Dow Chemical (DOW – Analyst Report) comfortably beat earnings expectations in second-quarter 2015 and saw a healthy rise in its profits, thanks to strong margins in its performance plastics business. But its sales missed expectations, hurt by currency headwinds stemming from a stronger greenback and lower oil prices.
The U.S. chemical kingpin recorded profits of $1,135 million or 97 cents per share in the reported quarter, a roughly 29% jump from $882 million or 73 cents per share recorded a year ago.
Barring one-time items including costs related to restructuring actions, earnings of 91 cents per share trounced the Zacks Consensus Estimate of 81 cents, marking the seventh straight quarter of positive surprise.
Dow logged higher EBITDA margin (as adjusted) in the quarter on strong margins across Performance Plastics and Performance Materials & Chemicals divisions. The plastics business is gaining from Dow's significant feedstock advantage in North America (stemming from cheaper natural gas).
However, Dow saw a double-digit decline in its sales in the quarter, hurt by unfavorable currency impact and lower oil price. Its revenues tumbled 13% year over year to $12,910 million with declines witnessed across the board. Sales trailed the Zacks Consensus Estimate of $13,115 million. Volume rose 3% on an adjusted basis in the quarter, driven by a 9% rise in volumes in the Performance Plastics unit.
Despite the healthy earnings beat, the Michigan-based company's shares were down around 2% in early trading, which appears to reflect the top line miss.
The Dow Chemical Company – Earnings Surprise | FindTheBest
Segment Analysis:
Agricultural Sciences
Sales fell 8% year over year to $1.7 billion in the quarter, affected by weak demand in Latin America and North America, currency headwinds and lower commodity prices. Crop protection revenues declined on unfavorable currency impact and weak volumes, partly due to wet weather conditions in North America. Sales of seeds also declined in the quarter, impacted by currency and shift in acreage from corn to soybeans.
Consumer Solutions
Revenues from the division were $1.1 billion, down 8%, as gains in North America were more than masked by declines in Europe, Middle East, Africa and India (EMEAI) and Asia Pacific. Sales fell across all business due to unfavorable currency impact. Automotive Systems delivered volume gains in EMEAI and North America, aided by new business wins.
Sales also fell in Electronic Materials despite healthy demand for semiconductor technologies on continued mobile device growth. The business also saw weak demand in display technologies.
Infrastructure Solutions
Sales from the division skid around 12% to $2 billion in the quarter on lower pricing and currency headwind. Energy and Water Solutions continued to benefit from healthy demand for reverse osmosis technologies. But this was more than offset by weakness in North American energy exploration and fracturing markets.
Volumes rose in the company's Building and Construction business across EMEAI and North America. Coating Materials volumes rose on strong industrial coating applications.
Performance Materials & Chemicals
Revenues went down 14% to $3.2 billion in the quarter as price declines and currency headwinds offset higher demand. Polyurethane volumes rose on improved operations and demand. Stable demand in Chlor-Alkali and Vinyl in North America and Asia Pacific was more than offset by declines in EMEAI and Latin America.
