The Associated Press
Thursday, April 27, 2006; 2:18 PM
MIDLAND, Mich. -- Dow Chemical Co. on Thursday posted a 10 percent decline in first-quarter earnings as the rising cost of raw materials offset a modest gain in sales.
Net income fell to $1.21 billion, or $1.24 per share, from $1.35 billion, or $1.39 per share, in the prior-year period. But the company reiterated its belief that 2006 will be better than last year.
"It is the diversity of our mix that continues to give us this outlook," Dow President, Chairman and Chief Executive Andrew Liveris told analysts during a teleconference.
First-quarter sales increased 3 percent to $12.02 billion from $11.68 billion a year ago on slightly higher prices.
Analysts polled by Thomson Financial forecast a profit of $1.17 per share on sales of $12.26 billion.
The Midland-based chemical giant said its results were hurt by an $800 million increase in feedstock and energy costs. Feedstock refers to the ingredients used to make Dow's chemicals.
That increase offset a 2 percent rise in prices for Dow's products, resulting in narrower margins, the company said.
Restructuring plans at major facilities in the United States and Europe reduced volume and significantly increased costs, Dow said. And it noted that earnings for the prior-year period included a gain of 5 cents a share on the sale of a 2.5 percent interest in a petrochemical joint venture.
U.S. sales slowed at the quarter's start, but demand picked up again in March, Chief Financial Officer Geoffery E. Merszei said in a statement.
"That demand has continued into the second quarter," he said.
Dow, which provides chemical, plastic and agricultural products, has $46 billion in annual sales and employs 42,000 people around the world.
"With a sharpened focus on price/volume management and our unwavering commitment to cost control, we continue to believe that 2006 will be better than 2005, and that 2007 will be another good year," Merszei said.
The company's shares fell 12 cents to $41.48 in afternoon trading on the New York Stock Exchange.
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Dow Chemical Co.: http://www.dow.com