Markets

DOW-Sadara Joint Venture - Analyst Blog

A generic image of a person holding cash.
Credit: Shutterstock photo

The Dow Chemical Company ( DOW ) and Saudi Arabian Oil Company (Saudi Aramco) announced the official formation of Sadara Chemical Company (Sadara), a $20 billion joint venture between the two companies.

The companies also announced the official formation and key officers of Sadara Chemical.

Once complete, the joint venture would represent the first ever petrochemical facility ever built in one single phase. Besides, the first production units are expected to roll out in the second half of 2015. All units are expected to be up and running in 2016.

According to the company, Sadara is poised to become a significant contributor for Saudi Aramco's transformational downstream growth strategy.

Sadara is expected to deliver annual revenues of approximately $10 billion within a few years of operation, along with generating thousands of direct and indirect employment opportunities.

Utilizing Dows cutting-edge product technologies and Saudi Aramcos world-class project management and execution capabilities, the manufacturing units will produce a wide range of performance products such as Polyurethanes (isocyanates, polyether polyols), Propylene Glycol, Elastomers, Linear Low Density Polyethylene, Low Density Polyethylene, Glycol Ethers and Amines. Sadara will market products within a regional zone consisting of Middle Eastern countries, including the Kingdom. Dow will leverage its global marketing know-how to market and sell on behalf of Sadara to the rest of the world.

Recently, DOW earned 69 cents per share in the third quarter of 2011, ahead of the Zacks Consensus Estimate of 64 cents per share as well as last year's 45 cents per share. However, including one-time charges, the company earned 62 cents per share compared with 54 cents per share in the year-ago quarter.

Quarterly revenues jumped 17% year over year to $15.1 billion, above the Zacks Consensus Estimate of $14.7 billion, driven by double-digit gains in all operating segments and geographic areas, with the largest growth in Latin America (21%) and Europe, Middle East and Africa (EMEA) (19%). In the emerging geographies, sales reached $5 billion, a new quarterly record for the company.

Dow anticipates demand to improve further, especially in Asia with the global economic recovery. The US and European markets have also started showing signs of improvement. Dow is also optimistic on major consumer-markets, including electronics, coatings, automotive and packaging. However, construction markets are expected to remain weak.

DOW faces stiff competition from EI DuPont de Nemours & Co . ( DD ).

Currently, DOW has a short-term (1 to 3 months) Zacks #3 Rank (Hold) but a long- term Neutral recommendation.

DU PONT ( EI ) DE ( DD ): Free Stock Analysis Report

DOW CHEMICAL ( DOW ): Free Stock Analysis Report

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More