Dow expects strong first-quarter sales on higher prices

Arathy Somasekhar and Ruhi Soni
Updated ·2 min read
FILE PHOTO: The Dow logo is seen on a building in downtown Midland, Michigan

By Arathy Somasekhar and Ruhi Soni

(Reuters) -Dow Inc on Thursday forecast better-than-expected sales for the current quarter after fourth-quarter results beat estimates, helped by higher prices for its products as supplies remained tight amid strong demand.

Shares of the company, which makes chemicals used in a range of products including food packaging, mattresses, textiles and electronics, rose as much as 6.5% to $60.97.

High demand as economies recover from the impact of COVID-19 along with supply-chain pressures, pandemic-related logistical constraints and weather-related outages at plants have allowed the company to boost prices.

Prices climbed 39% in the fourth quarter from a year earlier, while volumes fell 4%.

Dow forecast first-quarter sales between $14 billion and $14.5 billion, above analysts' estimates of $12.84 billion, according to Refinitiv IBES data, as industrial production and sustained consumer spending point to growing demand.

Logistical constraints are expected to ease throughout the year, helping clear elevated order backlogs and meet pent-up customer demand, Chief Executive Officer Jim Fitterling said.

Chief Financial Officer Howard Ungerleider added that while the Omicron variant resulted in some near-term disruption, the company does not expect any significant affect on its current recovery path.

However, margins are likely to moderate in 2022 as supply improves, he added, forecasting a $275 million hit to first-quarter margins compared with the fourth quarter.

KeyBanc Capital Markets analyst Aleksey Yefremov said that while demand is largely intact for Dow's end-markets, commodity margins are "really challenged".

"Ultimately, the earnings of the fourth quarter of 2022 are going to be lower than the fourth quarter of 2021."

Dow net operating income more than doubled to $1.6 billion, while earnings per share of $2.15 beat estimates of $2.04.

Sales rose 34.2% to $14.37 billion and topped estimates of $14.31 billion. However, this marked the first sequential decline in Dow's revenue in six quarters.

(Reporting by Ruhi Soni and Arathy Somasekhar in Bengaluru; Editing by Shounak Dasgupta and Vinay Dwivedi)

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