By Frank Esposito, Plastics News
Midland, Michigan-Jubilation over a record 2006 sales year for Dow Chemical Co. was offset by a drop of almost 18 percent in the firm's annual profit.
Midland-based Dow rang up sales of $49100 million in 2006, with more than half of that amount coming from the firm's basic and performance plastics units. The total sales number was up 6 percent against 2005, while sales in performance plastics - including polyurethanes, epoxy and elastomers - were up 12 percent and sales in basic plastics - including polyethylene, polystyrene and polypropylene - were up almost 8 percent.
But Dow's profit fell from $4500 million in 2005 to $3700 million last year. In plastics, pretax profit also told a less positive story. Performance plastics' pretax sank 35 percent, while basic plastics' pretax slumped almost 16 percent.
Andrew Liveris, Dow chairman and chief executive officer, described 2006 as "a tremendous year for the company."
"The diversity we have created across several different dimensions … overcame the ups and downs of a volatile year," he said in a Jan. 25 news release.
Pricing in Dow's basic plastics unit fell 3 percent in the fourth quarter, officials said in the release. Strong improvements in Europe and the Asia-Pacific region were offset by "a marked decline" in North America. This situation "was particularly evident in the polyethylene business, which reported increased demand in every geographic region, but saw North American prices decline by around 25 percent from the same period last year," officials said.
The story in PS was a bit different, but also not positive.
"Despite reporting price improvements for polystyrene in every geographic region [in the fourth quarter], the overall double-digit increase was not sufficient to keep up with the escalating cost of [feedstock] benzene, which continues to present a significant challenge for the business," officials said.
Dow is one of the world's largest producers of PE and PS. In North America, Dow ranks first in LLDPE, LDPE and PS, and fifth in HDPE, in terms of estimated annual sales.
In a 25 Jan note to investors, stock analyst Kevin McCarthy of Banc of America Securities llc in New York wrote that Dow's US volumes reflected soft auto and housing markets as well as "an unwillingness among buyers to purchase commodity petrochemicals during the recent deflationary environment that has exerted downward pressure on commodity petrochemical prices since September."
On Wall Street, Dow's per-share stock price bottomed out at around $35 in mid-2006 but since then had rebounded and was just above $41 in late trading 30 Jan."