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Weaker Demand Pressures Dow Chemical 2Q

Fri, 07/27/2012 - 10:29am
The Associated Press

MIDLAND, Michigan (AP) — Dow Chemical Co.'s second-quarter net income fell 34 percent as weaker demand led to lower prices. Softness in Europe and a stronger dollar also weighed on results. The biggest U.S. chemical maker expects to accelerate cost-cutting efforts.

Its results missed Wall Street estimates, and the company's shares dropped 3 percent in premarket trading Thursday.

Dow Chemical can offer a broad overview of global economic conditions because its products are used in nearly every sector. Its materials are used in products ranging from televisions and toys to automobiles.

Since the end of the first quarter, economies have slowed in the U.S. and China. Some European countries have fallen into recession as the massive debt crisis there continues. Manufacturing declined in all three regions.

Experts say that has cut demand for chemical products in a wide range of industries; including commercial construction, housing and consumer products like electronics.

"Sustained uncertainty in the world economy continues to present a challenging operating environment, and this quarter was no exception," Chairman and CEO Andrew Liveris said in a statement.

He said Europe's troubles have continued to pressure the company, while activity in China and other emerging markets slows. The U.S. is also a factor, Liveris said, as the nation's recovery is moderating from earlier in the year due to weakening consumer confidence, softer trade flows and high unemployment.

To contend with these conditions, Liveris says Dow Chemical will ramp up its efforts to cut costs.

"Despite these near-term headwinds, Dow has the right strategy in place to deliver over the long term," he said.

For the April-June quarter, Dow Chemical's earnings fell to $649 million, or 55 cents per share. That's down from $982 million, or 84 cents per share, a year ago.

Analysts forecast higher earnings of 64 cents per share, according to a poll by FactSet.

Revenue dropped 10 percent to $14.51 billion, missing Wall Street's estimate of $15.69 billion.

Prices fell 5 percent, declining in all geographic regions. The biggest drop — 8 percent — was in Europe.

One bright spot was the agricultural sciences division, which reported a 12 percent rise in sales.

Sales declines were reported by the electronic and functional materials unit, coatings and infrastructure solutions, the performance materials segment, performance plastics and the feedstock and energy division.

Shares of Dow Chemical fell 92 cents, or 3 percent, to $29.35 before the market opening.

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