The Dow Chemical Company
) continues to seek opportunities to optimize its portfolio by
selectively divesting its assets. The U.S. chemical kingpin said
yesterday that it aims to mop up nearly $1.5 billion from
non-core assets sale over the next 18 months.
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The move is in sync with the Midland, Mich.-based company's
portfolio management plans, which it revealed at its Investor
Forum in Dec 2012, and its strategy to focus on high-margin,
fast-growing businesses. Dow noted that it has identified two
non-core businesses - Polypropylene Licensing and Catalysts and
Plastics Additives - and will seek suitors for these units.
Dow's polypropylene licensing and catalysts unit, a part of its
Performance Plastics division, offers technology used to make
polypropylene, a plastic polymer used in wide spectrum of
applications. The plastics additives business, which belongs to
the Performance Materials segment, supplies additives used in an
array of applications including construction materials, packaging
containers, appliances and electronics and automotive parts. Dow
saw lower volumes across these segments in fourth-quarter 2012.
Dow has been activity engaged in portfolio management actions
over the last few years. The company has jettisoned non-core
assets worth roughly $8 billion since 2009. Dow, in Jan 2013,
sold the stabilizers component of its plastics additives unit and
agreed to divest its 50% stake in its Japanese joint venture,
Nippon Unicar Company Limited. The company also sold its
polypropylene business to Brazil-based Braskem SA in 2011.
Dow is also aggressively pursuing its cost reduction and
efficiency programs. Clobbered by a challenging global economic
environment, Dow announced a major restructuring program in Oct
2012. As part of the move, the company is slashing roughly 2,400
jobs, shuttering around 20 of its plants and pruning capital
spending on low-priority projects. Dow targets aggregate cost
savings of $2.5 billion with $1 billion expected this year.
Dow continues to witness slowing economic activity, largely due
to the beleaguered economic conditions in Europe. Softness across
end markets, especially in China, and weak pricing are denting
its results. Weakness in the electronics and construction
end-markets may continue into the first quarter of 2013.
Moreover, Dow contends with volatility in propylene costs. It
sees propylene costs to go up in the first quarter.
Nevertheless, Dow is benefiting from strong fundamentals in
agriculture and food markets and is leveraging its North American
feedstock advantage. A bevy of innovative products in its
pipeline adds to its strength.
Dow currently retains a short-term Zacks Rank #3 (Hold)
Other companies in the chemical industry having favorable Zacks
Akzo Nobel NV
). All of them hold a Zacks Rank #2 (Buy).