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Dow Chemical Profit Surges On Volume, Price Increases

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The Dow Chemical Co. (DOW) Wednesday reported a surge in first-quarter profit, as revenues increased over 48% driven by strong growth in volume and price. Adjusted earnings easily topped Wall Street consensus estimate.

Net income available for the company's common stockholders in the first quarter increased to $466 million from $24 million in the previous year. Earnings per common share increased to $0.41 from last year's $0.03.

First-quarter net income from continuing operations surged to $552 million from the prior year's $24 million. On a per share basis, net income from continuing operations available for common stockholders increased to $0.41 from $0.02 last year.

The latest results included adjustments related to the 2009 restructuring plan equal to $0.01 per share, and Rohm and Haas acquisition- and integration-related expenses of $0.01 per share. In the previous year, results included restructuring charges of $0.02 per share, acquisition- and integration-related cost of $0.04 per share and $0.03 per hare for Dow Corning restructuring.

Excluding items, the company earned $0.43 per share in the just concluded quarter versus $0.11 per share last year. On average, 11 analysts polled by Thomson reuters expected the company to earn $0.30 per share in the quarter. Analysts' estimates typically exclude special items.

In the preceding quarter, the company earned $0.08 per common share. Pro forma earnings were $0.18 per common share.

For the first quarter, on a pro forma basis, Earnings Before Interest, Tax, Depreciation and Amotization or EBITDA increased to $1.781 billion from $766 million in the prior year.

Net sales for the quarter increased to $13.417 billion from $9.041 billion in the previous year. Pro forma net sales excluding divestitures increased to $13.392 billion from last year's $10.042 billion. Wall Street expected sales of $12.93 billion for the quarter.

In the previous quarter, sales totaled $12.466 billion and pro forma net sales were $12.395 billion.

Sales in the first quarter improved year-over-year in all geographic areas, with a 27% improvement in North America, and a 35% improvement in Europe, Middle East and Africa.

On a pro forma basis, price was up 17% from last year. Volume increased 16% in the quarter as emerging geographies delivered volume growth of 27%.

Dow said broad-based pricing gains were achieved in all geographic areas and in Coatings and Infrastructure, Performance Systems, Performance Products, Basic Plastics and Basic Chemicals.

First-quarter sales in the Electronic and Specialty Materials segment increased 30% to $1.3 billion. Volume increased 31%, but price dropped 1%. EBITDA for the segment advanced to $381 million from $93 million in the same period last year.

The company noted that in Dow Electronic Materials, all business units reported double-digit sales growth with substantial volume growth in EMEA and Asia Pacific, particularly in Greater China.

Sales in Coatings and Infrastructure rose 21% to $1.2 billion in the first quarter of the current fiscal. Volume increased 16% and price was up 5%. EBITDA for the segment was $116 million, a drop from last year's $121 million.

In Health and Agricultural Sciences, sales declined to $1.344 billion from $1.461 billion in the year-ago period. Volume slipped 6%, while price was down 2%. However, EBITDA rose to $384 million from $363 million, primarily based on raw materials and operational cost improvements, and an enhanced sales mix.

Sales in Performance Systems increased 30% to $1.7 billion. Volume increased 27%, and price was up 3%. EBITDA for the segment increased to $204 million from $103 million in the year-ago period.

In Performance Products, sales improved 41% to $2.8 billion. Volume rose 27% and price incresed 14%. First-quarter EBITDA for the segment increased to $290 million from $147 million in the year-ago period.

Sales in the Basic Plastics segment were $3.0 billion, up 49% from last year. Volume increased 5% and price increased 44%. The segment's EBITDA for the quarter increased to $718 million from $122 million in the year-ago period.

In Basic Chemicals segment, sales in the quarter rose 22% to $714 million. Volume increased 16% and price was up 6%. EBITDA for the quarter was $120 million, compared to a loss of $5 million in the year-ago period.

Selling, General and Administrative expenses on a pro forma basis declined 8% from the same period last year.

Looking ahead, Andrew Liveris, Dow's chairman and chief executive officer, said, "Our double-digit volume improvements in North America and Europe are positive signs that demand growth is returning to developed markets. Strengthening consumer spending in areas such as electronics, appliances and automotive, combined with strong growth in emerging geographies, are driving broad-based manufacturing momentum. This, coupled with our global operating rates returning to levels not seen since the second quarter of 2008, points increasingly to a sustainable upturn.''

Among others in the sector, EI DuPont de Nemours & Co. (DD) said early this week that first-quarter net income attributable to DuPont increased to $1.13 billion or $1.24 per share from $488 million or $0.54 per share in the year-ago quarter. Quarterly net sales advanced 23% to $8.48 billion.

DOW closed Tuesday's regular trade at $30.07, down from the prior close of $31.33, on 12.81 million shares.

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