Issue Date: August 1, 2011
Earnings Strength Continues
U.S. chemical companies acted quickly to raise prices across the board in the second quarter, resulting in higher earnings compared with the same period last year. The price increases were driven by an upswing in global demand and the need to stay ahead of rising costs for raw materials and energy.
Dow Chemical’s second-quarter earnings of 85 cents per share beat consensus expectations by 6 cents, said Hassan I. Ahmed, an equities analyst at Alembic Global Advisors, in a note to investors. “Volume strength was evident across all geographies and segments,” he told clients. “We were particularly encouraged to see year-over-year volume gains in Dow’s more developed markets: North America and Europe, Middle East, and Africa.”
Overall, Dow’s earnings of almost $1 billion were up 61% compared with those from the second quarter of 2010. Its sales surpassed $16 billion. “Dow’s price and volume management more than offset rising feedstock and energy costs,” CEO Andrew N. Liveris said in a conference call with analysts. Standout segments for the quarter were agriculture, which posted record sales, and the water treatment and plastics businesses.
DuPont CEO Ellen J. Kullman also named agriculture as a major contributor to growth in the quarter, along with electronic and performance chemicals, especially titanium dioxide, refrigerants, and industrial products. In a call with analysts she stressed the importance of the photovoltaics market to the firm’s earnings and forecast a 15% growth in photovoltaics demand for the full year.
DuPont’s sales increased by 19% to $10.3 billion compared with last year’s second quarter. According to Kullman, 3% of the growth came from product lines gained in the $6.6 billion acquisition of Danisco, completed in May (C&EN, Jan 17, page 7).
Dow and DuPont both reported volume growth in most markets other than construction, which was flat. In contrast, firms including Cabot, Celanese, Cytec Industries, and Lubrizol said increased revenues came mainly from higher prices and new products.
Both Liveris and Kullman said growth in the second half of the year is likely to be modest. On the plus side, the chemical industry is looking ahead to stronger demand from the auto industry, which was adversely affected in the second quarter by the Japanese tsunami and earthquake. But government actions in China to contain inflation could dampen growth for some firms.
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