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Researched by Industrial Info Resources (Sugar Land, Texas)--With an improved market outlook, Dow Incorporated (NYSE:DOW) (Midland, Michigan) has beefed up its planned capital expenditures (capex) to $1.6 billion for this year, up nearly 30% from 2020's capex of $1.25 billion.
The chemicals producer had begun last year with plans to spend $1.75 billion, but sharply pared down that amount in response to the market fallout from COVID-19. Still, the market has seen a strong rebound, as reflected in Dow's fourth-quarter 2020 earnings results.
Industrial Info is tracking more than $2 billion in project activity by Dow.
Click on the image at right for a graph showing Dow's project activity by world region.
Dow reported more than $1.2 billion in net income during the just-ended quarter, compared with a $2.3 billion loss in fourth-quarter 2019.
Net sales for fourth-quarter 2020 were $10.7 billion, up 5% from a year earlier. Demand growth in Dow's Packaging & Specialty Plastics and Performance Materials & Coatings segments helped to drive the increase. The Packaging & Specialty Plastics segment benefited from higher polyethylene (PE) prices, according to the company.
Speaking to industry analysts during the company's January 28 earnings conference call, Chief Executive Officer James Fitterling said, "Throughout the pandemic, new consumer behaviors emerged that have driven strong demand for our products, and we expect these trends to continue benefiting Dow's consumer-led portfolio even as the pandemic diminishes."
Consumers "have become accustomed to new ways of purchasing and interacting," Fitterling continued. "Increased in-home delivery and takeout dining--paired with heightened awareness of food hygiene and security--will sustain demand strength for food and consumer packaging. The resilient housing market is creating higher demand for durable goods, such as furniture and appliances, and more time at home also leads to consumer spending on home improvement, including do-it-yourself coatings."
Dow's specialties business will benefit as more consumers are vaccinated, Fitterling added.
"And I think we're getting ahead of what will be some pent-up demand once we hit an inflection point on these vaccinations," he said. "Certainly, people are tired of being at home. They want to travel. They want to get back to life as normal, and that will open things up."
Turnaround spending is expected to greatly increase this year.
"Last year, we really crunched down the number of turnarounds," Chief Financial Officer Howard Ungerleider said during the earnings call. "This coming year, we'll have about $400 million of higher turnaround spending; $300 million of that in our core business (and) about $100 million in our joint ventures."
Dow's outlook largely reflects comments made by Trey Hamblet, Industrial Info's vice president of Chemical Processing, during last month's 2021 North American Industrial Market Outlook event.
Hamblet said turnaround and maintenance activity for the industry could increase by as much as $1 billion this year, as companies catch up on work that was deferred from last year.
"I think this sets the stage for potential challenges for resources, materials, deliveries and manpower," he cautioned. "It's not to say it can't be done; we don't have the same level of grassroot construction that we had in earlier years, but it would be a very remarkable year for the industry if we saw a billion-dollar increase in such a short period of time."
"As with most industrial sectors, the Chemical Processing Industry is starting the year with some baggage and spillover effects from what we experienced in 2020, with demand destruction, plants that were idled for extended periods of time, creating overcapacity for some commodities, a lack of capacity for others," Hamblet said. "The good news is the momentum for the industry as a whole has improved remarkably in the last few months." Hamblet said.
The industry has seen an increase in projects valued at $50 million or less, and dollars spent on in-plant capital projects have picked up, he continued. Meanwhile, grassroot project spending has trended lower.
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.
The chemicals producer had begun last year with plans to spend $1.75 billion, but sharply pared down that amount in response to the market fallout from COVID-19. Still, the market has seen a strong rebound, as reflected in Dow's fourth-quarter 2020 earnings results.
Industrial Info is tracking more than $2 billion in project activity by Dow. Click on the image at right for a graph showing Dow's project activity by world region.
Dow reported more than $1.2 billion in net income during the just-ended quarter, compared with a $2.3 billion loss in fourth-quarter 2019.
Net sales for fourth-quarter 2020 were $10.7 billion, up 5% from a year earlier. Demand growth in Dow's Packaging & Specialty Plastics and Performance Materials & Coatings segments helped to drive the increase. The Packaging & Specialty Plastics segment benefited from higher polyethylene (PE) prices, according to the company.
Speaking to industry analysts during the company's January 28 earnings conference call, Chief Executive Officer James Fitterling said, "Throughout the pandemic, new consumer behaviors emerged that have driven strong demand for our products, and we expect these trends to continue benefiting Dow's consumer-led portfolio even as the pandemic diminishes."
Consumers "have become accustomed to new ways of purchasing and interacting," Fitterling continued. "Increased in-home delivery and takeout dining--paired with heightened awareness of food hygiene and security--will sustain demand strength for food and consumer packaging. The resilient housing market is creating higher demand for durable goods, such as furniture and appliances, and more time at home also leads to consumer spending on home improvement, including do-it-yourself coatings."
Dow's specialties business will benefit as more consumers are vaccinated, Fitterling added.
"And I think we're getting ahead of what will be some pent-up demand once we hit an inflection point on these vaccinations," he said. "Certainly, people are tired of being at home. They want to travel. They want to get back to life as normal, and that will open things up."
Turnaround spending is expected to greatly increase this year.
"Last year, we really crunched down the number of turnarounds," Chief Financial Officer Howard Ungerleider said during the earnings call. "This coming year, we'll have about $400 million of higher turnaround spending; $300 million of that in our core business (and) about $100 million in our joint ventures."
Dow's outlook largely reflects comments made by Trey Hamblet, Industrial Info's vice president of Chemical Processing, during last month's 2021 North American Industrial Market Outlook event.
Hamblet said turnaround and maintenance activity for the industry could increase by as much as $1 billion this year, as companies catch up on work that was deferred from last year.
"I think this sets the stage for potential challenges for resources, materials, deliveries and manpower," he cautioned. "It's not to say it can't be done; we don't have the same level of grassroot construction that we had in earlier years, but it would be a very remarkable year for the industry if we saw a billion-dollar increase in such a short period of time."
"As with most industrial sectors, the Chemical Processing Industry is starting the year with some baggage and spillover effects from what we experienced in 2020, with demand destruction, plants that were idled for extended periods of time, creating overcapacity for some commodities, a lack of capacity for others," Hamblet said. "The good news is the momentum for the industry as a whole has improved remarkably in the last few months." Hamblet said.
The industry has seen an increase in projects valued at $50 million or less, and dollars spent on in-plant capital projects have picked up, he continued. Meanwhile, grassroot project spending has trended lower.
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.
