Dow Chemical (NYSE:DOW), the specialty chemical manufacturer, will announce its Q1 earnings on April 26. New product introductions combined with a rebound in the demand for performance materials and electronic and functional materials should see the company posting healthy revenue growth. Strong pricing should help the company maintain profitability. Dow Chemical competes with companies like PPG Industries (NYSE:PPG), 3M (NYSE: MMM) and Dupont(NYSE: DD). We currently have a Trefis price estimate of $39 for Dow Chemical’s Stock, which is 10% above the current market price.
Strong Pricing and Innovation Hold the Key
Sales of Performance Materials stood at $14.64 billion in 2011, an increase of 5% from 2010. Volume declined 7%, primarily due to sale of Emulsion Polymers, Synthetic Rubber and certain Dow Automotive Systems assets as part of the Styron divestiture. However, the decline in volume was more than positively offset by a 12% increase in pricing.
In the second half of 2011, Dow Corning opened a new facility for manufacturing silicones in the Jiangsu province in China. It is also beefing up its sales and distribution network in China. We also expect the launch of new products in 2012 to drive the volume growth for Dow Plastic Additives. Some of the products lined up in the pipeline which have the potential to significantly increase the company’s market in the global specialty market are ENLIGHT polyolefin encapsulant films and Ecolibrium biobased plasticizers, among others.
Coming to Performance Plastics, the company expects improving global economic conditions to increase the demand for polyethylene and with limited capacity addition expected industry wide, margins should remain healthy. We expect Dow Packaging and Converting volumes to increase due to reopening of its manufacturing facility that produces SARAN barrier resins.
Earlier in the month, Dow Chemical also announced its plans to build an ethylene plant in Texas to take advantage of low natural gas prices which represents an investment of a whopping $4 billion.  In the long run, we see the company increasing its market share gradually in the global hydrocarbons market helped by such large scale investments.Notes: