UPDATE 4-Weakening Europe again whacks Dow Chemical profit

Thu Jul 26, 2012 10:45am EDT

* Q2 EPS 55 cents vs. Street forecast 64 cents

* Revenue drops 10 percent to $14.51 billion

* Sales down in all units except Agriculture

* Shares drop 2.5 percent

By Ernest Scheyder

July 26 (Reuters) - Dow Chemical Co, the largest U.S. chemical maker by sales, reported a lower-than-expected quarterly profit on Thursday as demand for chlorine, plastics and electronic parts plunged around the world.

Shares fell 2.5 percent to $29.51 in morning trading.

Demand dropped sharply in April, with only mild improvement in May and June, and planned shutdowns at two large, profitable plants hurt results, Dow Chemical Chief Executive Andrew Liveris said in an interview.

"A company like ours is an economic bellwether for a reason," he said. "The macroeconomics are weaker. We really don't see much improvement for at least 12 months."

The results were weakest in Europe, which comprises a third of Dow's sales, as it has been for the company in recent quarters and for many peers.

"The eurozone issues continue to provide a domino effect, economically speaking, around the world," Liveris said.

Demand for Chinese exports is also slipping, Liveris said.

"I went to China three times in the quarter, and I could see it as I was traveling that they were fundamentally very worried about exports to Europe, and they were shutting down factories," Liveris said.

For the second quarter, Dow reported net income of $649 million, or 55 cents per share, compared with $982 million, or 84 cents per share, a year earlier.

Analysts expected earnings of 64 cents per share, according to Thomson Reuters I/B/E/S.

Revenue dropped 10 percent to $14.51 billion. Analysts expected $15.69 billion in revenue.

Sales fell in all Dow's businesses except agricultural sciences, where demand for pesticides and other farming products jumped during the North American spring planting season.

OLYMPICS

Dow's results come the day before the opening ceremony for the London Olympics, the company's first as a global sponsor alongside Visa Inc and McDonald's Corp.

Dow is hosting 480 customers in London during the Games, and Liveris said he will use the opportunity to help boost sales.

Dow's sponsorship has been controversial because of the company's connection to the Bhopal gas tragedy.

As many as 25,000 residents of Bhopal, India, died in the aftermath of a 1984 leak at a pesticide factory that was owned by a unit of Union Carbide, which sold the facility in 1994.

Dow bought Union Carbide in 2001.

Since then, members of the Indian and British governments, as well as several environmental groups, have demanded Dow increase a $470-million compensation package that Union Carbide paid victims in 1989. Some British politicians have recently asked London Olympic organizers to cancel Dow's sponsorship, saying it damages the Olympic's reputation.

Liveris said he doesn't believe the controversy will harm the goodwill Dow expects by being an Olympic sponsor. He expects the 10-year sponsorship deal will bring in $1 billion in revenue by supplying material used to make facilities at future Olympic sites in Russia and Brazil.

"When your name is up there and you're basically at an iconic event like the Olympics, you're not going to please 100 percent of the people 100 percent of the time," Liveris said.

"The 480 customers that we will have in the next two weeks, their ability to participate with Dow in this magnificent event is all the goodwill I really need because they'll buy more products from Dow."

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