|Traded as||NYSE: DOW
S&P 500 Component
|Founder||Herbert Henry Dow|
|Headquarters||Midland, Michigan, U.S|
|Andrew N. Liveris
(Chairman, President and CEO)
|Products||Chemicals, plastics, performance chemicals, catalysts, coatings, crop technology, crude oil and natural gas exploration and production|
$ 57.080 billion (FY 2013)
|$ 1.665 billion (FY 2011)|
|Profit||$ 4.816 billion (FY 2013)|
|Total assets||$ 69.501 billion (FY 2013)|
|Total equity||$ 21.867 billion (FY 2012)|
|Subsidiaries||Dow AgroSciences, LLC.
Union Carbide Corp.
Rohm and Haas
ANGUS Chemical Company
Dow Roofing Systems
The Dow Chemical Co., commonly referred to as Dow, is an American multinational chemical corporation headquartered in Midland, Michigan, United States. As of 2007, it is the second-largest chemical manufacturer in the world by revenue (after BASF) and as of February 2009, the third-largest chemical company in the world by market capitalization (after BASF and DuPont). It ranked second in the world by chemical production in 2014.
Dow manufactures plastics, chemicals, and agricultural products. With a presence in about 160 countries, it employs about 54,000 people worldwide. The company has seven different major operating segments, with a wide variety of products made by each one. Dow's 2012 sales totaled approximately $57 billion. Dow has been called the "chemical companies' chemical company" in that most of its sales are to other industries rather than end-users. Dow sells directly to end-users primarily in the human and animal health and consumer products markets.
Dow is a member of the American Chemistry Council. The company tagline is "Solutionism".
Dow is a large producer of plastics, including polystyrene, polyurethane, polyethylene, polypropylene, and synthetic rubber. It is also a major producer of ethylene oxide, various acrylates, surfactants, and cellulose resins. It produces agricultural chemicals including the pesticide Lorsban and consumer products including Styrofoam. Some Dow consumer products including Saran wrap, Ziploc bags and Scrubbing Bubbles were sold to S. C. Johnson & Son in 1997.
Performance plastics make up 25 percent of Dow's sales, with many products designed for the automotive and construction industries. The plastics include polyolefins such as polyethylene and polypropylene, as well as polystyrene used to produce Styrofoam insulating material. Dow manufactures epoxy resin intermediates including bisphenol A and epichlorohydrin. Saran resins and films are based on polyvinylidene chloride (PVDC)
The Performance Chemicals (17 percent of sales) segment produces chemicals and materials for water purification, pharmaceuticals, paper coatings, paints and advanced electronics. Major product lines include nitroparaffins, such as nitromethane, used in the pharmaceutical industry and manufactured by ANGUS Chemical Company, a wholly owned subsidiary of The Dow Chemical Co. Important polymers include Dowex ion exchange resins, acrylic and polystyrene latex, as well as Carbowax polyethylene glycols. Specialty chemicals are used as starting materials for production of agrochemicals and pharmaceuticals.
Dow Water and Process Solutions (DW&PS) is a business unit which manufactures Filmtec reverse osmosis membranes which are used to purify water for human use in the Middle East. The technology was used during the 2000 Summer Olympics and 2008 Summer Olympics.
Agricultural Sciences (Dow AgroSciences) provides 7 percent of sales and is responsible for a range of insecticides (such as Lorsban), herbicides and fungicides. Genetically modified plant seeds are also an important, growing area. Dow AgroSciences sells seeds commercially under the following brands: Mycogen (grain corn, silage corn, sunflowers, alfalfa, and sorghum), Atlas (soybean), PhytoGen (cotton) and Hyland Seeds in Canada (corn, soybean, alfalfa, navy beans and wheat).
Basic plastics (26 percent of sales) end up in everything from diaper liners to beverage bottles and oil tanks. Products are based on the three major polyolefins – polystyrene (such as Styron resins), polyethylene and polypropylene.
Basic chemicals (12 percent of sales) are used internally by Dow as raw materials and are also sold worldwide. Markets include dry cleaning, paints and coatings, snow and ice control and the food industry. Major products include ethylene glycol, caustic soda, chlorine, and vinyl chloride monomer (VCM, for making PVC). Ethylene oxide and propylene oxide and the derived alcohols ethylene glycol and propylene glycol are major feedstocks for the manufacture of plastics such as polyurethane and PET.
The Hydrocarbons and Energy operating segment (13 percent of sales) oversees energy management at Dow. Fuels and oil-based raw materials are also procured. Major feedstocks for Dow are provided by this group, including ethylene, propylene, 1,3-butadiene, benzene and styrene.
Dow was founded in 1897 by Canadian-born chemist Herbert Henry Dow, who invented a new method of extracting the bromine that was trapped underground in brine at Midland, Michigan. Dow originally sold only bleach and potassium bromide, achieving a bleach output of 72 tons a day in 1902. Early in the company's history, a group of British manufacturers tried to drive Dow out of the bleach business by cutting prices. Dow survived by also cutting its prices and, although losing about $90,000 in income, began to diversify its product line. In 1905, German bromide producers began dumping bromides at low cost in the U.S. in an effort to prevent Dow from expanding its sales of bromides in Europe. Instead of competing head on with the German producers, Dow bought the cheap German-made bromides and shipped them back to Europe, undercutting his German competitors. Even in its early history, Dow set a tradition of rapidly diversifying its product line. Within twenty years, Dow had become a major producer of agricultural chemicals, elemental chlorine, phenol and other dyestuffs, and magnesium metal.
During World War I, Dow Chemical supplied many war materials the United States had previously imported from Germany. Dow produced magnesium for incendiary flares, monochlorobenzene and phenol for explosives, and bromine for medicines and tear gas. By 1918, 90 percent of Dow Chemical production was geared towards the war effort. At this time, Dow created the diamond logo that is still used by the company. After the war, Dow continued research in magnesium, and developed refined automobile pistons that produced more speed and better fuel efficiency. The Dowmetal pistons were used heavily in racing vehicles, and the 1921 winner of the Indianapolis 500 used the Dowmetal pistons in his vehicle.
In the 1930s, Dow began producing plastic resins, which would grow to become one of the corporation's major businesses. Its first plastic products were ethylcellulose, made in 1935, and polystyrene, made in 1937.
From 1940 to 1941, Dow built its first plant at Freeport, Texas, in order to produce magnesium extracted from seawater rather than underground brine. The Freeport plant is now home to Dow's largest site – and one of the largest integrated chemical manufacturing sites in the world. The site grew quickly – with power, chlorine, caustic soda and ethylene also soon in production. Growth of this business made Dow a strategically important business during World War II, as magnesium became important in fabricating lightweight parts for aircraft. Based on 2002–2003 data, the Freeport plants (known as Texas Operations internally) produced 27 billion pounds of product – or 21 percent of Dow's global production. In 1942 Dow began its foreign expansion with the formation of Dow Chemical of Canada in Sarnia, Ontario to produce styrene for use in styrene-butadiene synthetic rubber. Also during the war, Dow and Corning began their joint venture, Dow Corning, to produce silicones for military and, later, civilian use.
In the post-war era, Dow began expanding outside of North America, founding its first overseas subsidiary in Japan in 1952, and in several other nations soon thereafter. Based largely on its growing plastics business, Dow opened a consumer products division beginning with Saran wrap in 1953. Based on its growing chemicals and plastics businesses, Dow's sales exceeded $1 billion in 1964, $2 billion in 1971, and $10 billion in 1980.
Contamination from fires and radioactive waste leakage plagued the facility under Dow's management. In 1957 a fire burned plutonium dust in the facility and sent radioactive particles into the atmosphere.
The Department of Energy transferred management of the facility to Rockwell International in 1975. In 1990, nearby residents filed a class action lawsuit against Dow and Rockwell for environmental contamination of the area; the case was litigated in federal court. In 2008 a federal judge ordered Dow and Rockwell to pay a combined $925 million in damages to the plaintiffs. However, in September 2010, the Tenth Circuit Court of Appeals reversed the decision. According to the Appellate Court, the owners of the 12,000 properties in the class-action area had not proved that their properties were damaged or they had suffered bodily injury.
The United States military dropped napalm bombs on North Vietnam during the Vietnam War. Dow was one of several manufacturers who began producing the napalm B compound under government contract from 1965. After experiencing protests and negative publicity, the other suppliers discontinued manufacturing the product, leaving Dow as the sole provider. The company said that it carefully considered its position, and decided, as a matter of principle, "its first obligation was to the government". Despite a boycott of its products by anti-war groups and harassment of recruiters on some college campuses, Dow continued to manufacture napalm B until 1969. The USA continued to drop napalm bombs on North Vietnam until 1973.
Agent Orange, a chemical defoliant containing dioxin, was also manufactured by Dow in New Plymouth, New Zealand, and in the United States for use by the British military during the Malayan Emergency and the U.S. military during the Vietnam War. In 2005, a lawsuit was filed by Vietnamese victims of Agent Orange against Dow and Monsanto Co., which also supplied Agent Orange to the military. The lawsuit was dismissed.
A major manufacturer of silicone breast implants, Dow Corning (Dow Chemical's Joint Venture with Corning Inc.) was sued for personal damages caused by ruptured implants. On October 6, 2005, all such cases pending in the District Court against the company were dismissed. A number of large, independent reviews of the scientific literature, including the Institute of Medicine in the United States, have subsequently found that silicone breast implants do not cause breast cancers or any identifiable systemic disease.
Union Carbide became a subsidiary of Dow Chemical in 2001. The Bhopal disaster of 1984 occurred at a pesticide plant owned by Union Carbide India Ltd., a subsidiary of Union Carbide, 17 years before Dow Chemical Co.'s acquisition. A gas cloud containing methyl isocyanate and other chemicals spread to the neighborhoods near the plant where more than half a million people were exposed to it. More than 27 years after the event, the actual number of fatalities is still unknown. The official immediate death toll was 2,259 and the government of Madhya Pradesh has confirmed a total of 3,787 deaths related to the gas release. Others estimate 3,000 died within weeks and another 8,000 have since died from gas-related diseases. There are wide variations in the estimated number of individuals permanently disabled by the event. By one independent estimate, 40,000 individuals were left permanently disabled, maimed, or suffering from serious illness as a result of the disaster. A government affidavit in 2006 stated that the leak caused 558,125 injuries, including 38,478 temporary partial injuries and approximately 3,900 severely and permanently disabling injuries. Union Carbide was sued by the Government of India and agreed to an out-of-court settlement of US$470 million in 1989. In 2010 eight former executives of Union Carbide India Ltd. were found guilty of death by negligence. Activists sought to have Dow Chemical held responsible for the ongoing cleanup of the site, now under the control of the state government of Madhya Pradesh.
Until the late 1970s, Dow produced DBCP (1,2-dibromo-3-chloropropane), a soil fumigant, and nematicide, sold under the names the Nemagon and Fumazone. Plantation workers who alleged that they became sterile or were stricken with other maladies subsequently sued both Dow and Dole in Latin American courts. The cases were marred by extensive fraud, including the falsification of test results and the recruitment of plaintiffs who had never worked at Dole plantations. While Nicaraguan courts awarded the plaintiffs over $600 million in damages, they have been unable to collect any payment from the companies. A group of plaintiffs then sued in the United States, and, on November 5, 2007, a Los Angeles jury awarded them $3.2 million. Dole and Dow vowed to appeal the decision. On April 23, 2009 a Los Angeles judge threw out two cases against Dole and Dow due to fraud and extortion by lawyers in Nicaragua recruiting fraudulent plaintiffs to make claims against the company. The ruling casts doubt on $2 billion in judgments in similar lawsuits.
In February 2013 a federal court rejected two tax shelter transactions entered into by Dow that created approximately $1 billion in tax deductions between 1993–2003. In the stated opinion, the Court termed the transactions "schemes that were designed to exploit perceived weaknesses in the tax code and not designed for legitimate business reasons." The schemes were created by Goldman Sachs and the law firm of King & Spalding, and involved creating a partnership that Dow operated out of its European headquarters in Switzerland. Dow stated that it had paid all tax assessments with interest. The case was a lawsuit against the Internal Revenue Service seeking a refund of the taxes paid. The case was appealed to the 5th Circuit court, where Dow's claims were again rejected. Dow has petitioned for an en banc hearing by the 5th Circuit, arguing that the decision was contrary to established case law.
In the early 1990s, Dow embarked on a major structural reorganization. The former reporting hierarchy was geographically based, with the regional president reporting directly to the overall company president and CEO. The new organization combines the same businesses from different sites, irrespective of which region they belong (i.e. the vice president for Polystyrene is now in charge of these plants all over the world).
At the beginning of August 1999, Dow agreed to purchase Union Carbide Corp. (UCC) for $9.3 billion in stock. At the time, the combined company was the second largest chemical company, behind DuPont. This led to protests from some stockholders, who feared that Dow did not disclose potential liabilities related to the Bhopal disaster.
William S. Stavropoulos served as president and chief executive officer of Dow from 1995 to 2000, then again from 2002 to 2004. He relinquished his board seat on April 1, 2006, having been a director since 1990 and chairman since 2000. During his first tenure, he led the purchase of UCC which proved controversial, as it was blamed for poor results under his successor as CEO Mike Parker. Parker was dismissed and Stavropoulos returned from retirement to lead Dow.
On August 31, 2006, Dow announced that it planned to close facilities at five locations:
On November 2, 2006, Dow and Izolan, the leading Russian producer of polyurethane systems, formed the joint venture Dow-Izolan iand built a manufacturing facility in the city of Vladimir. Also in 2006, Dow formed the Business Process Service Center (BPSC).
In December 2007, Dow announced a series of moves to revamp the company. A December 4 announcement revealed that Dow planned to exit the automotive sealers business in 2008 or 2009. Within several weeks, Dow also announced the formation of a joint venture, later named K-Dow, with Petrochemical Industries Co. (PIC), a subsidiary of Kuwait Petroleum Corporation. In exchange for $9.5 billion, the agreement included Dow selling 50-percent of its interest in five global businesses: polyethylene, polypropylene and polycarbonate plastics, and ethylenamines and ethanolamines. The agreement was terminated by PIC on December 28, 2008.
On July 10, 2008, Dow agreed to purchase all of the common equity interest of Rohm and Haas Co. for $15.4 billion, which equated to $78 per share. The buyout was to be financed with equity investments of $3 billion by Berkshire Hathaway Inc. and $1 billion by the Kuwait Investment Authority. The purpose of the deal was to move Dow Chemical further into specialty chemicals, which offer higher profit margins than the commodities market and are more difficult to enter for the competition. The purchase has been criticized by many on Wall Street who believe Dow Chemical overpaid (about a 75 percent premium on the previous day's market capital) to acquire the company; however, the high bid was needed to ward off competing bids from BASF. The transaction to purchase the outstanding interest of Rohm and Haas closed on April 1, 2009.
On December 8, 2008, Dow announced that due to the 2008 economic crisis, it would accelerate job cuts resulting from its reorganization. The announced plan included closing 20 facilities, temporarily idling 180 plants, and eliminating 5,000 full-time jobs (about 11 percent of its work-force) and 6,000 contractor positions.
Citing the global recession that began in the latter half of 2008, the Kuwaiti government scuttled the K-Dow partnership on December 28, 2008. The collapse of the deal dealt a blow to Dow CEO Andrew Liveris' vision of restructuring the company to make it less cyclical. However, on January 6, 2009 Dow Chemical announced they were in talks with other parties who could be interested in a major joint venture with the company. Dow also announced they that it would be seeking to recover damages related to the failed joint venture from PIC.
After the K-Dow deal collapsed, some speculated that the company would not complete the Rohm & Haas transaction, as the cash from the former transaction was expected to fund the latter. The deal was expected to be finalized in early 2009 and was to form one of the nation's largest specialty chemicals firms in the U.S. However, on January 26, 2009 the company informed Rohm and Haas that it would be unable to complete the transaction by the agreed upon deadline. Dow cited a deteriorated credit market and the collapse of the K-Dow Petrochemical deal as reasons for failing to timely close the merger. Around the same time, CEO Andrew Liveris said a first- time cut to the company's 97- year- old dividend policy was not "off the table." On February 12, 2009, the company declared a quarterly dividend of $0.15/share, down from $0.42 the previous quarter. The cut represented the first time the company had diminished its investor payout in the dividend's 97-year history.
The transaction to purchase the outstanding interest of Rohm and Haas closed on April 1, 2009. After negotiating the sale of preferred stock with Rohm and Hass' two largest stockholders and extending their one-year bridge loan an additional year, the company purchased Rohm and Haas for $15 billion ($78 a share) on March 9, 2009.
In the fourth quarter of 2014, Dow announced new operating segments in response to its previously announced leadership changes. The company stated it would give further support to its end-market orientation and increase its alignment to Dow’s key value chains – ethylene and propylene.
Several plants on the Gulf Coast of the US have been in development since 2013, as part of Dow's transition away from naphtha. Dow estimates the facilities will employ about 3000 people, and 5000 people during construction. The plants will manufacture materials for several of its growing segments, including hygiene and medical, transportation, electrical and telecommunications, packaging, consumer durables and sports and leisure.
Dow’s new propane dehydrogenation (PDH) facility in Freeport, Texas, is expected to come online in 2015, with a first 750000 metric tonne per year unit, while other units could become available in the future. An ethylene production facility is expected to start up in the first half of 2017.
On March 27, 2015, Dow and Olin Corporation announced that the boards of directors of both companies unanimously approved a definitive agreement under which Dow will separate a significant portion of its chlorine business and merge that new entity with Olin in a transaction that will create an industry leader, with revenues approaching $7 billion. Olin, the new partnership, became the largest chlorine producer in the world.
On December 11, 2015, Dow announced that it would merge with DuPont, in an all-stock deal. The combined company, which will be known as DowDuPont, will have an estimated value of $130 billion, be equally held by the shareholders of both companies, and maintain their headquarters in Michigan and Delaware respectively. Within two years of the merger's closure, DowDuPont would be split into three separate public companies, focusing on the agriculture, chemical, and specialty product industries. Estimates are it would take up to two years for the tax-free split. Shareholders of each company will hold 50% of the combined company. Dow Chemical CEO Andrew N. Liveris would become executive chairman of the new entity, while DuPont CEO Edward D. Breen would become CEO. In January 2017, the merger was pushed back a second time pending regulatory approvals.
The same day, Dow also announced that it had reached a deal to acquire Corning Incorporated's stake in their joint venture Dow Corning for $4.8 billion in cash and a roughly 40% stake in Hemlock Semiconductor Corporation. The sale is expected to close in early 2016. Commentators have noted that the deal is likely to face antitrust scrutiny in several countries.
Dow Chemical has begun to shed commodity chemical businesses, such as those making the basic ingredients for grocery bags and plastic pipes, because their profit margins only average 5–10%. Dow is, as of 2015, focusing resources on specialty chemicals that earn margins of at least 20%. This is in line with its restructuring, together with reducing debt, and expecting to raise more than $11 billion from asset sales by mid-2016.
Areas along Michigan's Tittabawassee River, which runs within yards of Dow's main plant in Midland, were found to contain elevated levels of the cancer-causing chemical dioxin in November 2006. The dioxin was located in sediments two to ten feet below the surface of the river, and, according to the New York Times, "there is no indication that residents or workers in the area are directly exposed to the sites". However, people who often eat fish from the river had slightly elevated levels of dioxin in their blood. In July 2007, Dow reached an agreement with the Environmental Protection Agency to remove 50,000 cubic yards (38,000 m3) of sediment from three areas of the riverbed and levees of the river that had been found to be contaminated. In November 2008, Dow Chemical along with the United States Environmental Protection Agency and Michigan Department of Environmental Quality agreed to establish a Superfund to address dioxin cleanup of the Tittabawassee River, Saginaw River and Saginaw Bay.
In 2003, Dow agreed to pay $2 million, the largest penalty ever in a pesticide case, to the state of New York for making illegal safety claims related to its pesticides. The New York Attorney General's Office stated that Dow AgroSciences had violated a 1994 agreement with the State of New York to stop advertisements making safety claims about its pesticide products. Dow stated that it was not admitting to any wrongdoing, and that it was agreeing to the settlement to avoid a costly court battle.
According to the United States Environmental Protection Agency (EPA), Dow has some responsibility for 96 of the United States' Superfund toxic waste sites, placing it in 10th place by number of sites. One of these, a former UCC uranium and vanadium processing facility near Uravan, Colorado, is listed as the sole responsibility of Dow. The rest are shared with numerous other companies. Fifteen sites have been listed by the EPA as finalized (cleaned up) and 69 are listed as "construction complete", meaning that all required plans and equipment for cleanup are in place.
In 2007, the chemical industry trade association – the American Chemical Council – gave Dow an award of 'Exceptional Merit' in recognition of longstanding energy efficiency and conservation efforts. Between 1995 and 2005, Dow reduced energy intensity (BTU per pound produced) by 22 percent. This is equivalent to saving enough electricity to power eight million US homes for a year. The same year, Dow subsidiary, Dow Agrosciences, won a United Nations Montreal Protocol Innovators Award for its efforts in helping replace methyl bromide – a compound identified as contributing to the depletion of the ozone layer. In addition, Dow Agrosciences won an EPA "Best of the Best" Stratospheric Ozone Protection Award. The United States Environmental Protection Agency (EPA) named Dow as a 2008 Energy Star Partner of the Year for excellence in energy management and reductions in greenhouse gas emissions.
Current members of the board of directors of The Dow Chemical Co. are:
On April 12, 2007, Dow dismissed two senior executives for "unauthorized discussions with third parties about the potential sale of the company". The two figures are executive vice president Romeo Kreinberg, and director and former CFO J. Pedro Reinhard. Dow claims they were secretly in contact with JPMorgan Chase; at the same time, a story surfaced in Britain's Sunday Express regarding a possible leveraged buyout of Dow. The two executives have since filed lawsuits claiming they were fired for being a threat to CEO Liveris, and that the allegations were concocted as a pretext. However, in June 2008 Dow Chemical and the litigants announced a settlement in which Kreinberg and Reinhard dropped their lawsuits and admitted taking part in discussions "which were not authorized by, nor disclosed to, Dow's board concerning a potential LBO" and acknowledged that it would have been appropriate to have informed the CEO and board of the talks.
In September 2004, Dow obtained the naming rights to the Saginaw County Event Center in Saginaw, Michigan; the center is now called the Dow Event Center. The Saginaw Spirit (of the Ontario Hockey League) plays at the Center, which also hosts events such as professional wrestling and live theater.
In October 2006, Dow bought the naming rights to the stadium used by the Great Lakes Loons, a Single-A minor league baseball team located in its hometown of Midland, Michigan. The stadium is called Dow Diamond. The Dow Foundation played a key role in bringing the Loons to the city.
In 2010, Dow signed a $100m (£63m) 10-year deal with the International Olympic Committee and agreed to sponsor the £7m Olympic Stadium wrap. Dow also sponsors NASCAR Sprint Cup Series driver Austin Dillon's #3 Chevrolet.
On May 20, 2013, Dow launched the Dow Lab Safety Academy, a website that includes a large collection of informational videos and resources that demonstrate best practices in laboratory safety. The goal of the website is to improve awareness of safety practices in academic research laboratories and to help the future chemical workforce develop a safety mindset. As such, the Dow Lab Safety Academy is primarily geared toward university students. However, Dow has made the content open to all, including those already employed in the chemical industry. The Dow Lab Safety Academy is also available through the Safety and Chemical Engineering Education program, an affiliate of American Institute of Chemical Engineers (AIChE); and The Campbell Institute, an organization focusing on environment, health and safety practices.
The Dow Lab Safety Academy is one component of Dow’s larger laboratory safety initiative launched in early 2012, following a report from the U.S. Chemical Safety Board that highlighted the potential hazards associated with conducting research at chemical laboratories in academic institutions. Seeking to share industry best practices with academia, Dow partnered with several U.S. research universities to improve safety awareness and practices in the departments of chemistry, chemical engineering, engineering and materials. Through the pilot programs with U.C. Santa Barbara (UCSB), University of Minnesota, and Pennsylvania State University, Dow worked with graduate students and faculty to identify areas of improvement and develop a culture of laboratory safety.
In January 2011, The Nature Conservancy and The Dow Chemical Co. announced a collaboration to integrate the value of nature into business decision-making. Scientists, engineers, and economists from The Nature Conservancy and Dow are working together at three pilot sites (North America, Latin America, and TBD) to implement and refine models that support corporate decision-making related to the value and resources nature provides. Those ecosystem services include water, land, air, oceans and a variety of plant and animal life. These sites will serve as a “living laboratories”, to validate and test methods and models so they can be used to inform more sustainable business decisions at Dow and hopefully influence the decision-making and business practices of other companies.
Dow CEO Andrew N. Liveris called 2005 the company's "best year ever" with operating profits of $5.4 billion, a jump of 56.5 percent compared with the previous year. Net income rose more than 60 percent to $4.5 billion, on sales of $46.3 billion. 2006 looks as if it could be even better, with first-quarter net earnings of $1.2 billion. All this is occurring in the context of adverse operating conditions, caused by high energy and raw material costs, and the effects of two damaging hurricanes.
Liveris supports the vertically integrated approach used at Dow, which produces everything from basic chemical feedstocks to high value products such as pesticides and reverse osmosis membranes. These value-adding product chains, along with Dow's wide product range, help the company to weather the storms of the global economy. Despite this, high energy and feedstock costs may begin to take their toll, particularly if global demand begins to fall just as supply is rising.
Like many chemical companies, Dow is facing pressures of regulation in the US and Europe, particularly as the EU introduces its new REACH policy. Litigation costs in the US taken over by Dow as a result of its 2001 takeover of Union Carbide also remain a concern.
For these reasons, Dow is looking to the Middle East and Asia for new projects. In Kuwait, Dow is constructing (with PIC of Kuwait) a new world-scale ethane cracker for production of ethylene, along with an ethylene oxide/ethylene glycol plant and (for 2008) a facility for production of aromatic hydrocarbons. In Oman, the company is working with the Oman government to build a new world-scale polyethylene plant. In China, the company is collaborating with Shenhua Group (the country's largest coal mining company) to improve catalyst efficiency to allow viable conversion of coal to olefins. Dow is also seeking to expand its R&D presence in Asia, adding 600 jobs in Shanghai by the end of 2007, and the company may open up a large R&D center in India.
The joint ventures planned for Asia are typical of Dow's "asset-light" approach, which works by offering a combination of intellectual property and money in exchange for a share in a world-scale production facility. At the same time, Dow is considering selling a share of some of its existing assets in order to free up cash.
An independent panel of 13 scientists convened by the Institute of Medicine at the request of Congress has concluded that silicone breast implants do not cause any major diseases.