This summary is based on the first quarter fiscal 2008 earnings call conducted by The Dow Chemical Company (DOW) on April 24, 2008.
Management:
EVP and CFO: Geoffrey E Merszei
Investor Relations: Kathleen C Fothergill
Credit Suisse: Mark Connelly
Key Investor Issues:
- EPS for the quarter were 99 cents versus $1 in Q1 of 2007.
- Q1 sales were $14.8 billion compared with $12.4 billion a year ago quarter.
- The management repurchased 10.8 million shares, the highest purchased in a single quarter in more than 10 years.
First-Quarter Financial Highlights
The company recorded double digit price increases in all geographic areas.
- The management reported that 6% volume growth was recorded in emerging geographies and higher growth in China, India, Russia and the Middle East.
- The sales in Agricultural Sciences rose 27%, with increases of 16% in volume and 11% in price. This resulted in quarterly records for both sales and EBIT.
The earnings for the quarter were 99 cents compared with $1 in the last year quarter.
- The company achieved such earnings in spite of an increase of $2.2 billion in purchased feedstock and energy costs versus the first quarter of the previous year. The increase represents the largest year-over-year increase in the company’s history.
- The equity earnings were $274 million for the quarter. This is the fifth consecutive quarter in which equity earnings have exceeded $250 million.
The quarterly price level was 17% higher than in the first quarter of 2007.
- Price increases were recorded in all operating segments and double digit increases in all geographic areas.
- The price gains offset significant increases in purchased feedstock and energy costs, which were $2.2 billion higher than last year quarter, representing an increase of 42%.
The year-over-year volume increased 2%.
- In the combined Performance segments, volume rose 6%.
- The strong demand in Asia Pacific, Latin America and the India, Middle East and Africa (IMEA) region, as well as modest volume gains in Europe, more than offset the continued weakness in North America.
During the quarter, selling, administrative and research and development expenses increased from the same period last year.
This was a result of the recent acquisitions in Performance businesses and planned investments in R&D, and marketing and sales focused on growth. This was in line with the company’s strategic direction.
- The quarterly CapEx was $359 million and the company remains on plan to deliver the full year target of $2.2 billion.
- The management reported that 10.8 million shares were repurchased during the quarter. Effective the first quarter of 2006, the company has spent $2.5 billion buying back 61 million shares.
- The return on capital and equity were solid at 14% and 19% respectively for the quarter.
Performance Analysis of Business Segments
Performance Plastics:
- Q1 sales were $4 billion, an increase of 12% from the same period last year.
- The price level rose 9% and volume put on 3%.
- The price was up in all geographic areas and volume rose in Asia Pacific, Latin America and IMEA.
