AP News, July 26th, 2007
Dow Chemical Co. said Thursday its second-quarter profit edged up 2 percent as international growth offset weakness in the North American housing and automotive sectors and the effect of rising petroleum prices on its plastics business. Its shares fell nearly 5 percent.
Net income rose to $1.04 billion, or $1.07 per share, for the three months ended June 30 from $1.02 billion, or $1.05 per share, a year ago.
Revenue increased 6 percent to $13.27 billion from $12.51 billion in the year-ago quarter.
Analysts surveyed by Thomson Financial had forecast profit of $1.05 per share on revenue of $12.63 billion.
The company said volume held steady in the quarter. Strong increases in Asia Pacific, Latin America and most operating segments in Europe offset continued weakness in the North American housing and automotive sectors, as well as the impact of a major planned turnaround that significantly reduced volume for Dow's hydrocarbons and energy division in Europe.
The Midland-based chemical giant said aggressive price and volume controls helped counter a sharp rise in raw materials used in production and in energy costs, which surged more than $550 million from a year ago. Second-quarter costs were $700 million higher than in the first three months of the year.
The quick rising cost of oil, a raw material for plastics, caught Dow by surprise, said Geoffery Merszei, chief financial officer.
"A surge of this magnitude was considerably more than we expected" and cut into profit margins, Merszei said in a Webcast.
Dow Chemical's share price fell $2.25 to $43.42 in late morning trading Thursday as the overall market lost ground.
For the first half of the year, profits fell to $2.01 billion, or $2.07 per share, from $2.24 billion, or $2.29 per share, during the first six months of 2006. Net sales rose 4.8 percent to $25.7 billion from $24.53 billion a year ago.
"Our performance through the first half of the year reinforces our view that our strategy is working and that we will continue to deliver strong results for the company and for its shareholders," Andrew N. Liveris, chairman and chief executive officer of Dow Chemical, said in a written statement.
The company said it anticipates solid demand through the third quarter, although its agricultural sciences segment is likely to see a typical seasonal decline. Feedstock and energy costs are expected to remain relatively high and volatile through the quarter.
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Associated Press Writer David N. Goodman in Detroit contributed to this report.
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Dow Chemical Co.: http://www.dow.com
