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Dow products will have price increase { April 2008 } Original Source Link: (May no longer be active)
http://www.forbes.com/markets/currencies/2008/05/28/dow-chemical-closer-markets-equity-cx_mlm_lal_0528markets32.htmlhttp://www.forbes.com/markets/currencies/2008/05/28/dow-chemical-closer-markets-equity-cx_mlm_lal_0528markets32.html
Market Scan
Dow Jacks Prices, Blames Washington
Miriam Marcus, 05.28.08, 5:00 PM ET
Dow Chemical says the government is forcing it to raise prices and push the cost of energy onto its customers.
On Wednesday, Dow Chemical (nyse: DOW - news - people ) announced it would raise product prices across the board by up to 20.0% to offset the rising costs of energy, raw materials and transportation. Chairman Andrew N. Liveris blamed the United States government’s failure to develop a sound energy policy that has led to the company’s attempt at mitigating astonishing rise in energy and raw material costs.
“For years, Washington has failed to address the issue of rising energy costs and, as a result, the country now faces a true energy crisis, one that is causing serious harm to America’s manufacturing sector and all consumers of energy,” he said.
A year ago, a barrel of crude oil cost less than $60. It was trading above $130 on Wednesday. The price of natural gas has gone up more than 65% since the end of 2007.
Liveris added that American global competitiveness has been curbed and “our own domestic markets are now starting to see demand destruction throughout the U.S.”
The Midland, Mich.-based company said it expected to spend $32.0 billion on energy and hydrocarbon-based materials, the basis of many chemicals, this year. In 2002, such spending was a quarter of that level, $8.0 billion.
Dow Chemical makes a wide range of chemical, plastic and agricultural products that are sold in 160 countries. Its U.S. sales, according to Revere Data, comprised 34.1% of overall revenue last year, while Europe was 36.7%. European customers will feel the pinch of higher prices far less than those in the United States because the euro has gained 7.8% against the dollar this year and 16.9% over the past 12 months.
The price increases will depend on each product’s exposure to the rising costs associated with it and will take effect June 1.
Investors seemed to think the higher prices would do more to boost the bottom line than they would to discourage sales. Dow’s shares traded up 60 cents, or 1.5%, to $40.83, by the close of trading on Wednesday. Still, the stock is down 10.4% in the last 12 months.
"What Dow's doing does help give headline support, but everybody has been doing it anyway," First Analysis Securities analyst Steven Schwartz said.
Albemarle, Nalco Holding and Praxair, all U.S. chemical companies, have also raised their prices in recent months.
Last month, Dow Chemical reported a 3.3% decline in first-quarter earnings, to $941.0 million, or 99 cents per share, while sales rose 19.0%, to $14.8 billion, boosted by double-digit price gains and strong growth in emerging economies. Earnings from Dow’s specialty chemicals and plastics businesses were hurt by weakness in the North American construction and automotive sectors and soaring costs for crude oil and natural gas. (See Dow Chemical Looks Less Volatile)
Reuters contributed to this article.
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