Company Delivers Quarterly Sales Record, Volume Gain of Five Percent and Record Performance from Dow AgroSciences
Second Quarter 2008 Highlights
- Sales for the second quarter set another Company record, rising 23 percent from the same period last year to $16.4 billion. Double-digit price increases were recorded in all operating segments and all geographic areas.
- Volume grew 5 percent, with 12 percent growth in geographic areas outside of North America, including an 11 percent volume increase in Europe.
- Earnings for the quarter were $0.81 per share, compared with earnings per share of $1.07 in the same quarter last year.
- Purchased feedstock and energy costs surged 42 percent, or $2.4 billion, compared with the same quarter last year, the largest year-over-year increase in the Company's history.
- EBIT in the combined Performance segments rose compared with the same period last year despite substantial increases in raw material and supply chain costs.
- Agricultural Sciences set a new quarterly record for both sales and EBIT. Sales rose 25 percent, and EBIT grew more than 60 percent versus the same period last year.
- Equity earnings were $251 million for the quarter, once again demonstrating consistent contributions from joint ventures to the Company's results.
The Dow Chemical Company (NYSE: DOW) reported sales of $16.4 billion for the second quarter of 2008, 23 percent higher than the same period last year, setting another quarterly sales record.
Net income for the quarter was $762 million. This compares with net income of $1,039 million in the second quarter of 2007. Dow reported earnings for the current quarter of $0.81 per share versus earnings of $1.07 per share in the second quarter of 2007.
Price was 18 percent higher than the same quarter last year, with double-digit increases in all operating segments and all geographic areas. These price gains offset significant increases in purchased feedstock and energy costs, which were $2.4 billion higher than the same period last year. However, these price increases were not enough to cover higher total raw material and supply chain costs.
Year over year, volume was up 5 percent, matching the highest quarterly increase since 2004. In the combined Performance segments, volume increased 7 percent. Growth in emerging geographies of 12 percent, and 11 percent growth in Europe, more than offset economic weakness in North America. Volume in North America was also impacted by various asset shutdowns, business exits and the formation of Americas Styrenics, a new joint venture between Dow and Chevron Phillips Chemical Company.
Equity earnings were $251 million for the quarter, once again demonstrating strong and consistent contributions from joint ventures to the Company's results.
"The surge in oil prices from first to second quarter added another $1 billion of cost sequentially, and we reacted quickly by announcing two broad-based price increase initiatives, adjusting plant operating rates and implementing additional cost-cutting measures," said Andrew N. Liveris, chairman and chief executive officer. "The fast implementation of these price increases limited margin compression to approximately $130 million in the quarter. This is a remarkable performance when you consider that this is only 1 to 2 percent of our total quarterly hydrocarbon and energy costs.
"These short-term actions, in addition to key elements of Dow's strategy, such as our large global footprint, our investments in Performance businesses and our asset light ventures, enabled us to weather unparalleled increases in hydrocarbons, supply chain and other costs."
Outlook
Commenting on the Company's outlook, Liveris said: "The surge in oil prices, which has further weakened the U.S. economy, has created new uncertainties in demand around the world. We believe the U.S. economy will continue to weaken for the rest of 2008, and that the outlook for the global economy will remain uncertain. Despite this, our results have demonstrated that our strategy for diversification on a global and end-use market basis has allowed us to manage through these challenging times.
"In addition, we remain committed to furthering our transformation, and to changing the earnings profile of our company. Two recent announcements speak well to this commitment. First, the announcement of our acquisition of Rohm and Haas, which will create the leading specialty chemicals and advanced materials company in the world. And second, the selection of the CEO and headquarters location for K-Dow Petrochemicals, our new joint venture with Petrochemical Industries Company of Kuwait, which we expect to close by the end of this year. These actions show our determination, and the progress we are making toward transforming Dow into an earnings growth company."
About Dow
With annual sales of $54 billion and 46,000 employees worldwide, Dow is a diversified chemical company that combines the power of science and technology with the "Human Element" to constantly improve what is essential to human progress. The Company delivers a broad range of products and services to customers in around 160 countries, connecting chemistry and innovation with the principles of sustainability to help provide everything from fresh water, food and pharmaceuticals to paints, packaging and personal care products. References to "Dow" or the "Company" mean The Dow Chemical Company and its consolidated subsidiaries unless otherwise expressly noted. More information about Dow can be found at www.dow.com