* Fourth-quarter adjusted earnings $0.65/shr vs est
* Expands share buyback program to $4.5 bln from $1.5 bln
* Raises quarterly dividend by 15 pct $0.37/share
* Shares rise as much as 6 percent
By Swetha Gopinath and Garima Goel
Jan 29 Dow Chemical Co hiked its
dividend and tripled its share buyback program, but signaled
that it was in no hurry to fall in line with activist
shareholder Daniel Loeb's demands to spin off its slow-growing
The company also reported a quarterly profit that
comfortably beat market expectations, powered by resilient
agricultural demand and strong margins at its plastics business.
Shares of Dow Chemical, the largest U.S. chemical maker by
sales, rose as much as 6 percent in early trading on Wednesday.
Dow and rival DuPont have recently been the target of
increased activism from investors who want the companies to
drive up shareholder returns.
Loeb wants Dow Chemical to spin off its petrochemical
businesses to hasten its transition to a company focused on
agriculture, electronics, pharmaceuticals, and food. The company
is Third Point's largest investment.
While Dow Chemical's Chief Executive Andrew Liveris said
Loeb's demands were similar to the company's strategy of
focusing on specialty chemicals, he stressed the value of their
lucrative raw material businesses.
"We're a complete value chain," Liveris said on a conference
call with analysts, arguing that Dow Chemical could no longer be
called a petrochemical company because it has sold off commodity
assets worth more than $10 billion since 2006.
Dow Chemical depends on its commoditized raw materials
businesses to keep costs down at its high-growth specialty
chemicals businesses - a strategy that some analysts said was
working, as was evident from the strong fourth-quarter results.
"As long as earnings estimates and the stock are going
higher, I think Andrew has people's support," UBS analyst John
DuPont, the target of billionaire Nelson Peltz, on Tuesday
said it would buy back $5 billion in stock after reporting
quarterly profit above market estimates, helped by early seed
shipments and strong insecticide demand.
Investor activism is speeding up restructuring in the
chemical industry, said Dhaval Patel, a managing director at
North American fund TIAA-CREF, which oversees about $564 billion
in assets, and holds Dow Chemical shares.
"You are seeing companies take the right steps, whether it
is increasing dividend, buybacks, selling non-strategic assets
or acquiring assets in areas that are more exciting or
SEEDS OF GROWTH
Dow Chemical's agriculture business has been its fastest
growing business in fiscal 2013 and Liveris expects the value of
the unit to double over the next 5 to 7 years.
Sales at the business rose 13 percent in the fourth quarter
and contributed 12 percent of total revenue, driven by demand
for insecticides and herbicides in North and Latin America.
The business is expected to benefit in the current quarter
as farmers buy seeds ahead of the planting season. Margins are
expected to expand by 3-4 percentage points in the near term.
Margins rose 7 percentage points in the fourth quarter at
the performance plastics unit, which supplies plastics to toy
makers, builders and car makers among other industries.
The business has reported four straight quarters of margin
expansion and is the company's biggest, accounting for more than
a fourth of total sales in the quarter.
The business, along with the performance materials and
feedstocks-and-energy units, is part of the company's
petrochemical businesses which Loeb wants to be spun off.
Dow Chemical expects a recent run up in natural gas prices
to eat into margins at its performance plastics and performance
materials units in the first quarter, but remains poised to
benefit from an abundant supply of gas in the United States.
The company increased its buyback from $1.5 billion to $4.5
billion, all of which it will buy back this year.
Dow Chemical, which has paid quarterly dividends since 1912,
raised its first-quarter dividend by 15 percent to 37 cents per
Net income available for common stockholders was $963
million, or 79 cents per share, in the quarter ended Dec. 31.
Dow Chemical posted a loss of $716 million, or 61 cents per
share, a year earlier due to a $990 million charge related to
job cuts, plant closures and write down of the value of its
lithium-ion battery business.
Adjusted profit was 65 cents per share in the latest
quarter, beating the analysts' average estimate of 43 cents per
share, according to Thomson Reuters I/B/E/S.
Revenue rose 3 percent to $14.39 billion.
Dow Chemical shares were up 3.6 percent at $44.64 in midday
trading on the New York Stock Exchange. The stock has risen 25
percent in the last year, outperforming the 19.5 percent rise in
the broader S&P 500 index.
DuPont shares were up 2.3 percent at $60.99.