Dow Chemical is carrying out “self-help measures in a slow-growth world” after reporting earnings that were up 17 per cent for the year but below analysts’ average expectations.
The company improved many of its operations but this was offset by continuing losses at the performance materials division.
It also raised its target for disposals to $3bn-$4bn, as it seeks to move out of lower-margin, more commoditised businesses.
Andrew Liveris, Dow chief executive, said the global economic recovery had been “hesitant” and growth had been “slow and spotty at best”, and hampered by “political uncertainties in key regions”.
In spite of the “recent paralysis in Washington”, he said “the US is on the whole demonstrating stable albeit slow growth”.
However, he added, the company was concerned that “ongoing dysfunctionality” would slow next year’s growth from the 3 per cent it had been expecting.
Mr Liveris also described China as “stabilising”, while the European market appeared to have “found bottom”, and he expected to see more positive signals in the near term than over the past three years.
The company has also said it plans to cut costs by $500m this year.
However, Mr Liveris also highlighted areas of strength including emerging markets, where the value of sales was up 5 per cent over the year, while it was flat in developed economies.
He reiterated that the company would still invest in “assets with low-cost positions”, a reference to Dow’s planned expansion in the US Gulf of Mexico coast region, to take advantage of low natural gas prices.
Mr Liveris also sounded upbeat about the company’s future, saying he could predict “quite confidently” that Dow’s earnings before interest, tax, depreciation and amortisation would rise to $10bn in 2015-16, from $7.5bn in 2012, because of the start up of new projects including Sadara Chemical, the $20bn joint venture with Saudi Aramco now under construction in Saudi Arabia.
Helped by a $2.16bn pre-tax gain from the successful outcome of arbitration in its dispute with Kuwait over a failed joint venture plan, the group has also continued to reduce its borrowings.
Net debt, built up as a result of the $15bn acquisition of Rohm & Haas in 2009, fell from $16.7bn at the end of last year to $13.3bn at the end of September.
Dow’s underlying earnings per share were 50 cents for the third quarter, up from 42 cents in the equivalent period of 2012, but less than the average forecast of about 53 cents.
Sales were also less than expected at $13.7bn, up 1 per cent over the year but below the average forecast of $14bn.
Europe was the weakest region, after the company cut back unprofitable capacity. Sales volumes were down 6 per cent in the quarter for the Europe, Middle East and north Africa region, with the decline driven by western Europe. The strongest region was Latin America, where sales volumes were up 5 per cent.
The troubled performance materials division, which makes products such as polyurethane and epoxy, was hit by falling sales and volatile feedstock prices, but still managed to cut its losses to $11m in the quarter from $30m in the equivalent period of 2012. The best performing division was performance plastics, which makes packaging materials, where profits rose almost fivefold to $134m.
The new target for disposals is an increase from the plan to sell businesses worth $1.5bn announced earlier this year. That plan was scheduled to run to the second half of 2014. The new plan, which includes the previously announced $1.5bn, is expected to be completed over the next 18 to 24 months.
This month Dow announced a disposal as part of that plan, selling its business providing technology and catalysts for making propylene for $500m to WR Grace.
Dow shares were down 0.5 per cent at $40.84 in lunchtime New York trading.