Dow Chemical touts Rohm acquisition, shares jump

By Ernest Scheyder

NEW YORK (Reuters) - Dow Chemical Co (DOW.N) defended its high-priced acquisition of Rohm & Haas to investors on Thursday, saying the deal "revitalized" its portfolio and should help earnings grow in the next two years.

In one of his first meetings with investors since the Rohm buyout, which nearly cost Dow its investment-grade credit rating, Chief Executive Andrew Liveris said he expects 2012 earnings of $4 to $4.50 per share.

That is sharply above the $1.82, excluding items, the company earned in 2008.

Liveris and other executives touted cost savings from the Rohm purchase and said it enhances the company's ability to generate new products and new revenue.

"We believe that Dow today has all of the elements in place to move forward aggressively," Chief Executive Andrew Liveris said at the company's investor day in New York.

Additionally, the Rohm assets should boost sales 10 percent, Liveris said.

Morningstar analyst Ben Johnson said the earnings outlook might be tough to achieve because the cost cuts that Dow has recently relied on may yield diminishing returns in future years. He also questioned Dow's assumption of consistently strong growth in emerging markets.

"The 2012 target is going to be a high hurdle," he said.

And while Liveris is bullish on growth, he said that even though he believes the recession is over, "we're still very much in a constrained environment."

JOINING FORCES, SELLING ASSETS

Dow also said it is moving forward on plans to sell its Styron unit and form a joint venture for its basic plastics business.

The company hopes to sell Styron, which makes polystyrene, rubber and latex, by the first quarter of 2010, executives said.

The company is also in talks with at least two state-owned raw material companies to form a joint venture akin to last year's failed K-Dow project.

Dow had planned to form K-Dow with a Kuwaiti company, only to have Kuwait walk away last December.

Liveris has declined to discuss the K-Dow collapse publicly, but in a private question-and-answer period with investors on Thursday the chief executive admitted a mistake had been made.