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Dow Profit Beats Estimates on Asia Demand and Cost Cuts, Sees Recovery in 2020

Dow has been cutting costs to offset a drop in demand for chemicals used in plastics, building materials and paints, amid a global slowdown.

By Taru Jain, Arathy S Nair

(Reuters) – Chemicals maker Dow Inc reported better-than-expected quarterly profit and revenue on Wednesday, helped by higher volumes in Asia as well as cost cuts, and pointed to a recovery in demand this year on the back of easing trade tensions.

Dow has been cutting costs to offset a drop in demand for chemicals used in plastics, building materials and paints, amid a global slowdown.

The company said it had reduced costs by $35 million in the quarter and would make further cuts this year.

“(2020 will see) not necessarily a snapback but improving demand as we go through the year just based on restocking to a normal demand pattern,” Chief Financial Officer Howard Ungerleider told Reuters.

An oversupplied market and uncertainties stemming from a prolonged U.S.-China trade war have also hit prices for polyethylene, the main ingredient used in making most plastics. The company’s overall prices declined 12% in the quarter.

Volumes fell 2%, primarily due to weakness in its hydrocarbon and energy unit, which sells by-products of oil refining. The drop was largely due to planned maintenance activity in Europe.

Sales fell across all its three businesses, with its biggest unit that makes chemicals used in packaging and specialty plastics posting an 18% drop.

However, Dow’s results were boosted by double-digit growth in China. Leading into the Chinese New Year, Dow saw strong demand, with many customers either maintaining or buying additional inventory, Ungerleider said.

Commenting on the coronavirus outbreak, Ungerleider said it was “too soon to tell” the impact, but added it may be a positive for Dow’s business as it supplies to the medical and health sectors.

Dow, spun off in April after chemical conglomerate DowDuPont split into three, posted operating earnings of 78 cents per share, excluding certain items. Analysts had on average estimated profit of 74 cents, according to Refinitiv IBES data.

The company posted a net loss available to shareholders of $2.32 billion in the three months ended Dec. 31, compared with a profit of $891 million, primarily as it took a $2.9 billion goodwill impairment, restructuring and asset-related charges.

Net sales fell 14.6% to $10.2 billion, but beat estimates of $10.07 billion.

Sister companies DuPont, which makes chemicals used in the automotive and electronic industries, and Corteva, which makes pesticides and seeds, are set to post their quarterly reports on Thursday.

Reporting by Taru Jain and Arathy S Nair in Bengaluru; Editing by Anil D’Silva.


Source: Reuters

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