MIDLAND, Mich.—Dow Chemical Co. reported a 7 percent decrease in sales for second quarter of 2016 but saw its net income increase by nearly $2 billion.
The firm said its nearly $12 billion in sales dropped by about $910 million largely because of lower hydrocarbons and raw material prices and the impact from the Dow Chlorine Products divestiture.
Cash flow from operations grew to $2.2 billion in the quarter, up from $1.4 billion in 2015, driven by what Dow described as ongoing disciplined actions to manage working capital as well as higher earnings.
“Dow's relentless and disciplined execution once again delivered another quarter of operating earnings growth and margin expansion, marking our 15th quarter in a row, through a variety of challenging geopolitical and market conditions, and outpacing our peers,” Andrew N. Liveris, Dow chairman and CEO, said in a statement.
The firm's Performance Materials and Chemicals segment reported a $900 million decrease in sales, to $2.3 billion compared to 2015. The firm again cited the divestment of its Chlorine Products unit as well as pricing declines. Volume was also down by 19 percent. However, volumes were flat when excluding the Chlorine Products divestitures, the firm said.
Dow said its polyurethanes business delivered volume growth led by double digit increases in demand for downstream, higher-margin system house applications, especially in the Asia-Pacific region.
Its Performance Plastics segment reported a $100 million decline in sales to $4.7 billion compared to 2015. Volume gains of 12 percent—13 percent when excluding the impact of acquisitions—in the segment were offset by pricing headwinds, primarily in its hydrocarbons business.
The second quarter also saw Dow make significant progress in two major transactions—the acquisition of its joint venture Dow Corning Corp. and its proposed merger with DuPont Co. into DowDuPont. Dow completed the $4.8 billion acquisition of Corning Inc.'s 50 percent stake in the silicones joint venture.
Liveris said the firm has increased its synergy target of $500 million. Dow in June revealed plans to eliminate 2,500 jobs, or 4 percent of its work force, in an effort to achieve cost synergies through the integration of Dow Corning. It will shutter silicone manufacturing facilities in Greensboro, N.C., and Yamakita, Japan, in addition to other administrative, corporate and manufacturing facilities to further enhance competitiveness and streamline costs associated with the joint venture purchase, the firm said.
The company said 700 reductions will occur within the Great Lakes Bay Region, which is where Dow is headquartered, from both Dow and Dow Corning.
On July 20, shareholders from both Dow and DuPont approved the proposed DowDuPont merger, representing a $59 billion transaction and creating a firm with about $83 billion in combined sales. The firms project $3 billion in cost savings and now have to clear antitrust hurdles to proceed. If approved, the plan is to split the combined firm into three businesses by the end of 2018—one focused on agriculture, the other on specialty products and the last on material science.