Second-Quarter Results

The two largest chemical companies in the world, BASF and Dow Chemical (see page 11), reported second-quarter results that were bad compared with the same period a year ago but not so terrible when contrasted with the first quarter.

Dow Chemical reported a second-quarter net loss of $486 million on sales of $11.3 billion. During the same period in 2008, the company earned $762 million on $16.3 billion in sales. Comparing before-tax earnings, excluding unusual items, the company earned $1.6 billion during the 2009 second quarter versus $946 million in the first quarter.

BASF earned $482 million during the second quarter on $17.6 billion in sales, a decline of 74% and 23%, respectively, versus the same period a year ago. The results missed analyst consensus earnings estimates of $533 million for the quarter.

“This was a very active quarter for Dow, and a successful one on many fronts,” Dow CEO Andrew N. Liveris told analysts.

Last week, Dow focused on its strategic moves rather than on its earnings. The company is selling its interest in the Optimal Group—a series of Malaysian petrochemical joint ventures—to its partner, Malaysia’s national oil company, Petronas. The $660 million deal is the latest in a series of divestitures—including the sale of its interest in a refinery, its calcium chloride business, and Morton Salt—meant to fine tune its portfolio and to help it pay for its Rohm and Haas acquisition.

Dow also disclosed that it is folding its polycarbonate, styrenics, and styrene-butadiene rubber and latex businesses into a new subsidiary called Styron Corp., preparing it for a possible sale.

BASF also had some positive points to talk about. BASF’s chemicals and plastics divisions showed some improvement in the second quarter versus the first quarter. Kurt Bock, BASF chief financial officer, told analysts that he saw positive signs that the worst is over, but wasn’t optimistic about a robust recovery in 2009. “In North America, the recession is bottoming out, and China is starting to see stronger growth,” he told analysts.