Dow Chemical Co., which plans to complete a historic merger with DuPont Co. this year, reported second-quarter profit that exceeded analysts’ estimates amid rising demand for plastics, the company’s leading product.
Operating earnings rose to 95 cents a share, Midland, Michigan-based Dow said in a statement Thursday. That beat the 85 cent average of estimates compiled by Bloomberg. Sales declined 7.4 percent to $12 billion, compared with the $11.2 billion estimate.
The plastics unit, Dow’s biggest, benefited from 12 percent higher sales volumes, driven by packaging, transportation and infrastructure markets. Chief Executive Officer Andrew Liveris has sold off less profitable commodity businesses such as chlorine while cutting costs. Dow raised prices in the first half for products such as polyethylene, a flexible plastic used in shopping bags.
“Anything consumer-facing is doing fine, and Dow plays nicely to that,” Matt Arnold, an analyst at Edward Jones, said by phone Thursday. “That allowed volumes to hold up even though industrial-facing businesses were down.”
Dow climbed 0.6 percent to $53.95 at 9:05 a.m. in New York before the start of regular trading. The shares climbed 4.2 percent this year through Wednesday.
The plastics operation can continue to post relatively high earnings in the second half, because U.S. producer inventories are low and demand is robust, Chief Financial Officer Howard Ungerleider said.
“We are in the middle of an earnings ridge,” Ungerleider said by telephone. “Maybe not a peak, but an earnings ridge.”
The quarter’s results also benefited from an initiative to reduce annual costs by $300 million, the CFO said. Sales volumes rose in every region.
“The Dow team found growth in every pocket of the world,” Ungerleider said.
The volume gains were offset by average prices that tumbled 10 percent despite increases for some products. Prices followed the path of the company’s oil- and gas-based raw materials, the CFO said.