Dow Chemical says cost savings will likely exceed FY target

Dow Chemical Co <DOW.N>, the No.1 U.S. chemical maker by sales, reported a better-than-expected quarterly profit, driven by growth in its high-margin businesses and cost cutting.

Swetha Gopinath/Reuters

Dow Chemical Co <DOW.N>, the No.1 U.S. chemical maker by sales, reported a better-than-expected quarterly profit, driven by growth in its high-margin businesses and cost cutting.

The company has said it plans to slash costs by $300 million this year. Of that, the company realized $90 million in the second quarter ended June 30.

It would be "reasonable to assume" that Dow will exceed its cost-savings target for the year, Chief Financial Officer Howard Ungerleider said in an interview on Thursday.

Dow and DuPont <DD.N>, who are expected to close their $130 billion merger this year, have been slashing costs by laying off employees and keeping a tight lid on expenses.

Dow's operating margin expanded by 160 basis points to 21 percent on an earnings before interest, taxes, depreciation and amortization (EBITDA) basis.


EBITDA at the company's Consumer Solutions business shot up to $1.58 billion in the quarter from $169 million, while it surged to $1.39 billion from $240 million in its Infrastructure Solutions unit.

Both units benefited from Dow taking full control of Dow Corning, the company's venture with Gorilla glass maker Corning Inc <GLW.N>.

Dow's strategy of focusing on high-margin products by shedding volatile commodity businesses such as its century-old chlorine business are also paying off.

The company's shares were up about 1 percent in light premarket trading.

The Dow-DuPont merger is the first step toward breaking the businesses into three separate companies focused on agriculture, material science and specialty products.

The EU competition enforcer is expected to rule on the deal by Aug. 11.

DuPont and Dow have offered concessions in a bid to allay EU antitrust concerns, according to a filing on the European Commission's website.

"We remain really good on our timeline to close the transaction before the end of the year," said Ungerleider.


"No discussion we have had with the European Commission takes us off of that view."

DuPont also reported a higher-than-expected quarterly profit on Tuesday, and forecast a 50 percent jump in third-quarter operating earnings as it steps up cost cutting.

Dow's net income attributable to shareholders nearly tripled to $3.12 billion, or $2.61 per share, in the quarter ended June 30.

Excluding items, it earned 95 cents per share, much higher than the average analyst estimate of 85 cents, according to Thomson Reuters I/B/E/S.

These items included a $2.20 per share gain related to the Dow Corning deal.

Sales fell 7.4 percent to $11.95 billion, but beat the average estimate of $11.24 billion.

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