Dow Chemical 1Q profit climbs on higher demand and price increases as economy stages rebound

Dow Chemical 1Q profit climbs as demand rebounds

DENVER — Dow Chemical Co. says consumers across much of the globe are starting to spend more on furniture, electronics and appliances. Even the housing market is looking better to the nation’s largest chemical manufacturer.

Dow said Wednesday the improving demand signals a stronger economy, although it remains concerned about high unemployment, potential inflation in some regions and debt problems in European countries.

“The overall global economic environment is on stronger footing, with the highlight being significant demand growth in Europe and North America,” Dow Chairman and CEO Andrew N. Liveris told analysts on a conference call.

Noting recent, healthier reports of new home sales and orders for most durable goods, he said, “Strength in all of these sectors illustrates that the consumer is finally returning.”

The Midland, Mich., company has a broad reach, from agricultural seeds to ingredients for cosmetics, electronics components, automobile paint and food additives.

Dow said stronger demand and price increases across most of its businesses bolstered its first-quarter results. Net income rose to $466 million, or 41 cents a share, after paying preferred dividends, A year ago, it earned just $24 million, or 3 cents a share.

Excluding certain items, Dow earned 43 cents per share.

Revenue rose 48 percent to $13.42 billion from $9.04 billion.

Wall Street expected earnings of 30 cents per share on $12.9 billion in revenue, according to a Thomson Reuters survey.

Dow shares rose $1.76, or 5.9 percent, to close at $31.83 Wednesday. Earlier in the session, the stock hit an annual high of $31.96.

Dow’s performance followed strong results Tuesday from chemical manufacturer DuPont, which also reported better consumer markets.

In recent weeks, there have been signs of strengthening in the U.S. economy. The Consumer Confidence Index rose in April to 57.9, according to The Conference Board, a private research group based in New York. That’s up from a revised 52.3 in March. The April reading is the highest since the 61.4 reading in September 2008, but still far below the 90 level considered healthy.

The Commerce Department reported last week that sales of new homes jumped 27 percent in March, bouncing off a record low in February

In the first quarter, Dow raised prices by 17 percent and logged a 16 percent increase in sales as volume grew across all regions.

Demand growth was strongest in China followed by Brazil, India and Eastern Europe. North America and Europe recorded smaller percentages of growth.

Revenue gains were led by higher sales in Dow’s basic plastics business, which posted a 49 percent sales increase. Performance products revenue climbed 41 percent.

Revenue in the electronic and specialty materials segment and its performance systems unit rose 30 percent, while revenue from its coatings and infrastructure business grew 21 percent. Basic chemicals revenue rose 22 percent.

The exception to growth was the health and agricultural segment, which had lower revenue due to an oversupply of glyphosate, which hurt demand for the weed killer used in popular products like Roundup.

The company did not provide a specific earnings or sales forecast for the current quarter or full year.

“You’re seeing higher pricing and volume which actually are pushing up revenue and you’re seeing it not on a domestic U.S. basis but on a global basis,” Argus Research analyst Bill Selesky said.

In a research note to clients, UBS analyst Don Carson said, “Dow continues to show improving leverage to the recovering global economy and good integration progress.”

Last year, Dow acquired Rohm & Haas for $16.5 billion to expand into the more profitable specialty chemicals business. The company said the acquisition and cost cuts allowed it to save $275 million in the period.