Dow Chemical: Q2 sales may be lower than expected due to weak demand for durable goods

Chemical manufacturer Dow Chemical noted on April 25 that second-quarter sales may be lower than expected due to weak demand for durable goods and continued uncertainty about the health of the European economy.

Retail sales in Germany, Europe's largest economy, unexpectedly fell in February, while manufacturing activity on the continent continued to decline in the first quarter.
Dow Chief Financial Officer Jeffrey Tate said on a call with analysts that demand for consumer durables continues to be sluggish, but Dow expects margins to expand in Europe for its industrial intermediates and infrastructure units.

According to data from the London Stock Exchange, Dow expects second-quarter sales of about $11 billion, up from the first quarter but below Wall Street expectations of $11.64 billion.

Vertical Research Partners said that after six quarters of negative earnings revisions, we have now reached a stage in the cycle where Dow Chemical's market outlook has become slightly more constructive. However, some investors remain concerned about the relative lack of free cash flow going forward. The Dow Jones Industrial Average fell 1.5% amid broader market losses.

Affected by a 10% drop in local prices, Dow Chemical's first-quarter net sales fell 9% to $10.77 billion.

After the Russia-Ukraine conflict led to tight supply of raw materials, chemical companies increased prices in 2022 to cope with inflation. Dow's rising sales and falling costs of raw materials such as natural gas helped its first-quarter profit exceed expectations. Dow Chemical said its volumes rose 1%, supported by all other regions except Europe, the Middle East, Africa and India.

"In the short term, demand in key end markets ranging from packaging, mobility to energy applications will trend upward sequentially." said Dow CEO Jim Fitterling.

The company reported operating earnings per share of 56 cents in the quarter ended March 31, while analysts' average estimate of 45 cents.