Dow Chemical Reports

• Posted by ToddSullivan
• on July 30th, 2009

There are two main items here:

1- The businesses Dow is retaining are profitable at these levels
2- The possibility of a Dow Ag sale seems to be slipping farther away almost daily

The cheat sheet:

Second Quarter 2009 Highlights
• Dow reported a loss of $0.47 per share. Excluding certain items and discontinued operations
in the quarter, the Company earned $0.05 per share, driven by favorable volume trends,
management’s accelerated cost interventions and the Company’s ability to maintain price
from the prior quarter.

• The Company is ahead of its commitments to reduce structural costs, with a decrease of more
than $375 million in costs in the quarter and more than $600 million year to date due to
ongoing cost reduction and restructuring efforts, as well as cost synergies achieved as a result
of the acquisition of Rohm and Haas. To date, the Company has achieved more than
70 percent of its 12-month cost synergy run rate goal, which began on April 1.

• Volume and price were each down 20 percent on a pro forma basis versus the year-ago
period. Sequentially, volume increased five percent with growth of at least 20 percent in
Electronic and Specialty Materials, Coatings and Infrastructure, and Performance Systems.

• Dow’s global operating rate improved seven percentage points to 75 percent versus the prior
quarter, driven by double-digit volume growth (compared with pro forma sales) in Asia
Pacific; India, Middle East and Africa (IMEA); and Latin America.

• At a company level, EBITDA excluding certain items improved sequentially by 64 percent
on a pro forma basis. This was driven by increases in the Advanced Materials and
Performance Products and Systems segments, which were up by $634 million; and Basic
Plastics, which improved by $284 million. Health and Agricultural Sciences decreased by
$238 million due to declines in agricultural chemicals.

What to look for in the future?

1- Dow Ag sales officially comes off the table
2- The dividend……does it get raised?
3- Operating rates creep above those of last year
4- Basics division, does it get sold?

Pretty simple. Management is great at controlling costs and is very proactive in that area. I would not expect the any dividend action this year or even into next depending clearly on what happens with additional asset sales. But it is something to watch that is a clear determinant of the general health of the company and managements outlook.

Shares are up 46% this year (down 30% for the past 12 months). When shares cratered in March to $6 it was the buying opportunity of a lifetime in shares (no I did not get them there, we bought at $8-$9). Dow’s overall business environment continues to improve so I will hold shares.

Full Report:
Dow Chemical Q2

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