) swung to a profit in fourth-quarter 2013 on healthy gains
across agriculture, coatings and plastics businesses, backed by
strength in emerging markets. The company's shares shot up on
better-than-expected top and bottom line numbers and its
announcement of a dividend hike.
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The biggest U.S. chemical maker by sales logged profit of $963
million or 79 cents per share in the quarter, a turnaround from a
loss of $716 million or 61 cents per share registered a year ago.
Results in the year-ago quarter were hurt by restructuring
charges of $990 million.
Barring one-time items (including costs associated with
restructuring program, impairment charges and one-time gains),
Dow earned 65 cents per share in the quarter, a 97% rise from 33
cents earned a year ago. That trounced the Zacks Consensus
Estimate by 22 cents.
Revenues went up roughly 3% year over year to $14,386 million in
the reported quarter as gains across agricultural sciences,
coatings, performance plastics and electronics more than offset a
decline in feedstocks and energy. Sales were ahead of the Zacks
Consensus Estimate of $14,157 million.
For full-year 2013, profit (as reported) rocketed more than
five-fold year over year to $4,447 million or $3.68 per share
from $842 million or 70 cents a year ago. Adjusted earnings of
$2.48 per share topped the Zacks Consensus Estimate of $2.27.
Revenues for the year inched up 1% year over year to $57,080
million, also beating the Zacks Consensus Estimate of $56,930
million. Emerging markets accounted for 35% of annual sales for
the first time in the company's history.
Separately, Dow raised its quarterly dividend by 15% and tripled
its share repurchase program. The Michigan-based company's shares
were up as much as roughly 8.5% in pre-market trading. The stock
is up roughly 30% so far this year.
Dow's shares rallied last week after activist investor Dan Loeb's
Third Point hedge fund bought a major stake in the company for
roughly $1.3 billion, marking the entity's biggest investment
yet. However, Third Point wants Dow to spin off its sluggish
petrochemicals business and focus instead on high-margin,
Volume and Pricing
Price edged up 1% year over year in the quarter as gains across
performance plastics and performance materials were mostly offset
by decline in feedstock and energy. Volume rose 2% in the quarter
as the company saw gains across most geographic regions and
business segments. Emerging markets led volume gains in the
quarter with Latin America recording a double-digit rise.
Segment Analysis - Agriculture Leads the Pack
Electronic and Functional Materials
Revenues rose 3% year over year to $1.1 billion in the reported
quarter on higher volume across Asia Pacific and North America.
Sales of OLED materials and interconnect technologies rose on
higher customer demand for mobile devices, offsetting weaker
demand for semiconductor technologies. Functional materials sales
rose on higher demand in energy and home care sectors.
Coatings and Infrastructure Solutions
Sales went up 10% to $1.7 billion in the quarter on higher volume
and pricing. Sales gains were recorded across North America, EMEA
and Asia Pacific. Building and construction sales rose on higher
demand across the board. Coating materials sales were boosted by
strong demand in architectural and industrial coatings.
The segment once again recorded the biggest gain with sales
rising 13% year over year to a fourth-quarter record of $1.8
billion, benefiting from double-digit gains across North and
Latin America. Crop protection products revenues rose 11% riding
on higher sales of herbicides across North and Latin America and
insecticides in Latin America.
New crop protection revenues jumped 23%. Sales of seeds, traits
and oils climbed 20% on higher market demand for quality
germplasm and stacked traits in Latin America.
Revenues edged up 1% to $3.4 billion on flat volume and a modest
rise in price. Polyglycols, surfactants and fluids registered
double-digit sales gains on healthy demand for deicing fluids in
North America. Strong demand in the exploration market led to
higher oil, gas and mining sales in the quarter.
Propylene oxide/propylene glycol sales rose on strength in home
and personal care products markets and increased production
capacity in Asia Pacific. Automotive systems gains were led by
strength in transportation fundamentals and gains in structural
Sales went up 5% to $3.9 billion in the quarter, aided by
double-digit gains across North America, Asia Pacific and Latin
America. Packaging and specialty plastics sales were higher
across all regions barring Europe which was impacted by the
closure of a plant in Belgium. Flexible food and specialty
packaging sales were higher in the quarter.
Sales rose across elastomers and electrical and
telecommunications businesses in the quarter. Elastomers revenues
were boosted by strong demand in transportation markets.
Feedstocks and Energy
The segment was once again the weakest link with revenues falling
6% to $2.4 billion on flat volume and lower pricing. Lower
aromatic prices within hydrocarbons led to the decline in price.
Balance Sheet and Shareholder Returns
Dow ended 2013 with cash and cash equivalents of roughly $5.9
billion, up 38% year over year. Total long-term debt declined
roughly 15% year over year to around $17.5 billion.
Dow pared gross debt worth roughly $3 billion during 2013
including around $660 million in the fourth quarter. Its
continued efforts to de-leverage its balance sheet led to a net
debt to total capitalization ratio of 30%, lower than its
historical average. The company generated operating cash flows of
$2.2 billion in the reported quarter, up 38% year over year.
Dow's Board announced a 15% hike in its quarterly dividend to 37
cents per share from 32 cents per share. The company also
expanded its authorized share repurchase program to $4.5 billion
from $1.5 billion to be completed this year. Dow retuned $1.8
billion (including $550 million in the fourth quarter) to its
shareholders in 2013 in form of dividends and share repurchases,
a nearly 30% year over year rise.
While Dow, a Zacks Rank #4 (Sell) stock, sees favourable trends
across major markets, business environment is expected to remain
uncertain in the near future. CEO Andrew N. Liveris said that the
company will continue to focus more on attractive end-user
markets and exit non-strategic assets while retaining a strong
focus on productivity improvement and cost controls.
Dow remains committed to its cost reduction and efficiency
programs while reducing debt, improving cash flows and maximizing
shareholder returns. The company exceeded its cost reduction
target of $500 million for 2013 and recorded roughly $850 million
in proceeds from non-strategic assets sale.
Dow will continue to invest in attractive regions through
highly-accretive projects including the expansions in the U.S.
Gulf Coast and Sadara joint venture in the Middle East. The
company expects its strategic actions to drive earnings and
enhance shareholder value in 2014.
Dow, which continues to face challenges in Europe, remains
actively focused on seeking opportunities to optimize its
portfolio by selectively spinning off or selling its
underperforming assets and gradually shift focus to high growth
The company, last month, revealed its plans to exit a major
portion of its chlorine business that has been in operation for
over 100 years. Commodity chemicals assets that are being
identified for separation represents up to $5 billion in
Dow's results shed light on demand trend for chemical products.
Among other big chemical names,
), which reported yesterday, saw its profit nearly double on
strength in its agriculture business.
), which reported on Jan 23, beat revenues and earnings
expectations in the fourth quarter.
) will report its fourth-quarter results after the closing gong