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UPDATE 2-Dow Chemical raises stock buyback plan after strong results

Swetha Gopinath and Garima Goel
Wednesday, 29 Jan 2014 | 9:54 AM ET

* Fourth-quarter adjusted earnings $0.65/shr vs est $0.43/shr

* Expands share buyback program to $4.5 bln from $1.5 bln

* Raises quarterly dividend by 15 pct $0.37/share

* Shares up 6 percent

Jan 29 (Reuters) - Dow Chemical Co reported a quarterly profit that comfortably beat market expectations, hiked its dividend and tripled its share buyback program, joining rival DuPont in increasing shareholder returns amid investor activism.

Shares of Dow Chemical, the largest U.S. chemical maker by sales, rose as much as 6 percent in early trading.

The company's results in the fourth quarter were powered by resilient agricultural demand and strong margins at its plastics business.

Activist investor Daniel Loeb, whose hedge fund Third Point holds a stake in Dow Chemical, is pushing the company to split in two by separating the booming agriculture business from the slower-growing petrochemical businesses.

Deutsche Bank analyst David Begleiter said the company's move on Wednesday to return cash to shareholders was "without question" in response to Third Point's demands.

However, Dow Chemical spokeswoman Rebecca Bentley said the hike in dividend and share buyback were not connected to Third Point.

"We have long said shareholder remuneration is a top priority for uses of cash," Bentley said in an email.

Investor activism is speeding up restructuring in the chemical industry, said Dhaval Patel, a managing director at North American fund TIAA-CREF, which oversees about $564 billion in assets, and holds Dow Chemical shares.

"You are seeing companies take the right steps, whether it is increasing dividend, buybacks, selling non-strategic assets or acquiring assets in areas that are more exciting or interesting."

DuPont, the target of billionaire Nelson Peltz, on Tuesday said it would buy back $5 billion in stock after reporting quarterly profit above market estimates, helped by early seed shipments and strong insecticide demand.

PLASTIC FANTASTIC

Sales rose 13 percent in the fourth quarter at Dow Chemical's agriculture business, driven by demand for insecticides and herbicides in North and Latin America. The business contributed 12 percent of total revenue.

Margins rose 7 percentage points at the performance plastics unit, which supplies plastics to toy makers, builders and car makers among other industries.

The business has reported four straight quarters of margin expansion and is the company's biggest, accounting for more than a fourth of total sales in the quarter.

The business, along with the performance materials and feedstocks-and-energy units, is part of the company's petrochemical businesses which Loeb wants to be spun off.

Dow Chemical increased its buyback from $1.5 billion to $4.5 billion, all of which it will buy back this year.

The company, which has paid quarterly dividends since 1912, raised its first-quarter dividend by 15 percent to 37 cents per share.

Net income available for common stockholders was $963 million, or 79 cents per share, in the quarter ended Dec. 31.

Dow Chemical posted a loss of $716 million, or 61 cents per share, a year earlier due to a $990 million charge related to job cuts, plant closures and write down of the value of its lithium-ion battery business.

Adjusted profit was 65 cents per share in the latest quarter, beating the analysts' average estimate of 43 cents per share, according to Thomson Reuters I/B/E/S.

Revenue rose 3 percent to $14.39 billion.

Dow Chemical shares rose 6 percent to $45.65 on the New York Stock Exchange. The stock has risen 25 percent in the last year, outperforming the 19.5 percent rise in the broader S&P 500 index.

DuPont shares were up 1.5 percent at $60.45.

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