Advanced materials company Dow Chemicals (DOW) is not expecting any turn around in market conditions in the first quarter. However, the company believes that economic recovery could gain momentum from the second quarter and rest of the year. The company disclosed this while releasing its fourth quarter earnings results that failed to meet analysts' estimations.
The company sees Western Europe challenges to remain in the immediate term. Yet, it said it would make its best efforts to deliver short and long-term goals.
Q4 Results
The Midland, Michigan-based Dow Chemicals reported a net loss of $20 million or 2 cents loss a share versus net income of $426 million or 37 cents earnings per share in the year earlier quarter. On an adjusted basis, net income would have been $289 million, down 46.3 percent from $538 million and earnings dropped 46.8 percent to 25 cents a share from 47 cents a share in the year-ago quarter.
Net sales, however, rose 2.4 percent to $14.1 billion from $13.8 billion in the previous year quarter. Street analysts had estimated earnings of 30 cents a share on revenues of $14.19 billion.
Weak demand was witnessed in Europe, North America and Middle East and Africa, but was offset by volume growth in Asia Pacific and Latin America by 3 percent and 4 percent respectively. The results were also favorably impacted by emerging geographies driven by 7 percent volume and 3 percent price increases.
The company's gross margin slipped to 11.8 percent from 14.18 percent in the year-ago quarter and from 14.44 percent in the third quarter. On the margin expansion, Dow Chemical operating rates will improve in ethylene industry during the next few years to improve its margins.
Peer's Performance
Rival DuPont's (DD) net income slipped to $373 million from $376 million and earnings dropped 30 percent to 35 cents a share from 50 cents a share in the year-ago quarter. DuPont blamed higher tax rate for the fall in earnings. The company also disclosed that increased price realization more than compensated the higher operational costs and raw materials besides lower volume.
Sales grew 14 percent to $8.43 billion from $7.4 billion in the previous year quarter. Volumes were weak throughout the regions hurt by destocking in polymer, photovoltaics besides industrial supply chains.
Our Take
The industry is going through tough times given the uncertain economic conditions, especially in the Euro Zone, impacting its results. The situation is not going to see any significant improvement in first quarter too. Therefore, there cannot be much of a movement in the stock to be seen in the near term unless fresh catalyst provides opportunities.