes as a result of scheduled turnarounds at its steam crackers in Antwerp, Belgium, and Port Arthur, Texas.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
