Diversified chemicals firm Dow Chemical Co. (DOW) Tuesday reported a profit for the fourth quarter of fiscal 2009, compared with a loss last year, favored by growth in emerging markets, the joint venture performance and strong sales at its Health and Agricultural Sciences, Basic Plastics and Basic Chemicals businesses. On an adjusted basis, the company's earnings per share topped Wall Street analysts' forecast.
Dow Chemical's fourth-quarter net income available for its shareholders was $87 million or $0.08 per share, compared to a net loss available for Dow Chemical shareholders of $1.55 billion or $1.68 per share last year. Net income attributable to the Dow Chemical Co. was $172 million in comparison with a loss of $1.55 billion in the prior-year quarter.
The current quarter results included certain items such as an adjustment to a previously recognized gain from the divestiture of the company's ownership stake in the Optimal Group of Cos., which increased earnings by $0.01 per share, a charge of $0.06 per share related to the company's Equipolymers joint venture, transaction, integration and other acquisition costs of $0.03 per share related to the acquisition of Rohm and Haas, a purchased in process research and development charge of $0.01 per share, and a charge of $0.01 per share related to a goodwill impairment loss.
Dow Chemical also stated that it benefited from a lower tax rate in the quarter due to higher earnings in emerging geographies and joint ventures.
Excluding the items and discontinued operations, the company reported quarterly earnings per share of $0.18, compared to an adjusted loss per share of $0.63 in the same quarter last year.
On average, 11 analysts polled by Thomson Reuters expected the company to report earnings of $0.11 per share in the quarter. Analysts' estimates typically exclude special items.
For the sequential third quarter, net income attributable to Dow Chemical common stockholders was $711 million or $0.63 per share.
Net income from continuing operations reached $178 million, turning around from a net loss from continuing operations of $1.55 billion in the fourth quarter of 2008. In the prior quarter, net income from continuing operations was $799 million, which reflected after-tax gains of $512 million from the company's divestitures of ownership stakes in Total Raffinaderij Nederland N.V. (TRN) and the Optimal Group of Companies.
Dow Chemical's fourth-quarter net sales grew 15% to $12.47 billion from $10.85 billion a year earlier. Seven analysts had a consensus revenue estimate of $11.81 billion for the quarter. For the preceding third quarter, the company's net sales were $12.05 billion.
On a pro forma basis excluding completed divestitures, the company's sales increased 4%, driven by a 10% rise in volume, partially offset by a 6% decrease in price. Growth was reported in all operating segments except Hydrocarbons and Energy, the company noted. Sequentially, the company's pro forma sales were up 8%.
Volume trends favored emerging regions and grew more than 20% in Asia Pacific, Latin America, Eastern Europe, and IMEA. On a pro forma basis, quarterly volume increased 33% in emerging geographies.
Commenting on the results, Andrew Liveris, Dow's chairman and chief executive officer, stated, "Dow delivered significantly better year-over-year revenue and earnings in the fourth quarter driven largely by volume gains across virtually all operating segments and improved equity earnings."
"Emerging geographies were a major factor in our results for the quarter, with volume up an impressive 33 percent, truly reflecting the strength of our broad geographic footprint. Quarterly equity earnings returned to a level not seen since before the economic downturn, further demonstrating the strategic importance of our joint ventures," Liveris added.
Selling, General and Administrative, or SG&A, expenses, as reported, were up more than 50% from last year, due to the acquisition of Rohm and Haas. On a pro forma basis, SG&A expenses declined 4%. R&D expenses, as reported, increased more than 35% on the acquisition of Rohm and Haas, and remained flat on a pro forma basis.
Dow Chemical's equity earnings were $219 million in the quarter, compared with a loss of $4 million a year ago, helped by Dow Corning, EQUATE and MEGlobal. Excluding certain items, equity earnings totaled $284 million in the fourth quarter.
Based on geographies, sales in North America declined to $4.12 billion from $5.07 billion a year ago. Europe posted sales of $4.12 billion, down from $4.28 billion in the prior-year quarter. Asia Pacific sales were $2.2 billion, compared with $1.73 billion in the fourth quarter of 2008. Latin America generated sales of $1.54 billion, higher than last year's 1.44 billion. Further, India, Middle East and Africa posted quarterly sales of $487 million, up from $363 million in the prior-year quarter.
Segment wise, the company's Electronic and Specialty Materials segment generated sales of $1.2 billion, flat with the same period last year. Volume increased 1% and price decreased 1%. Consumer demand for electronics remained firm in the quarter, reflecting a continuation in the industry's recovery that began in the second quarter of the year, Dow Chemical noted. On a sequential basis, sales in the Electronic and Specialty Materials segment were down 3%, with volume declining 4% and price edging up 1%.
Coatings and Infrastructure sales declined 3% to $1.18 billion. Volume was up 1%, while price declined 4%. The company stated that year-over-year volume growth was reported in Asia Pacific, Latin America and IMEA, with robust demand in these regions for both architectural and industrial coatings. This growth more than offset reduced demand in North America and Europe. Compared with the prior quarter, sales in Coatings and Infrastructure declined 11%, with volume down 14% and price up 3%.
Further, Dow Chemical's Health and Agricultural Sciences reported quarterly sales of $1.1 billion, up 17% from $920 million in the year-ago period. While volume rose 26%, price was down 9%. On a sequential basis, sales grew 35% from $796 million in the third quarter.
Performance Systems reported fourth-quarter sales of $1.58 billion, a decline of 3% from $1.63 billion a year ago. Volume was up 7%, while price declined 10%. Sales increased 3% sequentially, helped by a 4% increase in price, partially offset by a 1% decline in volume.
Performance Products sales totaled $2.60 billion, up 1% from $2.59 billion in the same quarter last year. Volume rose 16% and price declined 15%. Double-digit volume growth was reported across all geographic areas except North America, and across all business units except Emulsion Polymers. On a sequential basis, Performance Products' sales rose 8%, with volume up 1% and price up 7%.
Sales in the Basic Plastics segment were $2.9 billion, up 17% from the same quarter last year, as volume increased 13% and price increased 4%. Price increases were reported in all geographic areas, except Latin America. On a sequential basis, the segment's sales rose 10%, as volume increased 6% and price grew 4%.
Basic Chemicals recorded quarterly sales of $728 million, up 5% from last year. Volume grew 23% and price fell 18%. Sequentially, sales in Basic Chemicals increased 28%, with volume growing 16% and price improving 12%.
For fiscal 2009, net income available for the Dow Chemical company common stockholders was $336 million or $0.32 per share, compared with $579 million or $0.62 per share last year. Full-year net sales reached $44.88 billion, down from $57.36 billion in the previous year. Wall Street analysts projected earnings of $0.48 per share on sales of $45.15 billion.
Commenting on the company's outlook, Liveris said, "We see demand in emerging geographies continuing to show sustained growth, which bodes well for global growth. Growth will continue to lag in the U.S. and Europe, however, as high unemployment persists and questions about the sustainability of government stimulus spending remain."
Among others in the sector, DuPont (DD) has posted a profit in the fourth quarter, reflecting significantly higher sales volume, currency benefit and lower variable cost. The Wilmington, Delaware-based company's net income attributable was $441 million or $0.48 per share, compared to a loss of $629 million or $0.70 per share in the year-ago period. Quarterly net sales advanced 10% to $6.42 billion from $5.82 billion generated a year earlier.
DOW is trading at $28.11, down $0.52, on a volume of 11.22 million shares.
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