ICS Magazine

Dow profits drop due to higher costs

January 25, 2001
Midland, Mich. -- Dow Chemical Co. announced its fourth-quarter income fell 9%, hurt by significantly higher costs for raw materials and a slowing economy. Dow is acquiring Union Carbide Corp. and warned that business conditions were not expected to improve in the following months, similar to recent statements by rivals such as DuPont Co. According to Dow, its net income for the fourth-quarter fell to $243 million, or 36 cents a diluted share, from $267 million, or 40 a share, at the same time last year. Last year’s period involved special charges, including charges for restructuring that cut earnings by 10 cents a share.

According to First Call/Thomson Financial, which tracks estimates, Dow's earnings matched analysts' expectations of 36 cents a share. Similar to other chemical companies, Dow has been hit hard by rising costs for crude oil and natural gas -- key raw materials in the chemical industry – in addition to a weakening economic picture. While energy prices will most likely remain volatile for the first half of 2001and economic slowdown could challenge the chemicals industry, Dow said it expects some recovery from the middle of 2001 and said it would continue to focus on managing its working capital and cutting costs. Dow had hoped to close its deal to buy Union Carbide at this same time last year, but the deal has not yet been approved by anti-trust regulators. If the deal is completed, the combination would trail only DuPont in worldwide sales.