Regions

Dow Chemical reviews options on agri unit, rejigs JVs

October 26
12:32 AM 2015

As part of its massive restructuring plan, Dow Chemical Co has taken up several measures to increase the bottom line of the company. Dow has decided to review all the available options for its farm chemicals and seeds unit, which has been suffering from sales drop. Dow Chemicals is also considering an option to buy a stake of Coming Inc in a Silicon joint venture (JV). It has increased the dividend payout and is also in the process of offloading its stake in a Kuwait JV engaged in petrochemical products. 

With an objective of simplifying the business structure, Dow Chemical has been reducing the number of JVs. Exploring several options available for Dow Chemical, analysts feel that it may merge its agri unit with Monsanto Co or DuPont or sell it totally. Monsanto prefers to grow through acquisition route. Its recent acquisition bid for Syngenta AG couldn't succeed. 

Dan Loeb, an activist investor, advised Dow to split its agri unit. It's been advised for separating specialty chemical units from petrochemical divisions as well. Market analysts forecast that the agricultural unit of Dow may tie up with DuPont. The Chief Executive of DuPont has resigned from his post recently. 

The continuous drop in agricultural commodity prices coupled with expensive fertilizer output is forcing farm-based companies towards consolidation. Dow is also reducing low-margin commodity chemical business activity in addition to slowing down its century-old chlorine unit. 

Dow Chemical has decided to spin off a considerable portion of #mce_temp_url# and merge it with chemical maker Olin Corp in an estimated deal of $5bn and had also decided to separate US Gulf Coast chlor-alkali and viny, global chlorinated organics and global epoxy businesses. It also planned to merge all these separated business into Olin.

The net income of Dow rose over 50 percent to $1.59bn or $1.09 per share during the third quarter ending September. The sale proceeds of $621mn from AgroFresh specialty chemical business added to the net income. Operating profit surged 14 percent to 82 cents per share. The drop in raw material prices increased the margins of Dow. Revenues dropped 16 percent to $12.04bn.

Andrew Liveris, chairman and CEO of Dow Chemical, concluded the sale of chlorine business on 5 October 2015 enabling the company to focus more on higher-margin businesses such as plastic packaging, seeds, and pesticides. Dow business includes polyethylene and other plastics, which offer higher margins to the company. The lower price on naphtha refined from crude oil is benefiting factories in the Europe. 

Established in 1943, Dow Coming Inc is engaged in silicon-based products for aerospace, automotive and electrical segments. Dow has raised $1.5bn in pretax proceeds by offloading some stake in MEGlobal, a joint venture with Petrochemical Industries Co of Kuwait. Dow is also planning to slash its stake in another Kuwait joint venture called Greater EQUATE.

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