Dow and DuPont wrapped up the final quarter of 2019 with lower sales and earnings compared with the same quarter of 2018 because of soft demand from industrial buyers. Those buyers—particularly makers of cars and consumer electronics—are using up their existing raw materials while they wait out an uncertain economy.
The lack of growth was not unexpected by anyone reading news headlines. Trade tensions stretched on through the end of the year, and China’s giant economic engine continued to ramp down.
Dow navigated those waters with “feedstock flexibility, a lean cost structure, and leading positions in consumer-driven end-markets,” CEO Jim Fitterling wrote to investors. The good news in consumer markets included double-digit demand growth in Asia for plastics used in packaging and in medical and hygiene products.
Overall, production volumes at Dow slipped 2% compared with the 2018 quarter, but prices of basic chemicals like polyethylene as well as more specialized intermediates dropped sharply. In the fourth quarter, Dow’s earnings fell 28% to $577 million compared with pro forma figures for the fourth quarter of 2018.
At DuPont, weak automotive and electronics markets pushed volumes down 4% for the year, but prices were steady. Overall, earnings dropped 36% in the fourth quarter to $704 million.
There was strong demand for some DuPont specialties, however. The firm saw a sales boost in chemicals used to make new 5G-enabled smartphones, a rare bright spot in electronics. And the company saw double-digit demand growth for water treatment membranes.
While neither company expects troubled markets to soon turn around, they’re not announcing major restructurings or layoffs. Instead, they’re investing in growth businesses and infrastructure to capture lower costs.
DuPont, for example, snapped up three water treatment businesses to expand its capabilities. And it recently struck a deal to merge its Nutrition & Biosciences division with International Flavors & Fragrances to offer a wider portfolio of food, personal care, and other consumer specialties.