Diversified chemical firm The Dow Chemical Co. (DOW) Tuesday reported a loss for the fourth quarter, compared with a profit last year, hurt by charges, sharp declines in sales and volumes as well as lower prices, reflecting the global economic downturn.
The chemical industry worldwide is undergoing a demand slump, which is offsetting the positive effects of lower energy prices. Falling product sales prices are still keeping customers away from purchases as they hope for further decline in prices. Going forward, Dow expects that demand levels of late 2008 will continue for several quarters and possibly beyond.
For the fourth quarter, the company's net loss was $1.55 billion, or $1.68 per share, compared with a net income of $472 million, or $0.49 per share, in the year-ago quarter.
The net loss for the current-year quarter reflected the impact of net after-tax charges of $978 million related to restructuring activities, goodwill impairment losses, the impact of Hurricanes Gustav and Ike, K-Dow related expenses, purchased in-process research and development charges, and expenses related to the company's announced acquisition of Rohm and Haas Co.
Included in the year-ago quarter results were after-tax charges of $447 million related to restructuring activities and an adjustment to IPR&D, which were partially offset by a reduction in the provision for income taxes of $113 million related to a change in the legal ownership structure of EQUATE.
Excluding items, the loss per share for the quarter was $0.62, versus a profit per share of $0.84 in the prior-year period.
On average, 10 analysts polled by First Call/Thomson Financial expected the company to report earnings of $0.07 per share for the quarter.
Dow's quarterly net sales declined 23% to $10.9 billion from $14.23 billion in the prior-year quarter. Wall Street analysts projected sales of $13.37 billion.
During the quarter, volume declined 17%, and was down in all operating segments and in all geographic areas, reflecting the global economic downturn as well as the de-stocking that occurred through most value chains. The company also reduced production to match market conditions. For the quarter, operating rate was 64%, a rate not seen in more than 25 years, Dow noted.
The company also witnessed a 6% fall in price during the quarter, as a 4% increase in its Performance segments was more than offset by a 15% decline in its Basics segments.
Commenting on the results, Andrew Liveris, Dow's chairman and chief executive officer, said, "With a global economic crisis unfolding during the quarter, we responded with speed and urgency to get ahead of the demand destruction that continued to accelerate as we approached the end of the year."
"We immediately put in place a full array of aggressive cash generation and cost and capital control measures that delivered results. We remain intensely focused on those actions that we can control and will continue to do so throughout 2009," Liveris noted.
Business segment wise, Dow's sales in the Performance Plastics segment were $3.16 billion, down 20% from last year. While price increased 1%, volume declined 21%. Performance Chemicals' sales dropped 7% in the quarter to $1.97 billion from $2.13 billion a year ago. Globally, price was up 9% in the segment while volume decreased 16%.
Further, Dow's Agricultural Sciences segment posted fourth-quarter sales of $885 million, a 2% rise from last year. Volume declined 4% whereas price increased 6%.
Basic Plastics generated sales of $2.17 billion, down 38% from $3.49 billion last year. Price was down 15%, mainly due to rapidly declining hydrocarbon and energy prices. Volume fell 23%, reflecting lower demand in the quarter.
Basic Chemicals sales were down 39% from last year to $992 million as volume fell 33% on double-digit volume declines in all geographic areas. Prices were down 6%.
For fiscal 2008, Dow earned $579 million, or $0.62 per share, lower than $2.89 billion, or $2.99 per share, a year ago. The current year results included certain items with a net unfavorable impact of $1.1 billion. This compares with certain items with a net unfavorable impact of $735 million. Full-year net sales rose 7% to $57.51 billion from $53.51 billion in fiscal 2007. Wall Street analysts projected fiscal 2008 earnings of $2.51 per share on sales of $59.70 billion.
Among Dow's peers, EI DuPont de Nemours & Co., or DuPont, (DD) has reported a loss for the fourth quarter compared with a profit last year, hurt by restructuring costs and weaker demand across most markets. Wilmington, Delaware-based DuPont's net loss for the quarter was $629 million, or $0.70 per share, compared with a net income of $545 million, or $0.60 per share, last year. DuPont's quarterly net sales declined 17% to $5.82 billion from $6.98 billion in the prior-year quarter.
Going forward, Dow's Liveris said, "As we enter 2009 we are assuming that the late 2008 demand levels will continue for several quarters and possibly beyond. Most of our value chains are running at very low inventory levels, and when a recovery begins, possibly through government stimuli in the back half of the year, the recovery could be rapid. Having said that, we are planning for a global recession throughout 2009 and will continue to take actions on managing our cash and controlling our costs with the same intensity that we demonstrated in the fourth quarter."
DOW is trading at $11.19, up $0.14, on a volume of 16.79 million shares.
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