Dow Chemical 's Second-Quarter Net Down 19 Percent On Higher Energy Costs

MIDLAND, Mich. (AP) - Dow Chemical Co., the world's second-largest chemical company, said Thursday that second-quarter earnings fell 19 percent from a year ago, as record quarterly revenue failed to offset high feedstock and energy costs.

Net income after paying preferred dividends totaled $1.02 billion, or $1.05 per share, fo the three months ended June 30, down from $1.27 billion, or $1.30 per share, a year ago. Earnings for the second quarter of 2005 included a gain of 12 cents related to the repatriation of foreign earnings, and a charge of 2 cents per share for early debt redemption of debt.

Sales grew 9 percent to set a new quarterly record of $12.51 billion, compared with $11.45 billion last year.

The results missed analyst expectations for profit of $1.13 per share, although sales came in above Wall Street's $12.08 billion estimate.

Compared with the second quarter last year, Dow said volume improved a healthy 4 percent, and prices rose 5 percent. However, the company said this was not enough to offset another major rise in feedstock and energy costs, which climbed more than $800 million year-over-year. Dow is second only to Germany's BASF AG among the world's chemical makers.

Geoffery E. Merszei, Dow's chief financial officer, said, ''Although this was a challenging quarter, we posted record sales and healthy cash flow, despite headwinds in feedstock and energy costs. Industry fundamentals remain sound, although there was some softness in agricultural sciences, polyethylene and acrylic monomers during the quarter.''

Dow said it will be ''difficult'' to meet earlier expectations for fiscal 2006 improvement year-over-year.

''We will continue to focus on financial discipline and cost control, and expect to see further improvements in both price and volume,'' Merszei continued. ''Overall we still expect that 2006 and 2007 will be very good years for Dow.''