Sector News

Dow Chemical eyes consumer markets as it readies for DuPont merger

April 28, 2017
Chemical Value Chain

Dow Chemical Co forecast better-than-expected revenue for the current quarter and said it would expand four key consumer businesses, which will be part of a new firm created after its proposed merger with DuPont.

Dow and DuPont plan to merge and then break up into three independent publicly traded companies, with the first spinoff being called “Material Science Co”.

Dow will expand in the packaging, infrastructure, transportation and consumer care markets, Chief Executive Officer Andrew Liveris said on a post-earning call on Thursday, adding that 90 percent of the Material Science company’s revenue would be “aligned” to these end-markets.

DuPont said on Tuesday it expected its deal with Dow to close in August, after repeated delays due to strict regulatory scrutiny.

The merger was approved by EU antitrust regulators last month on the condition the companies divest assets and research and development facilities.

Regulators in the United States, Brazil, China, Australia and Canada are yet to clear the deal.

“We’ve had lots of substantive discussions, expect to hear from China and the U.S. Department of Justice next, followed by Brazil,” Howard Ungerleider, Dow’s chief financial officer, told Reuters.

“I won’t rule out additional remedy, there are likely to be some smaller remedies until we get final approval from authorities around the world,” he said, referring to asset sales required to secure regulatory clearances.

Dow said in February it would sell its ethylene acrylic acid business to South Korea’s SK Innovation, subject to the Dow-DuPont deal closing.

Robust demand in its consumer-focused businesses helped Dow report a better-than-expected profit for the first quarter ended March 31.

The company said sales rose in four of its five businesses, falling only in its agriculture unit.

Net sales rose 23.6 percent to $13.23 billion, beating analysts’ average estimate of $13.21 billion, according to Thomson Reuters I/B/E/S.

The company forecast sales of $13.3 billion to $13.8 billion for the second quarter ending June, above analysts’ estimate of $13.21 billion.

Sales in Dow’s agriculture business slipped 5 percent to $1.6 billion in the first quarter on lower herbicides and insecticides sales in Asia Pacific and weak demand for corn seeds in North America.

Dow’s agriculture business is heavily reliant on crop protection products, which make up 75-80 percent of the unit’s sales.

The company reported an operating profit of $1.04 per share, topping analysts’ estimate of 99 cents.

Dow Chemical’s shares were down marginally at $63.80.

By Swetha Gopinath and Arathy S Nair

Source: Reuters

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