This summary is based on the second quarter fiscal 2008 earnings call conducted by Dow Chemical Co. (DOW) on July 24, 2008.
Management:
Corporate Director of IR: Kathleen C. Fothergill
EVP and CFO; Member of the Board of Directors: Geoffery E. Merszei
CEO & Chairman: Andrew N. Liveris
Key Investors Issues
- EPS were 81 cents a share compared to $1.07 a share last year.
- Net income fell to $762 million from $1.04 billion a year earlier.
- Sales were $16.4 billion, 23% higher than the same period last year.
Second Quarter Highlights
Sales were $16.4 billion 23% higher than the same period last year, setting another quarterly sales record.
- Net income was $762 million. This compares with net income of $1,039 million in the second quarter of 2007. Dow reported earnings of 81 cents per share versus earnings of $1.07 per share in the second quarter of 2007.
- Price was 18% higher than the same quarter last year, with double-digit increases in all operating segments and all geographic areas. These price gains offset increases in purchased feedstock and energy costs, which were $2.4 billion higher than the same period last year. However, these price increases were not enough to cover higher total raw material and supply chain costs.
- Year over year, volume was up 5%, matching the highest quarterly increase since 2004. In the combined Performance segments, volume increased 7%. Volume growth in emerging geographies of 12%, and 11% growth in Europe, more than offset economic weakness in North America. Volume in North America was also impacted by various asset shutdowns, business exits and the formation of Americas Styrenics, a new joint venture between Dow and Chevron Phillips Chemical Company.
- Equity earnings were $251 million, once again demonstrating strong and consistent contributions from joint ventures to the company''s results.
In the Performance Plastics segment, sales of $4.4 billion represented an 18% increase over the same period last year.
- Price increased 11%, with gains in all geographic areas.
- Volume rose 7%, with particular strength in Europe and Asia Pacific. Despite robust price gains across the segment, selling prices continued to lag increases in raw material and supply chain costs.
- Recent acquisitions contributed to double-digit volume growth in Polyurethane Systems, as demand increased in applications such as insulation for oil and gas pipelines and refrigerated transport.
- Dow Wire and Cable reported strong demand in medium voltage cabling, as the pace of electrical infrastructure replacement in major cities increased and demand from emerging geographies grew due to construction of new electrical grids.
- Dow Epoxy Systems sales continued to ramp up, however, margins declined for epoxy intermediates in the face of rising raw material costs and additional industry capacity.
- The North American automotive and housing industries continued to decline, and negatively impacted results in a number of business units such as Dow Automotive, Dow Building Solutions, and Specialty Plastics and Elastomers.
- EBIT for Performance Plastics was $268 million, compared with $382 million in the second quarter of 2007.
Sales in Performance Chemicals were $2.5 billion, a gain of 20% compared with $2.1 billion posted in the same period last year.
- Globally, price was up 14% while volume increased 6%. Price increased in all geographic areas, and strong volume gains were reported in Europe, Latin America and the India, Middle East, and Africa region.
- Designed Polymers posted price and volume gains in all geographic areas, due in part to growth in pharmaceutical and oil and gas applications in Dow Wolff Cellulosics and strong demand for poultry food additives in its Specialty Polymers unit.
- Dow Water Solutions reported growing demand for FILMTEC reverse osmosis membranes, as more world scale desalination projects utilizing Dow technology were announced.
- The contraction in the U.S. housing industry dampened results for Dow Latex in paint applications.
- Equity earnings in the segment were $119 million, up $15 million on better results from Dow Corning and OPTIMAL.
- Performance Chemicals reported EBIT of $290 million, compared with $294 million for the same period last year.
The Agricultural Sciences segment posted record sales of $1.4 billion, 25% higher than the same period last year.
- All geographic areas posted double-digit increases in sales, reflecting organic growth and growth from recent acquisitions.
- Dow AgroSciences'' broad portfolio of both agricultural chemicals and seeds benefited from rising prices and low global inventories of farm commodities.
- Price was up 12%, with strong increases in all geographic areas.
- Volume was up 13% compared with the same period last year, with double-digit increases in North America, Europe, Latin America and Asia Pacific.
- Ag chemicals showed particular strength.
- Sales were up sharply for new cereal and rice herbicides, and for spinetoram insecticide, which continued its successful launch in the United States.
- Seeds and traits continued to benefit from a strong ag economy with global demand for agricultural output at record levels.
- The recent acquisitions of Agromen, MTI and Duo Maize continue to perform well, and the integration of newly acquired Triumph Seeds is progressing.
- EBIT for Agricultural Sciences was $335 million, compared with $208 million in the year ago period.
In the Basic Plastics segment, sales rose 19% to $3.8 billion, up from $3.2 billion in the same period last year.
