Dow Invests in Saudi Arabia - Analyst Blog


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Recently, The Dow Chemical Company ( DOW ) announced that it will invest in a coatings manufacturing plant in Saudi Arabia for boosting domestic and export markets.  Dow intends to invest in the facility in Jubail Industrial City for its Dow Coating Materials ("DCM") business unit.

DCM is the premier supplier of products and technologies to architectural and industrial coatings manufacturers. As per the company, the investment will provide customized and advanced materials for the people of Saudi Arabia.

The company aims to cater to the regional customers by investing in Saudi Arabia and thus achieve its regional objectives. The company will also create employment opportunities in Saudi Arabia while enabling people in that country to instill sustainable policies and practices in the industry.

Dow also entered into another agreement with Saudi Aramco in July 2011 to form Sadara Chemical Company in Jubail Industrial City, Saudi Arabia. Once operational, Sadara is expected to deliver annual revenues of approximately $10 billion within a few years of operation and generate thousands of direct and indirect employment opportunities through the complex and related investments in downstream value parks.

Dow released its fourth-quarter 2011 results in February 2012. The company earned 25 cents per share, missing the Zacks Consensus Estimate of 32 cents as well as trailing the year-ago earnings of 47 cents. However, including one-time charges, the company reported a loss of 2 cents per share compared with earnings of 37 cents in the year-ago quarter.

Though total revenues in the quarter inched up 2% to $14.1 billion, it was below the Zacks Consensus Estimate of $14.4 billion. Sales increased across all operating segments and geographic areas, except Electronic and Functional Materials.

Dow did not provide any financial guidance. The company anticipates that it will continue facing challenges from Western Europe in the near term.

The company did not forecast much improvement in market conditions for first-quarter 2012, but it has projected that economic recovery will gain momentum in the second quarter and the remainder of the year. It expects to meet its short and long-term targets irrespective of the economic conditions.

Dow expects its downstream, market-driven businesses to continue to capture value from improving North American feedstock dynamics. The company expects ethylene industry operating rates to tighten over the next several years, driving margin expansion. The company will keep its focus on generating enough cash flows while repaying its shareholders and funding organic growth.

Dow competes with EI DuPont de Nemours & Co. ( DD ). We are maintaining a long-term (more than 6 months) Neutral recommendation on the stock. Currently, Dow Chemical holds a Zacks #3 Rank, which translates to a short-term (1 to 3 months) Hold rating.

DU PONT ( EI ) DE ( DD ): Free Stock Analysis Report
DOW CHEMICAL ( DOW ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
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