Dow posted fourth-quarter net income of $1.8 billion, up 40% year-on-year (YOY) as sharp price and margin gains in all segments more than offset supply constraints. Net sales were $14.4 billion, up 34% YOY.
”Underlying demand strength and continued operating discipline enabled us to overcome supply and logistics constraints as well as higher raw material and energy costs,” says Dow chairman and CEO Jim Fitterling.
Local prices increased 39% versus the year-ago period. The gains came despite a 4% YOY volume decline, driven by supply constraints from maintenance turnarounds and lingering effects from Covid and weather-related outages as well as global logistics constraints across several key value chains.
Reported adjusted operating earnings were $2.15/share compared with 81 cts in the year-ago period and 5% above consensus analyst estimates as reported by Zacks Investment Research.
Segment results
Packaging & specialty plastics segment net sales in the quarter were $7.2 billion, up 40% YOY. Operating EBIT was $1.4 billion, up 85% YOY. Segment local prices increased 44% YOY due to tight supply and demand balances. Volume declined 3% year-over-year, as gains in energy sales volume was more than offset by lower polyethylene volume, primarily in Asia Pacific due to supply constraints.
Industrial intermediates & infrastructure segment net sales in the quarter were $4.5 billion, up 30% YOY. Operating EBIT was $595 million, up 101% YOY on continued price strength. Local prices improved 38% year-over-year with gains in all regions on strong industry demand. Segment volume declined 7% year-over-year due to an exit from a low-margin co-producer contract and planned maintenance turnaround activity.
Performance materials & coatings segment net sales in the quarter were $2.6 billion, up 26% YOY. Operating EBIT was $295 million, up 490%, compared to $50 million in the year-ago period, due to strong price momentum for silicones and coatings. Local prices increased 30% YOY, with gains in both businesses and in all regions. Volume declined 4% YOY as stronger demand for performance silicones applications and architectural coatings in the US and Canada was more than offset by lower siloxane supply availability due to a pull forward of maintenance activity to coincide with dual-control actions in China, Dow says.
Demand outlook solid
Dow expects strong demand growth to continue this year supported by global GDP growth forecasts that remain well above historical averages as well as significant pent-up demand from strong consumer savings, low inventories, and supply chain improvement. “In 2022, we expect continued demand strength across our end markets, supported by growing industrial production and sustained consumer spending,” Fitterling says. “We are working hard to normalize operating rates, inventory and service levels following a year of supply constraints and Covid-related logistics challenges.”
Elevated oil and oil-to-gas spreads, higher operating rates, and higher pricing should be favorable margin drivers in 2022. Potential risks the company is watching include near-term inflationary pressures on raw material prices, uncertainties around COVID recovery, and supply chain constraints.
“While the global economy continues to be impacted by supply chain pressures, these logistics constraints are expected to ease throughout the year to fulfill elevated order backlogs and pent-up customer demand,” FItterling says.
Source: Dow
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