January 29, 2020 / 11:03 AM / a month ago

Dow operating profit drops on lower prices, sees recovery in 2020

Jan 29 (Reuters) - Dow Inc reported a 27% fall in fourth-quarter operating profit on Wednesday as lower prices squeezed margins, but the chemicals maker pointed to a recovery in demand this year on the back of easing trade tensions.

An oversupplied market and uncertainties stemming from a prolonged U.S.-China trade war have hit prices for polyethylene, the main ingredient used in making most plastics

"(2020 will see) not necessarily a snapback but improving demand as we go through the year just based on restocking to a normal demand pattern," Chief Financial Officer Howard Ungerleider told Reuters.

The Midland, Michigan-based company, which makes chemicals used in plastics, building materials and paints, reported a fall in sales across all its three businesses. Sales in packaging and specialty plastics unit, its biggest, tumbled 18%.

Overall volumes fell 2%, primarily due to weakness in its hydrocarbon and energy unit, which sells by-products of oil refining. The drop was largely due to a planned maintenance activity in Europe. Prices also declined 12% in the quarter.

However, Dow's results were boosted by double-digit growth in China. Leading into the Chinese New Year, Dow saw strong demand, with many customers either maintaining or buying additional inventory, Ungerleider said.

Commenting on the coronavirus outbreak, Ungerleider said it was "too soon to tell" the impact, but added it may be a positive for Dow's business as it supplies to the medical and health sectors.

Dow, which was spun off in April after chemical conglomerate DowDuPont split into three, said it reduced costs by $35 million in the quarter and would make further cuts this year.

Dow posted operating earnings of 78 cents per share, excluding certain items, from $1.07, a year earlier.

Net loss available to shareholders was $2.32 billion in the three months ended Dec. 31, compared with a profit of $891 million, primarily as the company took a $2.9 billion goodwill impairment charge.

Net sales fell 14.6% to $10.2 billion.

Sister companies DuPont, which makes chemicals used in the automotive and electronic industries, and Corteva , which makes pesticides and seeds, are set to post their quarterly reports on Thursday. (Reporting by Taru Jain and Arathy S Nair in Bengaluru; Editing by Anil D'Silva)

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