Weaker demand pressures Dow Chemical 2Q

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By SANDY SHORE, Associated Press

Dow Chemical CEO Andrew N. Liveris has a pretty bleak assessment of the world's economy, predicting that it could take until 2014 for growth to return to a normal pace.

Liveris said Thursday that deteriorating global business conditions caused a 34 percent drop in Dow Chemical's second-quarter net income. And he doesn't expect to see much improvement for the rest of this year.

"The new reality is that this world is not in a normal growth mode," he told analysts on a conference call. "And it does not appear that we will see this for at least 12 to 24 months."

A quarterly profit of 55 cents per share missed estimates and shares in the nation's largest chemicals maker fell 3.7 percent in afternoon trading. Liveris said volumes fell in most categories as demand dropped because of a "synchronized global economic slowdown." Customers were cautious about purchases because of uncertainty about where global growth is headed.

The Midland, Mich., manufacturer has a broad reach across industries and geographic regions, selling materials used in everything from televisions and paint to construction and agricultural products.

Since the end of the first quarter, economies have slowed in the U.S. and China. Some European countries have fallen into recession as the massive debt crisis there drags on. Manufacturing has declined in all three regions.

For the April-through-June quarter, Dow Chemical's earnings fell to $649 million. A year earlier, Dow earned $982 million, or 84 cents per share. Revenue dropped 10 percent to $14.51 billion. That's the company's first decline in revenue since the third quarter of 2009.

Analysts polled by FactSet forecast earnings of 64 cents per share and revenue of $15.69 billion.

Sales fell for materials used in electronics, energy, coatings and infrastructure. Sales also fell for performance materials, like polyurethane and epoxy. Performance plastic volumes rose but sales dropped because of a 9 percent decrease in prices.

One bright spot was agricultural products where sales rose 12 percent to a second-quarter record of $1.7 billion.

Overall, prices fell 5 percent, declining in all geographic regions. The biggest drop — 8 percent — was in Europe.

To contend with these conditions, Dow Chemical will ramp up its efforts to cut costs and reduce capital expenditures. Liveris said that the company will extend the time expected for it to reach near-term earnings targets but still expects to hit those targets.

Shares of Dow Chemical fell $1.12, or 3.7 percent, to $29.15 in afternoon trading. Its shares have risen 41 percent since hitting a 52-week low of $20.61 in October but are still short of their high of $36.32 late last July.


AP Business Writer Michelle Chapman contributed to this report.

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