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Dow Chemical discussed its attempt at "reshaping [its] plastics portfolio for long-term success" in its first-quarter 2011 earnings report, saying that it will pursue an end-market orientation for the business, targeting packaging, hygiene/medical, elastomers, and electrical and telecommunications.

PlasticsToday Staff

April 28, 2011

2 Min Read
Dow reconfigures plastics portfolio

Dow Chemical discussed its attempt at "reshaping [its] plastics portfolio for long-term success" in its first-quarter 2011 earnings report, saying that it will pursue an end-market orientation for the business, targeting packaging, hygiene/medical, elastomers, and electrical and telecommunications.

Reviewing steps it has already taken, Dow noted that it placed its polyethylene terephthalate (PET) unit into a JV; divested its styrene monomer, polystyrene (PS), acrylonitrile butadiene styrene (ABS), and polycarbonate (PC) businesses, and "right sized" its polypropylene (PP) and high-density polyethylene (HDPE) units. Future segment reporting will be on Performance Plastics, which Dow describes as elastomers; wire and cable; specialty packaging and films; adhesives and functional polymers; with "technology differentiated" linear low-density polyethylene (LLDPE) and low-density polyethylene (LDPE).

Earnings up 90%

The company reported that earnings per share were up 90% to $0.82, with the second highest EBITDA it has ever recorded. The first quarter of 2011 also marked the eighth straight quarter of year-over-year margin expansion. Sales rose 20%, with double-digit gains in every geographic area and operating segment. Volume was up 8% and prices increased by 12%. Dow said those price increases offset by $700 million increase in feedstock and energy costs.

Plastic prices climb 14%

Year-over-year plastics volume was up 5%, electronic and specialty materials up 11%, and performance products up 2%. Geographically, the most growth came in EMEA (15%), followed by Asia Pacific (8%), Latin America (7%), and North America (3%).

Plastics prices rose 14%, the same amount as chemicals and energy, and trailing only performance products (16%) in the company's portfolio. By region, prices rose by double digits in every geography, led by EMEA (15%), with Latin America up 14%, and Asia Pacific and North America up 10%.

Within plastics, volume was up 5% overall and it increased by more than 30% in Asia Pacific, fed in part by the company's new Thailand investment. Polypropylene had a double-digit sales gain that led by growing demand in emerging economies.

Integrated ethylene

The company also touted its work towards integrating ethylene to further enhance growth. Dow recently announced plans to expand its own ethylene production by 20% over the next 2-3 years. By the time these efforts are completely finished, the company says more than 85% of its ethylene will come from its own ethane in 2017, compared to around 60% for the industry at large. The company also announced that its work to further integrate propylene into its business will reduce the amount of the monomer that Dow has to buy to less than 10% by 2019. For the first quarter, Dow's global operating rate as a percent of capacity was up to 83%, compared to 81% for the fourth quarter of 2010. 

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