Dow Chemical Co.'s quarterly profit easily beat Wall Street's expectations, helped by surging sales of plastics, pesticides and electronic parts.
The largest U.S. chemical maker said volume at only two of its business units has hit pre-recession levels, hinting that it has room to grow.
Shares of Dow rose nearly 2 percent in premarket trading.
While specialty chemical sales jumped during the quarter, the company's plastics unit continued to be the breadwinner, bringing in the largest share of revenue at $3 billion.
Dow easily outmaneuvered a $700 million jump in raw material costs. The company raised prices across the board by 12 percent, partly to demand a premium for its technology and partly to offset the higher supply costs.
"That was really the key here," Deutsche Bank analyst David Begleiter said. "They did a good job of getting out ahead of higher raw material costs."
For the first quarter, Dow posted net income of $625 million, or 54 cents per share, compared with $466 million, or 41 cents per share, a year earlier.
Dow took advantage of cheap credit markets during the quarter by slashing debt. The company also finished integrating assets from its two-year-old purchase of Rohm & Haas.
Excluding costs from those actions, Dow earned 82 cents per share. By that measure, analysts expected 67 cents, according to Thomson Reuters I/B/E/S.
Revenue rose 10 percent to $14.73 billion, besting the $14.03 billion analysts had expected.
Farmers gobbled up Dow's pesticides and genetically modified seeds, sending agricultural sales up 17 percent.
Electronic parts sales rose 14 percent to $1.3 billion on high demand for products such as televisions and Apple Inc's iPad.
The rough winter weather fueled higher sales of de-icing fluid, lifting sales at the performance products unit by 18 percent.
THE ETHYLENE PLAY
Dow bought specialty chemical maker Rohm & Haas in a heavily scrutinized deal worth more than $15 billion.
The acquisition was intended to wean Dow from its reliance on ethylene and other commodity chemicals, which are used in basic plastics and made in large batches, but have razor-thin margins.
So far, though, the confluence of cheap North American natural gas and rising consumer demand has refocused Dow's attention on the plastics market.
"Plastics was very strong, a little bit stronger than I expected," Deutsche Bank's Begleiter said of the quarterly results.
Ethylene prices have nearly tripled in the past two years. Spot prices for the chemical are currently trading around 65 cents per pound, according to industry newsletter PetroChemWire.
That jump, combined with the fact that the specialty chemicals part of Dow's portfolio has yet to outshine the commodity business, led the company to announce last week it would restart an idled ethylene plant in Louisiana and build a new one to be on line by 2017.
Dow also uses ethylene to make parts for wire, cable and automobiles.
"A lot of people used to look at natural gas and crude oil every day as indicators," said PetroChemWire's Kathy Hall. "Now they watch ethylene. It really is a great connector between manufacturing and energy markets because it's sensitive to both of them."
Shares of Midland, Michigan-based Dow were up 1.6 percent at $40.57 in trading before the market opened. At Wednesday's close, the stock had traded between $22.42 and $40.30 in the past 52 weeks.
Exxon Mobil, the second-largest U.S.-based chemical maker as well as the world's largest publicly traded oil company, said Thursday that its quarterly profit rose 69 percent.
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