Tag: dow

Hard to come up with anything really positive on this one other than “at least it wasn’t worse”.

Dow Chemical (DOW), unlike DuPont (DD) earlier this week posted earnings that impressed no one. It was not a disaster but shareholders are not dancing either this morning. After DuPont reported increased earnings and raised full year guidance, expectations for Dow were elevated. DuPont got significant contributions from its agricultural division and Dow’s did see dramatic improvement of EBIT of $65 million ($15 million after acquisition charges) up from $0 last year but like I said yesterday, this segment is not yet large enough to carry the day for Dow like DuPont’s is for them. Soon enough…

Profits fell dramatically in the Q3 due to changes in German tax laws, higher domestic tax rates and R&D charges. Despite sales increasing to $13.59 billion from $12.36 billion last year, Dow posted net income after paying preferred dividends of $403 million, or 42 cents per share, compared with a year-earlier profit of $512 million, or 53 cents per share. Dragging Q3 results was a provision for income taxes of $659 million, 5 times larger than the $137 million put aside last year. Excluding items, Dow reported profit of 84 cents per share.

The area I was most interested in was the equity earnings and even there the news was less than encouraging as earnings for Q3 were $296 million – down compared with the record $317 million posted in the same period last year.

There was some good news as Dow reported price increases in every geographic area and across all operating segments, outpacing an increase of almost $400 million in feedstock and energy costs.

Even Dow CEO Andrew Liveris was less than enthusiastic in his comments saying, “Global economic conditions remain reasonably healthy, even though there may be some concerns about the resilience of the U.S. economy going forward.” He continued “This was another sound quarter for Dow. We posted record quarterly sales with substantial growth in Europe, Asia Pacific and Latin America; we achieved solid price increases across every business and in every geographic region; we saw strong volume improvements in all but one of our operating segments; and our equity earnings were once again outstanding.”

Equity results were good, not outstanding. Outstanding would have been an increase over last year.

Sales are at record levels but feedstock costs are mitigating that. Dow is in the process of moving production to areas where these costs are a fraction of where they are now but that will take time. It will happen and the end results will be fantastic, but until then we have to wait. One good thing about buying shares this cheap now is that there isn’t really anywhere for them to go down unless the wheels completely fall off, which is unlikely. Any good news will cause an immediate jump..

Dow is transitioning and doing a great job at it and shareholder need to expect quarters like this every so often. My outlook has not changed long term.

The call today will be interesting…

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Dow Chemical (DOW), whose share are up 9% to date this year and pay a near 4% dividend reports earnings tomorrow. What are we looking for?

-Health of Joint Venture (JV) Strategy:
We are going to be looking at the “equity earnings” to see how well the joint ventures are performing vs last year and what percentage of earnings they represent. To see the current JV’s and understand how to read the earnings of them, please visit here: This will become more important every quarter and in after 2008 this section should take real prominence as the slew of JV’s announced this year begin coming online. Last quarter this segment produced 11% earnings growth and are up 30% year to date.

– Share Repurchases / Dividends / Debt:
Earlier in the summer Dow increased the dividend so do not expect any news on this front (although it would be nice). What is most likely the best use currently would be an acceleration of the share repurchases and decreasing the debt which has fallen $3.5 billion or 30% the past 3 years.

Earnings:
DuPont (DD) reported increased earnings yesterday and that has put the pressure on Dow. Much of DuPont’s increase was due to their strong agribusiness division. Dow, which is expending very aggressively into this area, is not big enough here to allow this divisions expected increase to affect earnings to the same degree as DuPont. That being said the overall analyst estimates are for $.90 cents a share. I would expect Dow to beat that and come in at $.95 to $.96 cents a share.

My feeling s the JV strategy and its contributions is not yet being fully incorporated into estimates. This strategy is a self funding one and its success is allowing Dow to produce about $1 billion a quarter from operations. This has enabled Dow to make the above mention decreases in debt at the same time raising its cash balance to near $4 billion. The debt reduction alone has decreased annual expenses $100 million a year or has added $.10 a share to earnings.

Input costs have skyrockets in this sector in the last year and Dow is in the process of moving operation to areas that raw material are exponentially cheaper. What is important to look for is how these cost are being managed in the short term because in the long term ,we know they will fall dramatically.

Every since Dow canceled it appearance at a meeting last week, rumor have been running rampant. Lehman Brothers (LEH) analyst Sergey Vasnetsov said the announcement might indicate that Dow Chemical is planning a “significant transformation” in the near-term. Vasnetsov noted major moves by companies elsewhere in the sector. PPG Industries Inc. (PPG) purchased SigmaKalon Group, a Dutch paint and coatings producer, and Rohm & Haas Co. (ROH) said it will buy back $2 billion in stock.

“Dow is likely to undergo a significant transformation in the near-term, perhaps using the recent PPG and Rohm & Haas actions as a roadmap,” Vasnetsov wrote in a client note.

Honestly, do not expect much in the way of earth shattering news. It is not Liveris’s style.

Just results..

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The drama between Dow Chemical (DOW), DuPont (DD) and JP Morgan (JPM) won’t go away ands if anything, looks to become a fascinating read.

In May I wrote about an upcoming SEC investigation in the mess, “The investigation might also probe Dow’s attempt last autumn to buy DuPont (DD)in a deal worth over $40 billion. At the time, neither company disclosed that Dow had approached DuPont. DuPont turned Dow down, but its stock rose 15% between September and December. The SEC is also examining the unusual trading that resulted from their actions in both companies stocks. Another question that will need to be answered is who at JP Morgan let the “cat out of the bag” to folks who then piled into shares of DuPont or, was it only Krienbeg and Reinhard since it appears JP Morgan was working both deals simultaneously?”

Romeo Kreinberg, former head of the specialty plastics and chemicals units and one of the executives fired , claimed in a court filing recently that JPMorgan CEO Jamie Dimon implicated him in the dealings to “curry favor” with Dow Chemical, a client.

“JPMorgan was intimately aware — and in fact acted as the driver of — leveraged buyout efforts targeting Dow,” Kreinberg said in court papers. “At all relevant times, the bank owed Dow a fiduciary duty that was breached when it participated in leveraged buyout efforts that it failed to disclose.”

Kreinberg requested in his court filing last Friday that Dimon and JP Morgan be added as defendants on the suit, claiming any breach of fiduciary duty committed was by the bank, not him.

JPMorgan provided Dow with a so-called sum-of-the-parts study that analyzed the value of the company’s various businesses, Dow spokesman Chris Huntley said. Huntley added that study was unsolicited and that “it’s the sort of thing we routinely receive from investment banks, and we did nothing with it.”

This is going to get good. I postulated in May that Dimon and JP Morgan were playing both sides of the fence and most likely had much more culpability here than initially thought. This is just beginning and ought to get very interesting. It is good that Kreinburg is focusing on Dimon and JP Morgan. It would lead us to believe as I have said that Dow CEO Andrew Liveris indeed reacted to event and did not participate in them.

I would love to see the “sum of the parts” study Morgan provided DOW though..

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The question is, why did Dow (DOW) do it?

On Friday, Dow postponed a meeting with institutional investors that was scheduled for Nov. 6th & 7th. Shares rose as high as 3.5% as investors speculated that the delay is linked to an announcement that may involve a major acquisition by the company or the spin-off of a business. It seems we are back where we were this spring with the Dow rumor mill.

Dow said in a note to investors, “As we move ahead with our transformational strategy, making solid progress on several fronts, we continue to explore a number of exciting opportunities.” Dow spokesperson Chris Huntley said the meeting will now be held sometime early next year.

Just what is going on? A spin off? Doubt it. Acquisition? If something is happening, it would be the reason. Dow has made no secret of wanting to expand its coatings and water business 3 times their current sizes and has said the time is now to do it. That kind of growth cannot come organically so it must be down through the purchase of another company or part of one. They also have made no secret of their ambition to grow Dow Agro Sciences immediately and have not rules out any option to do it.

If you remember earlier this year it was disclosed Dow made overtures to DuPont (DD) to acquire it. Perhaps DuPont has had a change of heart? It would make sense seeing as they are falling behind both Monsanto (MON) and Dow in the seed race and are falling behind DOW in the chemical game given the flurry of joint ventures Dow has already announced this year. What DuPont may have once viewed as an insult of an offer, it may now view as a necessity.

A smaller specialty chemical company WR Grace (GRA) could be bought. With market cap of $2 billion, Dow could virtually write a check for Grace and it would expand Dow footprint in an area they want to expand in. Grace currently in the bankruptcy process due to asbestos litigation like USG (USG).

If it is a coatings company, the best out there currently is Sherwin Williams (SHW). The coatings industry has been consolidating rather quickly recently and Dow may have decided to pick up the cream of the crop. With a market cap of only $8 billion and producing over $600 million a year in earnings, virtually no debt and a top notch paint business franchise, Sherwin could easily be absorbed by Dow and would be accredive to earnings immediately which is one of CEO Andrew Liveras’s conditions for any acquisition.

Alas, based on Dow’s recent history, it really is just a delay because, as Huntley said “there is nothing new to say”. It isn’t their style to do anything this way. When they have something to announced, it is announced. Sorry, but sometimes the real reason is actually the one they give. The speculation still is a whole lot of fun though.

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UPGRADES

Microchip MCHP Lehman Brothers Underweight » Equal-weight
Volvo AB VOLV JP Morgan Underweight » Neutral
Royal Caribbean RCL Lehman Brothers Equal-weight » Overweight
Carnival CCL Lehman Brothers Equal-weight » Overweight
Audiocodes AUDC Lehman Brothers Equal-weight » Overweight
MGI Pharma MOGN JP Morgan Neutral » Overweight
Tesoro Petroleum TSO Bernstein Mkt Perform » Outperform
Everest Re RE Banc of America Sec Neutral » Buy
PartnerRe PRE Banc of America Sec Neutral » BuY

DOWNGRADES

Omniture OMTR Pacific Growth Equities Buy » Neutral
NovaTel NGPS Canaccord Adams Buy » Hold
Arch Chemicals ARJ Wedbush Morgan Strong Buy » Hold
Omnicell OMCL BB&T Capital Mkts Buy » Hold
Capella Education CPLA Stifel Nicolaus Buy » Hold
Cambridge Heart, Inc. CAMH Boenning & Scattergood Market Outperform » Market Perform
Aurora Oil & Gas AOG KeyBanc Capital Mkts Buy » Hold
Qwest Q UBS Buy » Neutral
Thornburg Mortg TMA Keefe Bruyette Mkt Perform » Underperform
Novellus NVLS Lehman Brothers Equal-weight » Underweight
LTX Corp LTXX Lehman Brothers Overweight » Equal-weight
KLA-Tencor KLAC Lehman Brothers Overweight » Equal-weight
NRG Energy NRG Calyon Securities Buy » Neutral
Oxford Industries OXM Morgan Joseph Buy » Hold
Applied Materials AMAT Lehman Brothers Overweight » Equal-weight
Genworth Financial GNW Banc of America Sec Buy » Neutral
BEA Systems BEAS Banc of America Sec Buy » Neutral
Microchip MCHP Banc of America Sec Buy » Neutral
General Maritime GMR Bear Stearns Outperform » Peer Perform
Alnylam Pharmaceuticals ALNY Piper Jaffray Outperform » Market Perform
Tuesday Morning TUES JP Morgan Overweight » Neutral
Target TGT Piper Jaffray Outperform » Market Perform
Endurance Specialty ENH Credit Suisse Outperform » Neutral
Aspen Insurance AHL Credit Suisse Outperform » Neutral
Western Union WU Sun Trust Rbsn Humphrey Buy » Neutral
Dynamic Materials BOOM Jefferies & Co Buy » Hold
AMEDISYS AMED Deutsche Securities Buy » Hold
Jones Lang LaSalle JLL Wachovia Outperform » Mkt Perform

You know, I have been so excited waiting for this thing. Is there something wrong with me? Anyway, Dow Chemical (DOW) released the paper Friday and it did not disappoint.

The paper details the Joint Venture Strategy (JV) Dow has embarked on. How important is it and why does it matter? In 2006, the JV’s accounted for nearly 20% of Dow’s EBIT (earnings before interest and taxes) of $4.9 billion. What is even more important here as the US economy slows it that 70% of the JV earnings are from outside N. America where growth is still surging. When you consider this segment is going to continue to grow, a careful reading of the paper then become very necessary. Fortunately for you, I have done it.

Why the JV’s? Essentially, Dow has established a number of joint ventures with upstream partners focused specifically on developing highly competitive,world-scale production facilities with access to cost-advantaged feedstocks. Dow brings technology, operational know-how, global reach and product diversity. Its partners bring cost-advantaged feedstocks, upstream expertise, local market presence
and/or regional perspective. This combination delivers a significant competitive edge to each joint venture.

Is it a wise use of cash and resources? Yes, for the last three years Dow’s return on investment in the ventures has been around 40%.

To date in 2007 announced JV’s include:

• In April, the Company signed a Heads of Agreement with the National Oil Company of Libya to operate and expand the Ras Lanuf petrochemical complex. The venture is a strong example of Dow’s joint venture agenda for its Basics businesses lowering capital investment while capturing the benefits of a strategic location and cost advantaged feedstocks.

• Also in April, Dow announced the execution of a Memorandum of Understanding with Chevron Phillips Chemicals, for a polystyrene and styrene monomer joint venture in the Americas. The joint venture would unite Dow’s industry-leading polystyrene activities with Chevron Phillips Chemicals’ solid position in styrene monomers.

• In May, Dow announced the start of a detailed feasibility study with Shenhua Group for the construction of a world-scale coal-to-chemicals complex in the People’s Republic of China.

• The same week, the Company signed a Memorandum of Understanding with Saudi Aramco to move further forward with the Ras Tanura chemicals and plastics production complex in Saudi Arabia. KBR was subsequently appointed as the project management company for the feasibility study.

• And in July, Dow signed a Memorandum of Understanding with Crystalsev, one of Brazil’s largest ethanol producers, to form a joint venture to design and build a world-scale facility to manufacture polyethylene from sugar cane.

Who are they?

The top JV’s that account for 90% of the “equity earnings” they contribute are:

• Compañía MEGA S.A.
• Dow Corning Corporation
• EQUATE Petrochemical Company K.S.C.
• Equipolymers
• MEGlobal
• OPTIMAL Group of Companies
• SCG-Dow Group
• Univation Technologies LLC

How do you know how well they are performing?

Dow’s equity investments are classified as “Investment in nonconsolidated affiliates” in the consolidated balance sheets. Under the equity method of accounting, Dow’s investment in a joint venture is increased by: the initial investment in the venture
(which could be in the form of cash or assets); subsequent capital injections (typically cash); and Dow’s share of joint venture earnings. Dow’s investment in a joint venture is reduced by: dividends paid to Dow by the joint venture; return of capital to Dow; and Dow’s share of joint venture losses.

Dow’s share of earnings (or losses) in its equity investments are classified as “Equity in earnings of nonconsolidated affiliates” in the consolidated statements of income. Dividends received from equity investments have no effect in the consolidated
statements of income; rather they reduce the carrying value of the investment.

Dow’s consolidated statements of cash flows include the cash flow effect of dividends and other cash distributions from the nonconsolidated affiliates. Since the consolidated statements of cash flows are based on Dow’s net income, the equity in
earnings/losses of affiliates (which are non-cash) must be eliminated and dividends included. The net impact of the elimination of the equity in earnings/losses of these joint ventures and addition of dividends is included as “Earnings of nonconsolidated
affiliates in excess of dividends received” in the consolidated statements of cash flows. Other cash distributions are included as “Distributions from nonconsolidated affiliates” in the consolidated statements of cash flow.

The entire paper (23 pages) can be viewed here (PDF.)

9/25, Housing, Natural Gas, Cheap Music Downloads

– I did not know Sept. 25th was such a notable day.

– According to this. As goes housing, so goes the economy. I hope it is wrong.

– Why would you build a plant in the US with these Natural gas prices.

– Here is how Amazon (AMZN) is selling songs for your iPod cheaper than Apple (APPL)

More rumors, true?

Sherwin-Williams (SHW) shares have been trading higher on buyout rumors. The paintmaker and retailer, which has a market cap of $8.5 billion and long-term debt of $292 million, has been the subject of rumors for the better part of a month now. The coatings industry is undergoing rapid consolidation the past 6 months and Sherwin, with its name recognition and pristine financials would be a delicious target for someone. Companies like Dow Chemical (DOW) have publicly announced their intentions to grow their coatings business by billion dollar increments and that can only be done through acquisitions. The recent Akzo Nobel buyout of ICI chemical served to further heat up the rumor mill. Dow had an interest in ICI but not at the price Nobel paid. Now that ICI is gone, could a bid for Sherwin be coming?

However, Sherwin may not be a takeout candidate, but instead an acquirer,based on recent actions. The company recently bought Spokane, Wash.-based Columbia Paint & Coatings Co. after completing the purchase of Philadelphia based MA Bruder & Sons. The purchases followed Sherwin-Williams’ CEO Christopher M. Connor’s comments earlier in the year that the company would continue to expand in the “do-it-yourself” market through acquisitions.

How profitable could the JV in “The Kingdom” be for Dow?

The Saudi Aramco – Dow Chemical (DOW) joint venture at Ras Tanura will have a plastics processing zone, and area of petrochemical processing the Saudi’s covet diversification to, hence the recent purchase of GE Plastics (GE). Saudi Arabia is one of the most sought after destinations for petrochemical investments because it offers the lowest priced ethane in the world.

According to Dev Corp International, which is involved in developing plastics projects in the Kingdom, land is not a problem and companies have a choice of setting up facilities either on the east or the west coast and options include Jubail, Yanbu and the Plastic Valley in King Abdullah Economic City near Rabigh.

How much is the savings doing business in Saudi Arabia?

Land is available for lease at $0.27/square metre/year, .
Power costs are as low as $0.03/KWh.

Funding should also not be a problem as soft loans are available from the Saudi Industrial Development Fund to cover up to 48% of the project cost. As the upcoming “white paper” from Dow will illustrate, the JV strategy enables the projects to be self-funded.

One chief concern that has been voiced was the availability of skilled labor for the facilities but the Saudi government is reported to have set up institutes to train operators. They have a goal of producing 300 skilled operators every year.

There is a worldwide rush to get into Saudi Arabia now and Dow is the first to get it’s foot in the door in petrochemical processing and it is doing so on an unprecedented scale. What this will do is take the raw material costs which now stand at over 50% of Dow total cost structure and lower that dramatically, throwing more cash to the bottom line.

Based on recent history, that cash will be well taken care of for us shareholders.

On May 25th I posted “Dow has long coveted Dupont’s (DD) seed business an the offer was an attempt to get it. Since that seems to have failed, could a Monsanto (MON) joint venture be coming? It would be a way for Dow (DOW) to get heavily into the seed business and provide Monsanto cheaper building blocks for its products” The answer is apparently ..YES.

Andrew Liveras announced this morning on CNBC that Dow’s (DOW) AgroScience Division and Monsanto (MON) have collaborated to create SmartStax™, the most complete yield protection ever made available in a corn hybrid It features eight different Dow AgroSciences and Monsanto herbicide tolerance and insect-protection genes and is expected to be available to corn growers by the end of the decade (next year and a half). The multi-gene product will protect the corn crop against above- and below-ground insects and also guards the crop from being damaged by certain weed control chemicals. It will be the only seed on the market with this level of protection.

Dow and Monsanto also reached a 10-year agreement to exchange lines of corn in the United States, which will allow the companies to create additional hybrid seeds. The agreement is particularly beneficial to Dow, which is a relatively small but rapidly growing player in the corn seed market. Dow AgroSciences head Jerome Peribere said, “As we do have small market share, this is aiming at boosting essentially our part of the hybrid market share,” said

Dow will generate new royalty income from the agreement and this provides an important platform for future business growth. SmartStax will be incorporated into new, higher-yielding hybrid seed combinations and Dow will stack it with the other cutting-edge trait technologies currently under development.

The world’s demand for is almost unquenchable currently. Any seed that provides additional yield for farmers will be hugely profitable for the farmer and is practically guaranteed success. Monsanto’s recent 71% earnings groth the last quarter ought to proof enough of that. By partnering with the #1 seed company, Monsanto, Dow has assured success with this venture.

Then Liveris did say something that made me laugh…”This agreement provides a further endorsement of our strategy: we’re being patient, we’re being disciplined and we’re investing in both organic opportunities and targeted acquisitions as we deliver on our commitment to become .a predictable, long-term earnings growth company.”

Why did I laugh, he could have said that for everything they have done the past year and a half… gotta love it

There is a call today at 10:30. I will post any additional notables..

Dow Chemical(DOW) said on Thursday that its Dow Epoxy unit agreed to acquire three companies to expand its epoxy systems business.

The company agreed to buy UPPC AG in Germany, and POLY-CARB Inc and GNS Technologies here in the US. Terms of the transactions were not disclosed each acquisition is expected to close within 30 to 45 days. These acquisitions are perfectly consistent with Dow’s announced strategy to invest in its downstream performance businesses to further distance itself from the cyclical commodity chemicals business. For Dow Epoxy, the acquisitions will accelerate the growth and geographic expansion of its new Dow Epoxy Systems business unit, launched earlier this year.

About the companies(from their websites)

GNS Technologies: Specializes in providing high performance products and customized systems to thermoset polymer markets with a focus on cross-linking polymers such as epoxies, polyurethanes, polyureas, etc. used for civil engineering, industrial maintenance and steel structure coating applications. Additional info about GNS Technologies at www.gnstechnologies.com.

POLY-CARB Inc.: Provides epoxy products and systems in the following industries: highway bridge restoration and waterproofing, parking structures restoration and waterproofing, pavement striping and delineation, industrial floor surfacing and maintenance, corrosion control and tank linings, structural adhesives, and coatings and grouts. Additional info about POLY- CARB at www.poly-carb.com.

UPPC AG: UPPC AG is a leading systems and hardeners supplier deeply seated in the civil engineering, specialty coatings and composites industries, as well as select specialty markets. The company is headquartered in Baltringen, Germany and was established in 1986. Additional info about UPPC AG at www.uppc.de.

Big deal? Not huge but continued affirmation that Dow is on a very disciplined path.

Oh yeah, in case you did not hear it, Dow also declared a dividend of 42 cents per share today (384th consecutive), payable October 30, 2007, to shareholders of record on September 28, 2007. This gives Dow an annual yield at this rate of a solid 4%, nice. Since 1912, Dow has paid its shareholders cash dividends every quarter and has either maintained or increased the quarterly dividend amount throughout that time.

At the last earnings call Dow (DOW) spent quite a bit of time on results from its “JV Strategy” and then promised a white paper on it to give more detail to investors. Well, the time for it is nearly here..

Currently Dow is involved in about 80 joint ventures (JV’s) around the globe. A dozen of them account for 90% of the “equity earning” they produce. The upcoming paper that should be released electronically is expected to be ready by the end of September. It will be updated annually to reflect results for the prior year and give guidance for the upcoming one. I get the impression it will be release separately from the annual report but this may change. About a page will be dedicated to each of the dozen dominant JV’s and will answer questions like:

1- Why enter the specific JV and who are the partners
2- Principle products produced, volumes, markets
3- Equity Earnings
4- Future guidance

Notables:

1- The current JV strategy is “self funding” meaning that funds from operations fund startup costs and produce profits back to Dow.

2- The upcoming massive Kuwait 2 project is being funded by results from Kuwait 1 meaning there is no balance sheet impairment or current cash being used.

Neither myself nor does Dow expects the JV strategy to become the dominant earnings driver for Dow, but it will become very significant and it’s growth over the next 3-5 years should be spectacular as many of the recently announced ventures come online. The performance chemical unit, which is helping Dow relinquish itself from the cyclical businesses that have dominated it’s past will be the meat of Dow’s earnings (at least for the foreseeable future). That is clearly by design and in accordance with Liveris’s strategy to provide more predictability to Dow.

All in all I cannot wait to read it and will post on it very soon after it’s release. One has to suspect that the reason Dow is doing this is that it sees value in the JV’s that are not being fully realized by investors into Dow’s valuation. By providing clarity and guidance in the JV’s, they will enable large investor’s to have more confidence on Dow’s earnings profile.

I cannot think of anything to date that the Andrew Liveras lead Dow Chemical (DOW) has alluded to that has not happened. No reason to start doubting now.

“We expect our business in India to touch $1 billion by 2010 from the present $300 million. Dow looks at the proposed chemical hubs as an opportunity to scale up its manufacturing capabilities in the country,” Peter G Halloran, director-supply chain, Mumbai service center, Dow Chemical International, said last week. DOW also expects to see 50% of its R&D initiatives coming from India in the next 3-4 years, according to Halloran.

Dow Chemical (DOW), is betting big on the proposed Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIR) in the country to scale up its manufacturing capabilities in line with upcoming business opportunities much like they are doing in China, Russia, Iraq and Saudi Arabia.

Halloran said DOW was in talks with various government agencies to set up manufacturing facilities here.

India’s Commerce Minister Kamal Nath recently said that since DOW did not have a direct link to the Bhopal gas tragedy (it bought Union Carbide several years after the tragedy), its investments in India would not be adversely affected.

DOW is making huge bets overseas where inputs will be cheap for both raw materials and skilled labor. If you go back and review most of their releases, these project are scheduled to all come online around 2010. What about between now and then? DOW is becoming a cash producing machine and these new projects are being paid for with produced funds, not cash pout of pocket and that point cannot be emphasized enough. It means DOW can keep these projects coming, adding to earnings without any balance sheet weakening, risk to it’s near 4% (and growing) dividend or reduction in it’s stock repurchase plans. All these are very good things for investors.

The next big event, (aside from any additional almost weekly expansion plans) will be the upcoming “white paper” this fall. In it they will detail the expected results from Liveras’s strategy. I think shares are treading water currently because Wall St. is having trouble determining the value of all the recent joint ventures DOW has entered into. Without a clear understanding of their impact to earnings, people are not able to value DOW.

Personally I think the value of these in a year will be multiples of what they now the paper, when release will illustrate this. What it will also show is DOW is becoming less dependent on the US market and even more of a worldwide player is areas other that cyclical chemicals that their fortunes have been predominately tied to until as recently as last year.