By JACK KASKEY
Dow Chemical CEO Andrew Liveris defended his strategy of
integrating commodity chemicals with specialty products after
activist investor Third Point called for the company to spin
off its petrochemicals
Dow only makes commodity chemicals -- such as ethylene and
propylene -- to provide ingredients for its higher-value
products in agriculture, electronics and plastics, Liveris
said Wednesday on the companys fourth-quarter earnings
We have a very focused and integrated portfolio, a
rising and increasingly growing earnings profile and
tremendous financial flexibility, he said.
Third Point, founded by billionaire Dan Loeb, said in a Jan.
21 letter that Dow is its top holding and could add billions
of dollars to earnings by spinning off commodity- chemicals
Dow said at the time that it welcomes constructive input and
will keep talking with Third Point. Liveris said Wednesday
that Dow can realize more from the commodity business with project
s such as its $4 billion
plan for US Gulf Coast plants to take advantage of cheap
They seem pretty married to their existing strategy of
investing in upstream units to feed downstream
businesses, Matt Arnold, a St. Louis-based analyst at
Edward Jones & Co. who recommends selling Dow shares,
The Midland, Michagan-based company will boost investment in
businesses with attractive end markets, such as plastic
packaging, and in units such as electronics and agriculture
where Dows science capabilities give it an advantage,
said Liveris, 59. The company will continue to cut costs to
improve returns at underperforming units, he said.
Recent and planned asset sales show Dow is willing to take
the sort of actions advocated by Third Point, Liveris said.
It has hired advisers to assist with the previously announced
plan to divest as much as $4 billion of operations including
chlorine derivatives, he said.
We have not and will not shy away from aggressive
options to exit complex portions of our portfolio,
Liveris said. When it comes to creating shareholder
value, everything is on the table.
Liveris said Dow achieved its 2013 goals for cutting costs
and debt, selling underperforming assets and improving
For the fourth quarter, net income was 79 cents/share,
compared with a net loss of 61 cents a year earlier. Profit
excluding some one-time items was 65 cents/share, Dow said,
beating the 43-cent average of 20 analysts estimates
compiled by Bloomberg. Sales of $14.4 billion topped
the $14.1 billion average estimate.
Dows plastics unit had earnings before interest, taxes,
depreciation and amortization -- excluding some items -- that
jumped 40% in the quarter. The segment accounted for 55% of
the companys adjusted Ebitda as price gains and low US
gas prices widened margins.
Dow said in a separate statement that it raised its quarterly
dividend to 37 cents from 32 cents and would repurchase $4.5
billion of shares by 2014, increasing a $1.5 billion program
announced last February.
Liveris said on Wednesday's call that he hopes improved
earnings will lift Dow to where the preferred stock held by
Warren Buffetts Berkshire Hathaway will convert to
common shares. Starting in April, Dow has the right to swap
the investment into common stock if its shares trade above
$53.72 for any 20 trading days in a consecutive 30-day
Dow, founded in 1897 as a bleach maker, is the worlds
biggest producer of epoxy resins and some grades of
polyethylene plastic. Its the worlds
second-biggest chemical maker by sales after Germanys