Dow Chemical (NYSE: DOW) reported Q1 EPS of $0.89, $0.06 better than the analyst estimate of $0.83. Revenue for the quarter came in at $10.7 billion versus the consensus estimate of $10.66 billion.

Highlights and Commentary:

• Volume rose 4 percent, excluding the impact of divestitures and acquisitions. Growth in North America (up 6 percent), Europe, Middle East, Africa and India (up 4 percent) and Asia Pacific (up 3 percent) more than offset a decline in Latin America (down 4 percent). Volume grew in the emerging geographies, as results in Greater China (up 5 percent) and India (up 13 percent) reflected solid consumer-driven demand in these regions.
• EBITDA(3) was $2.3 billion on an operating basis(4), or $1 billion on a reported basis, compared to $2.4 billion on an operating basis in the year-ago period. Operating EBITDA improvement from targeted end-markets such as transportation, infrastructure and electronics was more than offset by the impact of lower equity earnings and divestitures.
• Operating EBITDA margin(5) expanded from 19 percent to 21 percent – the highest level in more than a decade – reflecting disciplined margin management and the benefits of self-help actions. Gains were delivered in most operating segments, led by Consumer Solutions (up 400 basis points), Agricultural Sciences (up 250 basis points), Infrastructure Solutions (up 220 basis points) and Performance Plastics (up 70 basis points). These gains more than offset a decline in Performance Materials & Chemicals (down 130 basis points), which was primarily impacted by lower equity earnings related to a reduced contribution from MEGlobal and Sadara start-up expenses.
• Dow's focus on reliability and operational excellence delivered an 88 percent operating rate for the quarter and, excluding the impact of divestitures, the highest production volume quarter in the Company’s history.
• Dow returned $506 million to shareholders through its highest regular quarterly paid dividend to date.

Comment

Andrew N. Liveris, Dow’s chairman and chief executive officer, stated:

“Dow’s resolute focus on our priorities was once again evident, with this quarter marking the fourteenth in a row of year-over-year operating EPS and EBITDA margin increases. The strength of our businesses and business model was on display across our broad geographic footprint and targeted end-markets, from transportation to agriculture to construction. These results are notable in the context of the lower hydrocarbon and crop price environments and underscore the power of Dow’s unique combination of differentiation and integration, coupled with a focused market participation, driven by our innovation agenda and a disciplined productivity mindset.

“Equally important, throughout the quarter our teams achieved additional milestones on our near-term earnings growth drivers, including progressing our investments in Saudi Arabia and the U.S. Gulf Coast, commercializing our robust innovation pipeline and further enhancing our operational excellence performance.

“Finally, we remain on track with our historic Dow Corning and DowDuPont transactions. In both cases, the joint implementation teams made significant progress in defining the plans to accelerate integration and synergy capture activities. We remain excited about the potential for these once-in-a-generation strategic actions to further enhance the demonstrated performance, strength and resilience of our businesses and our business model.”

Outlook

Commenting on the Company’s outlook, Liveris said:

“Looking ahead, we expect continued strength in the consumer driven end-markets where we have demonstrated a narrower and deeper focus, especially in our materials businesses that provide innovative products to the packaging, transportation and infrastructure markets. We see strong demand signals in North America, gradual recovery in Europe and ongoing sustainable urbanization in China, all of which are driving the need for Dow’s unique products, underscoring our innovation, market access and integration – enabling us to grow faster in our selected market sectors.

“We believe pockets of volatility will persist, including near-term geopolitical and economic uncertainty, most notably in Brazil. In this environment, we continue to control what we can control: implementing disciplined self-help and productivity actions; advancing our innovation agenda; and progressing our strategic growth investments.

“Our teams remain squarely focused on delivering on our three priorities: meeting our financial commitments, and quickly closing the Dow Corning and DowDuPont transactions. We remain committed to flawless operational, commercial and project execution to deliver value for our customers and enhanced returns for our shareholders.”

For earnings history and earnings-related data on Dow Chemical (DOW) click here.