Dow earnings drop on economic woes

Slow economic activity around the world stymied third quarter performance at Dow, the largest US chemical maker and the first major firm to report results.

Dow’s sales were down 24% in the third quarter versus the same period a year ago, while net income declined 57%.

Selling volumes declined by 6%, but a bigger factor in the results were prices for Dow products, which declined 18% from a year ago, the result, primarily, of lower energy costs.

The company’s largest business segment, Packaging and Specialty Plastics, saw a 26% drop in sales. Demand for the segment’s key product, polyethylene, was strong, but volumes for merchant sales of chemicals were weak. Moreover the segment saw a 20% decline in prices.

The main factors behind the sluggish economic performance continues to be Europe, which is seeing tepid growth, and China which is experiencing a slow recovery from its lockdowns.

But the results weren’t all negative. “Automotive, I would say, is a bright spot globally,” Dow CEO Jim Fitterling told analysts in a conference call. “Even Europe, in spite of a slow GDP, has seen pretty strong automotive builds through the year.”

Fitterling noted that activity in the sector should be even stronger once strikes at US assembly plants end.

“We expect the challenging macroeconomic dynamics to continue through the fourth quarter, including sluggish industrial activity,” says Howard Ungerleider, Dow’s president and chief financial officer.

Separately, Ungerleider will retire from the company in January. He had been Dow’s CFO since 2014 and was named president in 2018. He will be replaced by Jeffrey L. Tate, CFO of furniture maker Leggett & Platt. Tate had previous experience with Dow, serving with the company for 27 years, including as head of investor relations.

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