Dow Chemical Asia Profits Down
NEW YORK (AP) _ Dow Chemical Co.’s plastics division struggled this year because of sluggish prices and the effects of Asia’s economic turmoil, executives said Friday.
Profits fell 1 percent to 2 percent this year and are expected to be flat in 1998, but the pricing pressures may begin to ease toward the end of next year, Dow executives said in a yearend media briefing.
Dow Chemical’s stock fell 1.5 percent, or by $1.50 a share to close Friday at $97.50 on the New York Stock Exchange. It is among the multinational companies to lose ground in a stock market that is focused on Asian economic unrest.
The company’s biggest question mark is Asia, where currency devaluations have already cut into the company’s bottom line, said Tony Carbone, a vice president for plastics and energy at Dow Chemical.
Dow gets about 10 percent of its revenue in the region, and more than half of that comes from plastics, Carbone said.
``It’s a very awkward and confused business market right now.″ Carbone said. ``You’ve got customers out there with very little financial flexibility, customers who are slashing inventories so they don’t get caught with assets they don’t need.″
Dow Plastics, based in Midland, Mich., makes materials for products ranging from cars and appliances to insulation and carpets. It had about half of Dow Chemical’s total revenue of $20 billion in 1996.
The division doesn’t release specific profit figures, but sales were $9.2 billion in 1996 and are expected to be $9.3 billion this year. That should rise to $9.6 billion next year, the company said, mainly because of acquisitions and its entry into polypropylene, an ingredient in carpet fibers and fabrics.
Dow also expects to start making plastic from plants instead of fossil fuels. It agreed last month to form a joint venture with Cargill Inc., a big grain processor, to develop the technology and is considering Blair, Neb., for a production site.
Current applications for plant-based plastics include garbage bags and yogurt cups, but the business should grow rapidly as costs come down, said Kathleen Bader, a vice president for Dow Plastics.