Dow Margin Expansion to Push Growth

Published By : 28 Jan 2015 | Published By : QYRESEARCH

The fourth quarter earnings of The Dow Chemical Company are expected to be released on January 29. The company is expected to draw its growth mainly from expanding its margin, which is a consequence of savings in productivity costs from a greater operating leverage. In the most recent presentation made by Dow, at the Credit Suisse Basic Materials Conference, improvements in 100 basis points in the company’s annual operating rate boosts its EBITDA by more than US$200 million.

In the first nine months of 2014, the operating rate of Dow was held at 85 per cent, which is an increment by 400 points from the same time frame in 2013. This was a major improving factor that pushed the net improvement of nearly 115 basis points. The points are in the Dow consolidated and adjusted EBITDA margin over last year.

Analysts expect to witness a similar growth pattern with margin improvements through the fourth quarter, which will mostly be driven by a greater demand for operating rates of polyethylene plants. This is a direct cause of the rising global demand for plastics which has overtaken supply additions.

Dow is known for being a diverse company in the chemical industry. It operates in specialty chemicals, agro-sciences, advanced materials, and plastics. The company offers products and solutions to customers in more than 160 countries. The previous year saw Dow report an annual sale of almost US$57 billion and a US$2.9 billion earnings adjusted net income.

In March 2014, Dow experienced a further expansion in its divestiture targets to US$4.6 to US$6 billion. The chemical giant’s official spokesmen do now disclose the specific nature of the businesses that were added to the divestment plan.
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