Dow’s results for first quarter of 2023 come in at a loss

In the first major earnings announcement of 2023, Dow has posted a loss for the first quarter, an indication that the weak global economy, particularly in Europe, has created tough conditions for the chemical industry.

Dow’s sales for the quarter were $11.9 billion, a 22% decline from the first quarter of 2022. The company posted a net loss of $73 million. In the year-ago quarter it posted profits of nearly $1.6 billion.

“Declines in all operating segments were driven by continued soft global macroeconomic activity,” Dow CEO Jim Fitterling said in a conference call with analysts.

The results are in line with the expectations of BASF and Covestro, which both recently disclosed estimates for the quarter. Blaming low production volumes, BASF expects sales in the quarter to decline by 13%. Covestro anticipates a 20% drop.

Still, Dow notes some positives. Sales were flat versus the fourth quarter of 2022 while earnings before taxes improved, an indication that economic conditions, including high energy prices driven by the war in Ukraine, have stabilized.

European economic forecasts are getting more hopeful. The European Union is “set to narrowly escape the recession that was pencilled in back in Autumn,” the European Commission stated in a recent report. EC economists forecast modest 0.8% growth for the EU in 2023.

Dow’s president and chief financial officer, Howard Ungerleider, noted that conditions will remain challenging in Europe in the near term. “While energy prices have remained lower than previously anticipated, higher inflation levels continue to weigh on both consumer and business sentiment,” he told analysts.

Due to the high cost of operating chemical plants in Europe versus other parts of the world, the region will also likely be the focus of the $1 billion in cost cutting and 2,000 in layoffs Dow is planning this year. The company estimates that 75% of the layoffs will occur by the end of the second quarter.