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Dow Chemical warns on 4Q
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January 3, 2002: 11:41 a.m. ET
No. 2 chemical maker cites declining sales, thin margins.
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NEW YORK (CNN/Money) - Dow Chemical Co. said Thursday it does not expect to meet its fourth-quarter earnings estimates of 10 to 20 cents a share because of softer volume in several of its businesses and declining margins in basic chemicals and plastics.
The nation's No. 2 chemical maker has been struggling with declining sales in recent quarters as the economic downturn and lower chemical prices have put continued pressure on its bottom line.
With the economic slowdown, chemical companies like Dow (DOW: up $1.06 to $35.25, Research, Estimates) were caught with too much inventory. Their goal has been to rid themselves of the excess by cutting production and even closing some facilities.
On Oct. 25, Dow posted a 10 percent drop in third-quarter sales, yet still met Wall Street earnings expectations. At that time, Dow projected fourth-quarter earnings of 10 to 20 cents a share.
Morgan Stanley analyst Leslie Ravitz said many on Wall Street have been prepared for fourth-quarter earnings even more dismal than a third quarter characterized by some as one of the industry's worst in almost two decades.
"We knew that there was inventory liquidation, that they were keeping their operating rates down to avoid building inventory at their own plants, so there was never a high degree of confidence in the estimate," Ravitz said. "We just knew it was going to be an awful quarter." 
from staff and wire reports
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