EPS affected by $.12 from the September hurricanes. Good news? Oil prices fell. Bad news? Couldn’t produce anything when it dropped.
Highlights:
– Sales for the quarter increased 13 percent from the same period last year to $15.4 billion.
— Price increased 22 percent, with double-digit price gains in all operating segments and all geographic areas. This was the largest year-over- year percentage increase in price since the first quarter of 2005.
— Volume was down 9 percent globally, reduced by the impact of Hurricanes Gustav and Ike, further weakening of demand, and the Company’s focus on implementing price increases in the quarter. Excluding the impact of acquisitions, divestitures and the hurricanes, volume was down 5 percent.
— Earnings for the quarter of $0.46 per share were unfavorably impacted by certain items such as the hurricanes ($0.09 per share in costs and $0.03 per share in margin on lost sales), purchased in-process research and development charges of $0.03 per share, and acquisition-related expenses of $0.02 per share (see supplemental information at the end of the release for a description of these items).
— Purchased feedstock and energy costs surged 48 percent, an increase of $2.6 billion over the same quarter last year, the largest year-over-year increase in the Company’s history and the third consecutive quarter in which these costs reached new highs. Margin expansion was not achieved in both Basic and Performance segments, as the hurricanes idled approximately 80 percent of the Company’s North American capacity in September, when feedstock costs were declining.
— Agricultural Sciences set a new third quarter sales and EBIT(1) record, with sales up 24 percent to $976 million. Price was up 16 percent and volume up 8 percent compared with the same quarter last year.
— Equity earnings were $266 million for the quarter. This was the seventh consecutive quarter that earnings from joint ventures exceeded $250 million.
CEO Andrew Liveris: “The global economy is now feeling the full effects of the same economic issues that have plagued the U.S. for the past several quarters. These issues have now been exacerbated by the lack of credit, resulting in a drop in demand not only in the U.S., but around the world. In our view, we will likely see a global recession through most of 2009.
“Dow is well positioned, however, to weather this increasingly difficult economic downturn. We have a strong balance sheet, we have a track record of strong financial discipline and we are accelerating our focus on what we can control, namely costs and capital, asset restructuring, and other interventions. In addition, we will continue to implement our transformational strategic actions, such as closing our petrochemicals joint venture with PIC of Kuwait and closing our announced acquisition of Rohm and Haas (ROH).”
Here is how it breaks down. Ag and Performance Chemicals saw earnings increases. Basic Plastics, Chemicals, and Performance Plastics saw decreases. Those divisions also saw $76 million in hurricane related costs.
It is frustrating but we have to play the game for another quarter. Then the Kuwait and the Rohm deals close and the earnings profile is forever altered. Will it be an immediate panacea? No. It will remove oil (USO) as the immediate concern on the mind of investors.
Recession. Will it hurt? Yep. A global recession will hurt, well, the globe (hence the name). But, what do we have? A 7% plus dividend yield that is not going down, Berkshire’s Warren Buffett (BRK.A) as a fellow shareholder (the largest individual one) and company with a global footprint both in manufacturing and sales. It manufactures the basic building blocks for virtually every industry.
When it all shakes out the $.60 before charges did beat what the guys and gals on Wall St. expected ($.58) so we may see a bump in shares. I would also say we ought to see some Q4 expectations increase as it appears price increases are holding and oil continues its nose dive.
Also:
– The European Commission Monday cleared the creation of a joint venture between Dow Chemical Co. (DOW) and a unit of the Kuwait Petroleum Corporation. Dow and Petrochemical Industries Company will jointly control the new company, which will manufacture and market polyethylene, ethylenamines, ethanolamines, polypropylene, and polycarbonate.
– Dow AgroSciences has added 350 jobs around the world so far this year-200 of them at its Indianapolis headquarters-and the CEO of the agricultural-chemical company expects to continue expanding the work force into next year. “Global demand for food, feed, fiber and fuel reinforces the need for agricultural productivity, and Dow AgroSciences is well positioned as a technology leader to provide solutions,” CEO Jerome Peribere said in a statement.
The company in recent years has been evolving from a maker of herbicides and pesticides into a biotechnology firm using genetics to develop products that protect crops and improve yields.
Disclosure (“none” means no position):Long DOW, none
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