Equate Petrochemical, a joint venture between Petrochemical Industries Company (PIC), The Dow Chemicals Company (NYSE:DOW) and others, posted a handsome net profit of $1.05 billion for 2011, an increase of 20% over last year. Both PIC and Dow hold a majority stake of 42.5% each in Equate, which is based out of Kuwait. The company’s sales crossed $2.5 billion for the first time in its history in 2011.
Equate started its operations in 1997 and is the single biggest operator of a fully integrated manufacturing facility which manufactures over 5 million tonnes of high quality petrochemical products annually. Its main product is polyolefins and they are marketed throughout Middle East, Asia, Africa and Europe. This is the second year in a row that Equate’s profits have jumped after a dismal performance in 2009, when profits plunged by 25% due to the global financial crisis and a sharp slide in energy prices.
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The company’s higher profits can mainly be attributed to an improvement in its operational performance, which was realized at all production units of the company and is partially reflected in improved sales and margin figures across all of its product categories. Higher oil prices due to stabilized demand also helped the company’s financial results.
The overall efficiency from production to sales and supply chain has helped Equate offer a better value proposition to both its local and global customers. The company’s efforts in the environmental domain are also laudable. It was recently conferred with the award for the best plant in the Middle East.
Equate’s strong financial performance bodes well for Dow Chemical as plastics, hydrocarbons and energy are the most valuable chunk, accounting for nearly 52% of Dow’s stock value, by our analysis.