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Mixed Results for Fourth Quarter

Where gains occurred, better prices and volumes drove improvements

February 2, 2004 | A version of this story appeared in Volume 82, Issue 5

There is little overall direction evident in the results of 12 large and midsized chemical companies that have reported fourth-quarter results. Half have had declines in earnings from continuing operations, excluding significant one-time gains and charges. The other six showed improvements.

The six with higher earnings include Monsanto and Dow Chemical, which went from red ink in fourth-quarter 2002 to positive results in the same period in 2003. Monsanto improved by $19 million, rising to $10 million in earnings from a $9 million loss in the same period a year earlier. Sales at Monsanto increased 21.5% to $1.03 billion. CEO Hugh Grant says performance for the quarter “was anchored by improved Roundup and branded seed corn results in Brazil.” Indeed, total sales for the company&a#146;s Roundup herbicide improved 65% from the prior year’s quarter to $429 million.

But it was industry leader Dow that showed an especially large jump, rising from a loss of $172 million in the last three months of 2002 to a gain of $475 million in the 2003 period. Including such one-time items as tax benefits in the fourth quarter of 2003 and charges aken in the 2002 quarter, the improvement was even more significant. Fourth-quarter net income totaled $929 million against a loss of $809 million in the same period in 2002—a $1.74 billion difference.

Number two DuPont, on the other hand, had an earnings decline of 14.2% to $296 million. DuPont’s net income, however, was up 81.7% to $636 million, which includes the money received from the sale of its Invista fibers unit.

When companies had higher earnings, it was generally because improved demand and cost-cutting measures offset higher feedstock and energy costs. For instance, Dow says a 12% increase in prices and 8% higher sales volume helped to make up for a 15% rise in feedstock and energy costs.

DuPont, conversely, says higher raw material costs for the fourth quarter reduced earnings by about $230 million. Cost cutting also helped earnings but did not completely overcome the effect of the higher prices paid for raw materials.



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