) saw its profit soar in first-quarter 2013 on strength in its
agriculture science business, reflected by record sales of seeds
and crop protection products.
The U.S. chemical kingpin, whose products are used across a bevy
of industries, racked up profit of $550 million or 46 cents a
share, a roughly 33% rise from $412 million or 35 cents a share
earned a year ago. A hefty restructuring charge (of $357 million)
crimped the bottom line a year ago. Dow also benefited from a
nearly $300 million decline in raw material costs in the reported
Barring one-time items (including charges associated with tax
adjustments and loss on early extinguishment of debt), the
company earned 69 cents a share in the quarter, up from 61 cents
a year ago. That comfortably beat the Zacks Consensus Estimate of
The Michigan-based company's shares rose 4% in pre-market
trading, reflecting the handy earnings beat.
Revenue, Volume and Pricing
Dow recorded revenues of $14,383 million in the reported quarter,
down 2% year over year, as gains across agricultural sciences and
electronic and functional materials were marred by declines in
other areas, especially the Feedstocks and Energy unit. Sales
lagged the Zacks Consensus Estimate of $15,029 million.
Sales rose narrowly in North America while declining 8% in
Europe, Middle East and Africa (EMEA). Latin America saw a
roughly 8% rise in sales while Asia Pacific registered a 2%
decline. Price edged up 1% year over year while volume declined
3% in the quarter.
Electronic and Functional Materials
Revenues rose 2% year over year to $1.1 billion in the reported
quarter as higher volume offset lower pricing. Electronic
materials recorded modest decline while semiconductor
technologies business saw volume gains on strength in memory
manufacturing. Functional materials sales rose on higher volume
across the board and improving pharmaceutical demand.
Coatings and Infrastructure Solutions
Sales edged down 2% to $1.7 billion in the quarter as volume fell
due to weakness in Europe and price remained flat. Building and
construction business saw lower volume in the quarter. Weak
commercial construction demand in North America also contributed
to the volume decline.
Sales were flat in the coating materials business as volume gains
across North America and Asia Pacific was offset by decline in
Europe. The company's water and process solutions business
reported higher sales, aided by improving demand.
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The segment was the bright spot with sales climbing 14% year over
year to a record $2.1 billion, benefiting from strong volume
gains and better pricing. Crop protection products revenues rose
7% riding on gains across America and Latin America.
New crop protection revenues rose significantly in the quarter.
Sales of seeds, traits and oils surged 37% on the back of strong
demand for SmartStax products in North and Latin America.
Revenues clipped 4% to $3.3 billion as volume decline offset a
rise in price. Higher pricing were achieved in polyurethanes,
formulated systems and oxygenated solvents. Volume fell in the
epoxy and polyurethanes businesses.
Sales dipped 3% to $3.5 billion in the quarter as volume fell on
weak demand in Europe and closure of a polyethylene plant in
Belgium. Sales fell across elastomers and electrical and
telecommunications businesses. Packaging and specialty plastics
registered higher volumes in North and Latin America, but
witnessed a decline in Europe and Asia Pacific.
Feedstocks and Energy
The segment was the weakest link in the reported quarter with
revenues slipping 13% to $2.6 billion on a double-digit decline
in volumes, offsetting a modest rise in pricing. Volume fell on
weak demand in Europe and the sale of the polypropylene business.
Dow ended the first quarter with cash and cash equivalents of
roughly $3.5 billion, down 3% year over year. Total long-term
debt declined roughly 2% year over year to around $19.6 billion.
Operating cash flows increased $500 million year over year in the
Looking ahead, Dow noted that it will focus on organically
growing its attractive businesses and driving earnings leveraging
its feedstock strength. The company will continue to pursue its
cost reduction and efficiency programs while reducing debt and
maximizing shareholder returns. However, Dow does not see a
material improvement in the macroeconomic environment this year.
Dow, under its restructuring program, is reducing its global
headcount by 5% and closing some of its manufacturing facilities.
The company targets aggregate cost savings of $2.5 billion with
$1 billion expected this year.
Moreover, Dow continues to seek opportunities to optimize its
portfolio by selectively divesting its assets. It aims to mop up
nearly $1.5 billion from non-core assets sale in the near term.
Dow, which currently holds a Zacks Rank #3 (Hold), is benefiting
from strong fundamentals in agriculture and food markets. A
string of innovative products in its pipeline also adds to its
However, Dow contends with weakness in the electronics and
construction end-markets. Building and construction sales are
declining due to lower volume in Europe and recovery in
electronics remains slow due to sluggish growth China and the
prevailing uncertainty in Europe.
Dow's results put a spotlight on the end market scenario and
demand trend for chemical products. Among the other big chemical
), which reported on Apr 23, delivered better-than-expected
results on strength in its agriculture business. Gains in
agriculture helped it to offset the lingering weakness across
titanium dioxide and photovoltaic markets.
) first quarter results, reported on Apr 18, were a mixed bag
with earnings topping expectations while sales missing the same.
) will report its first quarter results after the closing gong