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February 2, 2004
Volume 82, Number 5
CENEAR 82 5 p. 8
ISSN 0009-2347


EARNINGS

MIXED RESULTS FOR FOURTH QUARTER
Where gains occurred, better prices and volumes drove improvements

WILLIAM STORCK

There is little overall direction evident in the results of 12 large and midsized chemical companies that have reported fourth-quarter results. Half have had declines in earnings from continuing operations, excluding significant one-time gains and charges. The other six showed improvements.

The six with higher earnings include Monsanto and Dow Chemical, which went from red ink in fourth-quarter 2002 to positive results in the same period in 2003. Monsanto improved by $19 million, rising to $10 million in earnings from a $9 million loss in the same period a year earlier. Sales at Monsanto increased 21.5% to $1.03 billion. CEO Hugh Grant says performance for the quarter “was anchored by improved Roundup and branded seed corn results in Brazil.” Indeed, total sales for the company’s Roundup herbicide improved 65% from the prior year’s quarter to $429 million.

But it was industry leader Dow that showed an especially large jump, rising from a loss of $172 million in the last three months of 2002 to a gain of $475 million in the 2003 period. Including such one-time items as tax benefits in the fourth quarter of 2003 and charges taken in the 2002 quarter, the improvement was even more significant. Fourth-quarter net income totaled $929 million against a loss of $809 million in the same period in 2002—a $1.74 billion difference.

Number two DuPont, on the other hand, had an earnings decline of 14.2% to $296 million. DuPont’s net income, however, was up 81.7% to $636 million, which includes the money received from the sale of its Invista fibers unit.

When companies had higher earnings, it was generally because improved demand and cost-cutting measures offset higher feedstock and energy costs. For instance, Dow says a 12% increase in prices and 8% higher sales volume helped to make up for a 15% rise in feedstock and energy costs.

DuPont, conversely, says higher raw material costs for the fourth quarter reduced earnings by about $230 million. Cost cutting also helped earnings but did not completely overcome the effect of the higher prices paid for raw materials.



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