Issue Date: October 31, 2016 | Web Date: October 28, 2016
Dow, DuPont raise earnings amid demand for cars, houses, and food
Demand for high-margin specialties used in consumer products lifted the chemical industry’s earnings above expectations in the third quarter. Firms reported more sales of chemicals used in packaging and autos, while volatile electronics and agriculture markets appeared to stabilize.
Dow Chemical captured robust demand for silicones used in automotive and construction markets, thanks to its move last year to obtain full ownership of Dow Corning. In addition, it saw 11% volume growth in performance plastics compared with the year-ago quarter, which helped boost overall earnings by more than 7% to over $1 billion.
Dow CEO Andrew N. Liveris noted that success came amidst a “persistently slow-growth global economic environment.” He stressed the firm is looking to the future with the start-up of its Sadara petrochemical joint venture in Saudi Arabia and steady progress on an ethylene cracker in Texas.
Consumer trends cranked up DuPont’s earnings by 48% to $218 million. It sold more performance materials for the Chinese auto market and saw sales of Tyvek protective materials grow because of a construction rebound in North America.
But the strongest sellers were in DuPont’s biobased businesses. Earnings from probiotics, cultures, and other ingredients soared 32%, while biotech products used in home and personal care grew 28%. Demand was soft for crop chemicals and electronics materials, but cost-cutting moves stabilized earnings in those businesses.
Dow and DuPont executives updated investors on their upcoming merger, saying additional regulatory paperwork has moved the expected combination past 2016 to the first quarter of next year.
Sales were flat or lower across the industry, largely due to effects from currency exchange and lower costs for raw materials and energy that were passed on to customers.
At BASF, a 20% sales drop stemmed mainly from divestiture of its gas trading and storage business. The firm reported increased earnings and volumes for its chemical business owing to demand from the auto and construction industries. Sales growth in China was slightly higher than expected, BASF said, while Europe pitched in with moderate growth across all sectors. In contrast, volumes sank in Brazil, BASF’s largest market in South America.
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