Dow Expected to Enjoy Earnings Growth in 2001
- Published: March 01, 2001, By Edward Boyle, Contributing Editor
NEW YORK, NY, USA—Dow Plastics is expected to enjoy earnings growth of 10%/share in 2001 due to expansion, mergers and acquisitions, and new business development, according to new company president and CEO Michael Parker.
Parker, who took office Nov. 1, 2000, spoke at Dow's annual press briefing in New York City on Dec. 8, 2000. He reported that ongoing capital investments and new product developments will help make the company more versatile in meeting the growing worldwide demand for polypropylene and other Dow products.
“Sometimes you'd think we were a consumer products company [with the flexibility] we're running our operation,” Parker emphasized to the assembled trade press editors.
He reported that Dow Plastics experienced strong customer demand for its products and anticipates 2000 global sales of more than $11 billion, an increase of more than 15% compared to 1999 sales. More than half of the increase was due to volume growth. The outlook for 2001 includes volume growth comparable to the rate for 2000.
Dow Plastics expects to build on the foundation of significant improvements over the past five to seven years, Parker noted, including $2.4 billion in structural cost reductions, 10%/yr productivity improvements, and a $10 billion portfolio restructuring.
“Our higher aspirations for Dow overall are grounded in our financial objective to grow earnings per share by 10 percent per year from peak-to-peak through the business cycle,” stressed Parker. “To reach this premier status, we are combining our ‘old economy’ strengths of global reach, integrated assets, established customer base, and financial depth with ‘new economy’ traits including speed, flexibility, outside-in focus, constant innovation, and sustainability.”
Many others addressed the group, including Romeo Kreinberg, business president for the Polyethylene, Polypropylene, Ethylene Styrene Interpolymers, PET/PTA, INSITE Technology, and Wire and Cable Business. He explained that Dow Plastic's newest PP plant is the fourth to be built in four years and noted that existing PP plants are already running at capacity, producing 620,000 million tons of film each year.
New Plant, New Resins
The company highlighted the successful completion of its newest world-scale north american PP manufacturing plant, located in Freeport, TX. The facility was in start-up mode at year's end and will ultimately be capable of producing in excess of 550 million lb of polystyrene resins annually.
“The Freeport production facility is a key building block in our Dow polystyrene assets and our ability to locally serve our North American customers,” explained William Zarkalis, North American senior Value Center manager for PS. “We were able to leverage existing Dow feedstock and infrastructure capabilities, as well as supply chain efficiencies, for our new production facility — all of which will enable us to ramp up production quickly and economically.”
Dow introduced new two Styron A-Tech advanced PS resins designed for performance in packaging and food service applications. Based on Dow's technology for the production of high-impact PS (HIPS), Styron A-Tech 1220 and Styron A-Tech 1260 PS resins reportedly offer unique property combinations that provide cost-effective processing and improved end-use performance in extrusion/thermoformed packaging applications. Both were expected to be broadly available throughout North America in January.
The Polystyrene Picture
Dow Plastics continues to strengthen its global PS market leadership as it marks the halfway point in its ten-year growth initiative. The company announced it would increase worldwide capacity for PS resins to more than 2.25 million metric tons by the end of 2002.
Global demand for PS is estimated at 10 million metric tons annually. Dow, the largest global supplier of PS, currently supplies 20% of that demand, with approximately 2 million metric tons of production capacity at 19 facilities around the world, including affiliate locations.
According to Clay Dunn, VP of Dow Polystyrene, Dow is moving to grow its PS business with capacity expansions in all four major geographics: North America, Europe, Latin America, and Asia Pacific regions.
Dow, for example, has become the largest PS producer in Latin America since acquiring a 100% interest in Brazilian PS producer Estireno do Nordeste (EDN) in February 2000. Dow also has begun a plant modernization program that will increase the capacity of its EDN site in Guaruja, Brazil, from 110,000 to 200,000 metric tons.
Once on-line late in the third quarter of 2001, Dow's total capacity in Latin America will be 240,000 metric tons. Dow will utilize the new capacity at Guaruja to produce both general-purpose PS (GPPS) and HIPS, as well as to support growing demand in the region for new Styron-a-Tech advanced resins.
Renovations also proceeded smoothly and are now complete at Dow's Hanging Rock plant in Ironton, OH. These upgrades have added 25,000 metric tons of capacity at the facility, raising Dow's total capacity in North America to 800,000 metric tons. The company has seven PS facilities throughout North America.
Dow's most recent capacity addition in Europe is a newly constructed 130,000-metric-ton plant at the BSL Schkopau, Germany, site, which is strategically located to serve Central and Eastern Europe. Dow also broke ground in October for a new 120,000-metric-ton plant at Zhangjiagang, China, in partnership with Asahi Chemical Industry Co. Ltd. Startup for the new facility will be in early 2002, bringing Dow's capacity in the Pacific to 590,000 metric tons.
