Dow Chemical raises asset sale target to $3 billion-$4 billion

Thu Oct 24, 2013 3:43pm EDT

Andrew Liveris, Chairman and CEO of the Dow Chemical Company, participates in a group discussion on ''Business by Design: Business with Integrity'' during the second day of the Clinton Global Initiative 2012 (CGI) in New York on September 24, 2012. REUTERS/Lucas Jackson

Andrew Liveris, Chairman and CEO of the Dow Chemical Company, participates in a group discussion on ''Business by Design: Business with Integrity'' during the second day of the Clinton Global Initiative 2012 (CGI) in New York on September 24, 2012.

Credit: Reuters/Lucas Jackson

(Reuters) - Dow Chemical Co (DOW.N) said it now expects to raise between $3 billion and $4 billion from asset sales in the next 18 to 24 months, at least double its earlier target, as it looks to shed businesses exposed to commodity price swings.

The bulk of what Dow Chemical plans to sell is housed in its performance materials business, which was mainly responsible for the company's weaker-than-expected quarterly results.

Dow Chemical shares were down 1.5 percent at $40.45 in early afternoon trading on Thursday.

The performance materials unit includes the epoxy and commodity chlorine derivatives businesses that Dow Chemical wants to sell.

"In performance materials, we are still facing significant headwinds and so that's why you see us increasing that divestiture target to $3 billion-$4 billion," spokeswoman Rebecca Bentley said.

Dow Chemical was earlier targeting proceeds of $1.5 billion from sales of non-core assets.

"It's possible that they will even increase that target again," UBS Investment Research analyst John Roberts said.

The company will shed its epoxy business through a joint venture or a sale, with a transaction expected in the near term, Chief Executive Andrew Liveris said on a conference call.

Demand for epoxy resins, used in windmill blades and a host of other products, has tumbled due to excess capacity in China and the loss of subsidies for wind energy in Europe.

Liveris said the company would sell parts of its chlorine and derivatives assets such as chlorinated organics -- used in electronics and refrigerants among other things -- and vinyls, used to make a raw material for water pipes.

The company said in August that it was also looking at options for its European construction materials businesses.

"We are moving away from being all things to all markets and going deeper and narrower into profit pools ...," Liveris said, adding the company's focus would now be electronics, packaging and agriculture.

The company sold its polypropylene licensing and catalyst business to smaller rival W.R. Grace & Co (GRA.N) for $500 million this month.

The largest U.S. chemical maker by sales has divested non-core businesses representing about $8 billion in revenue since 2009.

PLASTIC GAINS OVERSHADOWED

The performance plastics business, Dow Chemical's largest unit, has enjoyed margin expansion, driven by abundance of cheap shale-derived natural gas, used to produce ethylene, a building block for plastics. EBITDA at the segment shot up 32 percent.

The company expects strong margins to continue in the business, Chief Financial Officer William Weideman said on the post-earnings call, adding that its agricultural sciences business would continue to grow as well.

EBITDA at the performance materials business fell 36 percent in the third quarter.

Dow Chemical's net income rose 20 percent to $594 million, or 49 cents per share, helped mainly by the plastics, packaging, coatings and electronics businesses.

The adjusted profit was 50 cents per share, missing the average analyst estimate of 54 cents per share.

Revenue rose 1 percent to $13.73 billion. Analysts on average had expected $13.99 billion.

(Reporting by Garima Goel and Swetha Gopinath in Bangalore; Editing by Kirti Pandey and Saumyadeb Chakrabarty)

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Comments (1)
Nygard1 wrote:
So, let me get this straight, according to DOW CEO Mr. Liveris the proposed exports of US-made Liquefied Natural Gas (LNG) will cause US natural gas prices to rise, which in return will hurt Mr. Liveris’ much-touted, but still merely hypothetical “manufacturing renaissance”.
But wait, LNG exports are still years away and DOW is still enjoying the huge competitive advantage associated with having vastly lower natural gas costs than its foreign competitors. And yet DOW is bleeding cash and must sell assets.
So here is the mediocre reality: Super-low energy prices obviously cannot save DOW which means that its shareholders will need to try something else. They should start with replacing their whining, blame-deflecting CEO with somebody more capable. (Shouldn’t be hard to find) And, maybe if Mr. Liveris’ replacement would focus his attention on improving DOW’s business strategies and keep his nose out of other people’s natural gas business, DOW could then be brought back to its former glory days.
Bye-bye, Mr. Liveris!

Oct 24, 2013 1:08pm EDT  --  Report as abuse
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