Dow Chemical profit beats, selling unit to Braskem

NEW YORK (Reuters) - Dow Chemical Co (DOW.N) posted a higher-than-expected quarterly profit as higher selling prices and volumes offset a 30 percent jump in raw material costs.

The company also said it would sell its polypropylene business to Braskem SA (BRKM5.SA) (BAK.N), Brazil's largest chemical company, for $340 million, excluding debt. The deal must still be approved by regulators.

Shares of Dow closed 2.4 percent lower at $34.99 on the New York Stock Exchange on Wednesday, in line with a broadly lower market, after opening higher.

The polypropylene business is "not a strategic fit for our company moving forward," Dow spokeswoman Rebecca Bentley said.

The Midland, Michigan-based company has been selling assets for the past two years, focusing on joint ventures and more-profitable chemical products to cut risk and cost.

In the past week Dow announced partnerships with Japan's Mitsui & Co Ltd (8031.T) to make plastic from sugar cane -- a venture that ironically will compete with Braskem -- and with Saudi Aramco SDABO.UL to build one of the world's largest chemical facilities.

So far, results show that customers are willing to pay more for Dow's diverse product line, especially basic plastics, lubricants, pesticides and seeds, and electronic parts.

"Price momentum is something that Dow knows how to do, and we will continue to do it," Chief Executive Andrew Liveris said on the conference call with investors.

The company raised prices 19 percent across the board, roughly $2.4 billion, to offset the $1.5 billion increase in raw material costs.

Even with the higher prices, volumes rose 9 percent.

"It's always an interesting balance between volumes and price," said Alembic Global Advisors analyst Hassan Ahmed. "The fact that these guys kind of kept pace with raw materials, while still maintaining a near double-digit volume growth, is obviously a sign that the balance has been maintained."

BEAT EXPECTATIONS

The largest U.S.-based chemical maker posted net income of $982 million, or 84 cents per share, compared with $566 million, or 50 cents per share, a year earlier.

Excluding a debt repayment charge, Dow earned 85 cents per share. By that measure, analysts had expected 81 cents, according to Thomson Reuters I/B/E/S.

Revenue rose 18 percent to $16.05 billion. Analysts had expected $14.74 billion.

Sales jumped in all business units and around the world, and Dow's plastics, chemical and specialty lubricants and solvents saw some of the highest demand.

The agricultural unit saw an 18 percent jump in sales, due in part to strong demand for cotton seeds in the United States and corn seed in Latin America, Dow said.

Sales in the construction and coatings business remained soft due to lackluster North American demand, Dow said.

The company got bigger checks from its lucrative joint ventures with Corning Inc (GLW.N), Kuwait and others. It collected $291 million from its partners, up 19 percent from a year earlier.

Braskem is paying $323 million cash for Dow's polypropylene business and $17 million in cash and contingency assumptions.

Dow expects the close the sale by the end of September. As part of the deal, Dow is selling four plants in Germany and Texas, some of its technology and customer contracts. (Reporting by Ernest Scheyder; Editing by Dave Zimmerman, Gerald E. McCormick and Gunna Dickson)