This summary is based on the first quarter fiscal 2007 earnings call conducted by The Dow Chemical Co. (DOW) on April 26, 2007.
Corporate Director of Investor Relations: Kathleen C. Fothergill
Dow’s Executive Vice President and Chief Financial Officer: Geoffery Merszei
Key Investors Issues
- EPS were $1 a share compared to $1.24 a share a year ago.
- Net income was $973 million compared to $1.21 billion in the year-earlier period
- Revenue rose 3.4% to $12.43 billion from $12.02 billion last year.
First Quarter Highlights
Sales rose 3% from the same period last year to $12.4 billion, with strong underlying volume and solid price increases across most businesses.
- Double-digit sales improvements in Europe, Asia Pacific and Latin America more than offset continued weakness in North America, particularly in the housing and automotive sectors.
- Earnings were $1 per share, down from $1.24 in the same period last year. The fall was principally due to a decline in licensing revenues from extremely high levels a year ago.
- Equity earnings were $274 million, an increase of more than 60% compared with the first quarter of 2006, reflecting the value of the Company''s asset light strategy.
- Year over year, volume was up 1%, with solid gains across most businesses.
- The company benefited from a temporary lull in the rising cost of purchased feedstocks and energy, resulting in a year-over-year decline of 2% compared with the same period in 2006, allowing some margin restoration.
The company announced a 12% increase in dividend.
The company spent more than $400 million in repurchasing 9.3 million shares. It completed the initial 25 million share repurchase program that begun in 2005 and a new start of the new $2 billion program that was authorized last October.
March was strong with demand growth in excess of the normal seasonal rebound.
In large part this was driven by growth in Europe, where mild spring weather created a solid demand from the agricultural and construction sectors and by growth in greater China, where volume picked up rapidly after the Chinese New Year. China reported a year-over-year volume increase for more than 20% in both the basics and the performance segments.
Capital spending was $330 million, higher than the same period a year ago but in line with expectations.
Selling, administrative and research and development expenses edged higher but remained well under control at less than 6% of sales. Over 70% of the increase was in support of performance portfolio. Planned investments focused on establishing brands, building markets and expanding the solutions of offerings in several of high-valued market facing businesses.
In the working capital affront, day sales outstanding and receivables remained at a slow level of just 39 days. Day sales and inventory was cut from 67 days at the end of the first quarter last year to 61 days at the end of the first quarter of this year. Inventory management remained a priority.
Unallocated includes items that are not specifically related to a particular business, such as results from insurance operations or 4X gains and losses.
Any of these items can vary from quarter to quarter, but the total is typically between negative 150 million and negative 200 million for a quarter. In the current quarter, there were 2 items that put unallocated outside the normal range at a negative 257 million. These items were higher performance based compensation for employees and a multi-year accrual related to franchise taxes. Without these 2 items, which were not specifically related to operations in the current quarter; unallocated would have been within the normal range.
Operating rate was 87%, up 3% from first quarter last year.
The company announced upgrades and capacity additions at sialoside manufacturing facility in West Virginia supporting Water-Soluble Polymers business as a sharp-ended focus on paint and oil field applications.
The company reported that the successful start up of a new plant to product Styrofoam brand installation in Russia for use in the fast growing Russian economy. This plan is already running at full capacity and in March the company joined forces with the world’s leading supplier of a formulated product the pharmaceutical industry, Colorcon.
- The 33% of sales were from products introduced in the past 5 years.
