Dow Chemical Profit Hurt by High Energy Costs
Dow Chemical posted second-quarter earnings that fell short of market expectations as its price increases did not completely offset a sharp spike in energy and raw material costs.
The largest U.S. chemical maker reported quarterly net income of $762 million, or 81 cents a share, down from a year-ago profit of $1.04 billion, or $1.07 a share, and below Wall Street's expectations of 85 cents a share.
Its shares were down in early trading on the New York Stock Exchange.
Quarterly revenue rose, driven by price increases and strong volume growth in overseas markets.
Analysts on average had forecast revenue of $14.90 billion, according to Reuters Estimates.
"There is no question that our emerging geographies strategy has served us well, typical of many international corporations. But, the U.S. demand destruction is still yet to really be felt around the world," said Chief Executive Andrew Liveris, in an interview with Reuters.
Liveris said the full impact of the price increases it has implemented will only be reflected in the third quarter.
In June, Dow said it would boost its prices as much as 25 percent, institute freight surcharges and cut output of some products because of soaring energy prices.
In May, Dow had already announced price increases of up to 20 percent on all products.
The Midland, Michigan-based company makes thousands of products ranging from plastic wraps to car parts and insecticides.
Liveris has steered Dow from being primarily a commodity chemical company toward a more specialty chemical maker, in a bid to reduce earnings cyclicality and improve profit margins.
Earlier this month, Dow said it would acquire specialty chemical maker Rohm and Haas for $15.3 billion in a move to broaden its product offerings in higher-margin markets such as paints, coatings and electronic materials.
Dow has long been among the largest global makers of commodity chemicals such as those used to make plastics, but that business is typically cyclical and yields thinner margins than specialty chemicals.
Shares of Dow have fallen almost 15 percent in the last three months, while the Standard & Poor's Chemical Index is down 3.3 percent.