Fixed-price supplies help Dow boost revenue despite rising energy costs

City A.M. Reporter
DOW Chemical barely blinked at rallying energy costs in the fourth quarter as it tapped fixed-cost supplies from the Middle East and boosted customer pricing by 10 per cent.

The largest US chemical maker effectively dodged $685m in higher costs for crude and natural gas, the building blocks for many of the paints and plastics that are Dow’s breadwinners.

Dow’s joint ventures, including Kuwait-based MEGlobal and Equate, guarantee it fixed pricing for the crude and natural gas that the rest of the world barters daily on exchanges. Even as energy prices rise around the world, Dow’s own costs remain relatively low and it is able to still charge the market rate.

Several of Dow’s businesses, including electronic and specialty materials, also make specialised products highly in demand, allowing the company to easily pass along higher costs.

“The pricing is being set by the higher-cost crude oil link. Dow’s feedstock costs are flat in these low-cost areas and crude oil prices are ripping,” Alembic Global Advisors analyst Hassan Ahmed said.

Dow’s quarterly results also got a boost from brisk agricultural, plastic and electronic sales.

Net income rose to $426m, compared with $87m in the year-earlier period.

Revenue rose 11 per cent to $13.77bn.