One of the United States best performing companies, Dow Chemical, comfortably beat Wall Street targets in the second quarter as it seeks to finalize a merger with its closest competitor, Dupont.
The reason for the company’s stellar figures is increased demand for its primary product, plastics.
According to a report by the company released Tuesday, operating earnings jumped to 90 cents a share, outperforming Wall Street forecasts by 5 cents.
Dow’s chairman and CEO Andrew Liveris said in a prepared statement, “This quarter our company has yet again delivered significant growth and expansion of operating profits. Considering the current climate in both the geopolitical and market spheres, it’s extraordinary that we could hit fifteen quarters of growth consecutively.”
Although Dow have comfortably and consistently outpaced their rivals, sales for the Michigan based company have dropped to $11 billion, a decline of 6 percent compared to the same quarter in 2015. Crude prices and the impact from the offload of Dow’s chlorine unit can be blamed for the dip.
The statement also mentioned that due to increased demand throughout all of its global demographic strongholds, volume grew 3 percent.
The company has worked hard to reduce costs this year, with the statement claiming that upwards of $80 million has been saved this quarter alone, bringing the semi-annual savings to $190 million. The company looks good to beat the $290 million savings target for the year end.
Earnings will also get a boost from the recent acquisition of Corning Corporation’s silicon unit, which could add over a billion dollars to the company’s profits per year.
The plastics and materials industry will get a shake up when Dow and DuPont complete the proposed merger, which was green lit by major shareholders in a meeting last week.
The agreement is valued at over $140 billion and the process is said to involve a future split into three separate entities, two of which will concentrate on science and agriculture, and will be headquartered in Delaware.
The third entity, a plastics and materials focused concern, will be based in Dow’s spiritual home of Michigan.
Dow produces a broad range of materials from paint to plastics including many products used in the automobile sector. The company employs over 60,000 staff, many in Michigan. However, there could be downsizing on the horizon.
“Everyone involved in the deal knows that there will be significant job cuts coming,” said Michael Lane, Global Co-Head of the Investment Management Division at Shizuoka Capital Wealth Management. “DuPont already made thousands of employees redundant, and Dow announced last week that certain sacrifices will need to be made involving the workforce.”
