Dow sees India sales driven by specialty products
MUMBAI (Reuters) - Dow Chemical Co (DOW.N) expects its portfolio of specialty chemical products to drive its growth in India and estimates that its 2008 annual sales in the country rose 25 percent from a year ago, a company official said on Wednesday.
Ramesh Ramachandran, head of Dow's operations in India said the company currently expects 2008 sales of about 25 billion rupees, or about $512 million. In 2007 the company posted sales in the country of 20 billion rupees, or about $410 million.
Dow, the largest U.S. chemical maker, has operated in India for more than 50 years and markets chemicals used in paints, pharmaceuticals, automobiles, cosmetics and other products.
"Across the gamut the specialty portfolio has provided the impetus for growth," said Ramachandran in an interview with Reuters.
Midland, Michigan-based Dow is currently targeting sales of $1 billion in India by 2010 and it is confident of achieving sales growth despite the global economic slowdown.
Dow and other chemical companies are struggling because of a recession in most developed countries and a sharp slowdown in many emerging economies.
The company said last month it would close 20 facilities, divest several businesses and cut 5,000 jobs to cope with the slump.
If anything, the global economic slowdown has reinforced the notion that geographic diversification, needs to be a critical component of the strategy, said Ramachandran.
JOINT VENTURE STRATEGY
The chemical maker is currently in discussions with potential joint venture partners in India, said Ramachandran.
"There are areas in India where we may not have the market expertise, but have the technology and those are the areas that we would look into a joint venture model," he said.
Last year, the company signed a 50:50 joint venture agreement with Gujarat Alkalies and Chemicals Ltd to set-up a manufacturing facility in Gujarat at a total cost of about $250 million.
The facility, which is due to be operational by 2011, will produce chloromethanes, which are used as a solvent in the manufacture of pharmaceutical products and other chemical processing applications.
Dow is following a joint venture strategy to grow its highly cyclical and low margin commodity chemicals business, while investing heavily in more profitable specialty chemical products.
However, this strategy was partially derailed last month when Kuwait scrapped a deal to form a $17.4 billion petrochemical joint venture with Dow, potentially upsetting Dow's plan to buy specialty chemical maker Rohm & Haas Co ROH.N. Dow planned to use the proceeds from the Kuwaiti joint venture to pay down debt that would have been used for the Rohm & Haas Co acquisition.
BHOPAL TRAGEDY WEIGHS
Despite, strong sales growth, Dow also has faced a great deal of opposition in India.
Many Indians link Dow with the catastrophic industrial accident, which occurred in Bhopal in central India in 1984, when tonnes of toxic gas leaked from a pesticide plant owned at the time by Union Carbide.
Nearly 3,800 people died soon after exposure to the gas, while tens of thousands of others fell ill. Union Carbide later became a subsidiary of Dow. There is still argument over who should clean up the site, which remains polluted.
Dow's plans to construct a $100 million research and development center about 200 km (120 miles) from Mumbai were put on hold after protesters, worried about industrial pollution, set fire to the construction site in July.
"To find that a science and technology investment can run into activism issues sends a very dangerous signal," said Ramachandran.
"Growth in India purely by building roads and bridges is not sustainable. You can build the infrastructure, you can build airports, but these are all enablers -- at the end of the day growth in the country is going to come because there is innovation here."
($1= 48.8 rupees)
(Reporting by Euan Rocha; editing by Carol Bishopric)
