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Associated Press Financial Wire

July 26, 2007 Thursday 8:56 PM GMT

SECTION: BUSINESS NEWS

LENGTH: 482 words

HEADLINE: Dow Chemical posts better-than-expected 2Q profit

BYLINE: By JAMES PRICHARD, AP Business Writer

DATELINE: GRAND RAPIDS Mich.

BODY:
Dow Chemical Co. reported a 2 percent increase in profit for the second quarter as strong international growth off-
set weaknesses in the North American housing and automotive sectors and the effect of rising petroleum prices.
Shares fell $2.22, or 4.9 percent, to close at $43.45 as Wall Street suffered its one of its worst plunges of the year.
Net income climbed to $1.04 billion, or $1.07 per share, for the three months ended June 30 from $1.02 billion, or
$1.05 per share, a year ago.
Revenue jumped 6 percent to $13.27 billion from $12.51 billion in the year-ago quarter.
Analysts surveyed by Thomson Financial had forecast profit of $1.05 per share on revenue of $12.63 billion.
"On a segment basis, profit in basic plastics exceeded our forecast, while Dow Agrosciences was in line and the
performance businesses came in light not an inspiring mix overall," Kevin McCarthy, an analyst at Banc of America
Securities, wrote in a note to investors.
The company said volume held steady in the quarter. Strong increases in Asia Pacific, Latin America and most op-
erating segments in Europe offset continued weakness in the North American housing and automotive sectors, as well
as the impact of a major planned turnaround that significantly reduced volume for Dow's hydrocarbons and energy divi-
sion in Europe.
The Midland-based chemical giant said aggressive price and volume controls helped counter a sharp rise in feed-
stock raw materials used in production and energy costs, which surged more than $550 million from a year ago. Second-
quarter costs were $700 million higher than in the first three months of the year.
The quick rising cost of oil, a raw material for plastics, caught Dow by surprise, said Geoffery Merszei, chief finan-
cial officer.
"A surge of this magnitude was considerably more than we expected" and cut into profit margins, Merszei said in a
Webcast. If they do not go much higher, "we can expect to see some margin recovery as we move through the current
quarter."
For the first half of the year, profits fell to $2.01 billion, or $2.07 per share, from $2.24 billion, or $2.29 per share,
during the first six months of 2006. Net sales rose 4.8 percent to $25.7 billion from $24.53 billion a year ago.
"Our performance through the first half of the year reinforces our view that our strategy is working and that we will
continue to deliver strong results for the company and for its shareholders," Andrew N. Liveris, chairman and chief ex-
ecutive officer of Dow Chemical, said in a written statement.
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Dow Chemical posts better-than-expected 2Q profit Associated Press Financial Wire July 26, 2007 Thursday 8:56 PM
GMT

The company said it anticipates solid demand through the third quarter, although its agricultural sciences segment
is likely to see a typical seasonal decline. Feedstock and energy costs are expected to remain relatively high and volatile
through the quarter.
Associated Press Writer David N. Goodman in Detroit contributed to this report.
On the Net:
Dow Chemical Co.: http://www.dow.com

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