Emerging markets drive Dow Chemical's 4Q profit

(AP) — Dow Chemical Co. on Tuesday said it posted a fourth-quarter profit of $87 million and expressed cautious optimism about a global economy that seems poised to rebound faster in emerging markets.

Because the company's chemicals are in a vast array of products from insulation to car paint, Dow's results and outlook can serve as a barometer for consumer sentiment.

Dow said it expects continued improvement in emerging markets such as Asia and Latin America, while growth in the U.S. and Europe will lag due to high unemployment and uncertainty in government stimulus spending.

Still, last week's strong U.S. gross domestic product data showed evidence that companies were restocking inventories, "a good lead indicator to some confidence returning from a US consumer point of view," said CEO Andrew Liveris in a conference call with investors, expressing hope for a rebound in the second half of the year.

The Midland, Mich., company said the quarterly profit was driven by strength in emerging markets and gains from acquisitions. Earnings rose to $87 million, or 8 cents per share. A year ago, in the depths of the recession, Dow posted a loss of $1.55 billion, or $1.68 per share. During 2009, Dow slashed jobs, shuttered plants, cut its dividend and sold assets to conserve cash and lower debt.

Excluding one-time items, adjusted earnings of 18 cents per share beat expectations. Analysts surveyed by Thomson Reuters expected an adjusted profit of 11 cents per share.

Revenue rose 15 percent to $12.47 billion from $10.85 billion. In April Dow acquired Rohm & Haas for $16.5 billion to expand into the more profitable specialty chemicals business. If Rohm had been part of Dow in the year-ago quarter, the revenue increase would have been 4 percent.

Shares of Dow tumbled $1.08, or 3.8 percent, to $27.55 in Tuesday trading.

"There is a 'buy the rumor, sell the news' kind of thing going on," said Credit Suisse analyst John McNulty, who noted that the stock climbed 6 percent on Monday. "People made bets ahead of the quarter and now they're unwinding their bets."

Dow saw volume gains across nearly all operating segments in the fourth quarter. The best-performing segments were health and agricultural sciences, basic chemicals and performance products. Emerging markets delivered a 33 percent volume boost. Regionally, China led the way with a 60 percent growth in volume, while India and Russia each boosted volume by 30 percent.

The rising volumes outweighed a decline in prices from the prior year. Sequentially, fourth-quarter results delivered both price and volume gains.

Dow's full-year profit declined to $336 million, or 32 cents per share, compared with $579 million, or 62 cents per share in 2008. Excluding special items, earnings totaled 63 cents per share.

Revenue slid 22 percent to $44.88 billion.

Dow said its structural cost reductions exceeded $215 million in the quarter and $1.2 billion for the year, ahead of its goals.

The company has cut its debt due in 2011 by 80 percent to $2.9 billion and it ended 2009 with a cash balance of $2.8 billion.

McNulty said company's solid cash position was as important as the strong results.

"I think the long term story is a pretty solid one and the numbers we saw for the fourth quarter continue to support that," he said in an interview.