news of the week
MAY 3, 2010 EDITED BY KIMBERLY R. TWAMBLY & LAUREN K. WOLF
EARNINGS JUMP IN FIRST QUARTER
RECOVERY: Return of consumer
demand brings chemical results
closer to prerecession level
FIRST-QUARTER CHEMICAL earnings are far surpassing analysts’ expectations, and for the first time since late 2008, company executives are
talking about growth, rather than mere survival.
“The consumer is finally returning,” observed Andrew N. Liveris, CEO of Dow Chemical, in a conference
call with analysts. Sales at the company, the largest U. S.
chemical producer, rose 48% compared with last year’s
first quarter, to $13.4 billion. When results from sold-off businesses are removed, the rise was 33%.
The sales boost at Dow and other chemical firms
can be attributed roughly equally to higher prices and
increased volumes. Although Asia’s brisk economy was
the leading source of growth for Dow, Liveris reported
that business in North America and Europe showed
“notable improvements.”
The rebound in consumer spending buoyed most of
Dow’s businesses. Its performance, specialties, and coat-
ings segments benefited from sharply higher demand for
cars, electronics, appliances, packaging, and water treat-
ment. Referring to the company as “the new Dow” after
its integration of Rohm and Haas, Liveris told analysts he
still plans to find joint-venture partners for its remain-
ing basic chemicals and plastics businesses, even though
sales were up significantly in those segments as well.
A year of dramatic cost-cutting helped Dow and at
least seven other firms leverage the rebound and more
than double earnings compared with the first quarter
of 2009. Dow’s earnings per share of 43 cents blew past
the 25 cents expected by John Roberts, a stock analyst
at Buckingham Research, who wrote that customers
may be buying more than normal in anticipation of possible price increases.
Similarly, DuPont’s earnings per share of $1.24 beat
consensus expectations by 18 cents. Earnings of $1.1
billion were more than double last year’s first quarter, on a sales increase of 24%. “DuPont’s aggressive
restructuring has yielded benefits, as margins in the
performance businesses have returned to prerecession
levels,” wrote P. J. Juvekar, a chemicals analyst for Citigroup, in a note to investors.
Like Dow, DuPont saw its largest sales gro wth in
Asia, up 71% from last year to $1.6 billion. Globally, in
addition to sales increases to automotive and electron-
ics customers, demand for photovoltaic (PV) materials
“surged beyond our expectations,” DuPont CEO Ellen
J. Kullman told analysts, thanks to government incen-
tives and pent-up demand from last year. “DuPont sales
in PV are so strong that we now expect to surpass $1 bil-
lion in 2011, one full year ahead of plan,” she said.
PETER CUTTS PHOTOGRAPHY
Liveris
FIRST-QUARTER CHEMICAL RESULTS
Earnings soar on recovery-driven increases in sales volumes, prices
Air Products
Albemarle
Ashland
Celanese
Cytec Industries
Dow Chemical
SALES EARNINGSa
($ MILLIONS)
$2,249 $267
580 70
2,248 199
1,388 106
787 33
13,417 594
CHANGE FROM 2009
SALES EARNINGS
15.0% 29.6%
19. 1 176.8
13.0 91.3
21. 1 783.3
28. 6 1,111.1
48. 4 191.2
PROFIT MARGINb
2010 2009
11.9% 10.5%
12. 1 5. 2
8. 9 5. 2
7.6 1. 1
4. 2 0.4
4. 4 2. 3
DuPont
Eastman Chemical
Mosaic
PPG Industries
Praxair
Sigma-Aldrich
8,484
1,564
1,732
3,126
2,428
572
1,129
101
223
117
340
106
23. 5
38. 5
25.9
12. 3
14. 4
10. 2
131.4
461.1
278.0
265.6
17. 2
26. 2
13. 3
6. 5
12. 9
3.7
14.0
18. 5
7.1
1. 6
4. 3
1. 1
13.7
16. 2
a After-tax earnings from continuing operations, excluding significant extraordinary and
nonrecurring items. b After-tax earnings as a percentage of sales.
Overall, industry executives and analysts say cost-cutting, increases in capacity utilization, and rising consumer demand will support earnings growth in 2010. Indeed, DuPont, Celanese, Praxair, and Nalco raised their
earnings expectations for the year. But analysts warn
that the recovery will bring higher raw material costs
that could take a bite out of margins.—MELODY VOITH
