Dow Chemical posts $1.55B 4Q loss, sees rough 2009

Dow Chemical Co. reported a $1.55 billion fourth-quarter loss Tuesday as a deteriorating global economy led to a 23 percent drop in sales and huge job cuts.

The loss was larger than expected and revenue came in below Wall Street expectations.

"We are planning for a global recession throughout 2009 and will continue to take actions on managing our cash and controlling our costs," said Andrew N. Liveris, Dow's chairman and chief executive.

Dow slashed operating rates to 64 percent in the fourth quarter with demand for its products evaporating. Diminished production led to operating rates not seen in more than 25 years, according to the company.

The nation's largest chemical maker said its loss amounted to $1.68 per share in the three months ended Dec. 31. It had earned $472 million, or 49 cents per share, during the last quarter of 2007.

Dow reported $978 million in charges related to restructuring, including a previously announced 11 percent cut to its work force. Dow also took a financial hit from two hurricanes in the Gulf of Mexico where it has plants, a failed joint venture and a proposed acquisition of rival Rohm and Haas Co.

Excluding those one-time costs, its loss was 62 cents per share.

Analysts surveyed by Thomson Reuters expected a profit of 6 cents. Those estimates typically exclude one-time charges.

Dow shares fell to a 52-week low of $10.50 at one point Tuesday, but closed up 30 cents at $11.35. That's a 74 percent discount to the stock's 52-week high of $43.42.

Midland-based Dow said sales fell to $10.9 billion from $14.2 billion. Analysts had been looking for revenue of $13.3 billion.

"The financial results are very disappointing and a reflection of the demand deterioration we saw in global markets and the turmoil in the financial world," Liveris said during a teleconference.

However, "considering today's economy, we remain a strong company with many options moving forward," he said.

In a recent interview with The Associated Press, Liveris raised the possibility of the chemical company's first-ever dividend cut, but there further mention of dividends in the fourth-quarter report.

Hassan Ahmed, an analyst for HSBC Securities, called Dow's fourth-quarter results "very disappointing" and "very poor" in a note to investors. He also predicted that a dividend cut was imminent.

Dow has paid a dividend in every quarter since 1912. It disbursed about $1.5 billion in dividends in 2008.

The company's costs for energy and raw materials fell $1.2 billion, or 23 percent, from the same period last year. Meanwhile, its Agricultural Sciences segment posted record sales for the 10th consecutive quarter.

It was a difficult year for Dow, which reported $579 million in annual profits, or 62 cents per share, compared with $2.89 billion, or $2.99 per share, in 2007. Annual sales rose 7 percent to $57.51 billion from $53.51 billion in 2007.

First, the soaring price of commodities forced it to twice raise prices by more than 20 percent. While commodity prices eventually plunged, so did the global economy, cutting sales drastically.

That led a Kuwaiti state-run petrochemical company to pull out of a $17.4 billion venture with Dow just days before the deal was to close. Dow expected $7 billion from the joint venture as it moved forward on its proposed $15.4 billion acquisition of specialty chemicals maker Rohm & Haas.

That deal is now in limbo and the companies traded barbs Tuesday.

In a letter from Dow, the company said a court-forced merger "under the present circumstances will cause irreparable harm to both Dow and Rohm and Haas."

In response, Rohm & Haas wrote, "We understand that this is a difficult environment for the chemical industry. However, the difficult conditions in the chemical industry and financial markets commenced before Dow agreed to acquire Rohm and Haas and were widely expected to worsen."

The company, which has filed suit against Dow, again insisted that Dow complete the deal.

Dow Chemical is required to pay a $3 million "ticking fee" for every day the deal is not closed, after federal regulators approved the acquisition in mid-January.

Dow has set about slashing costs and in early December it said it would cut 5,000 full-time jobs, close 20 plants and sell several businesses. Dow also will temporarily idle 180 plants and prune 6,000 contractors from its payroll.