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MOSCOW (MRC) -- Dow says it expects a
USD350-million headwind to second-quarter EBITDA, mostly due to a
slower-than-expected demand recovery in the automotive and consumer durables end
markets, reported Chemweek.
The
demand decline will particularly impact Dow’s polyurethanes business, where
second-quarter demand is expected to decline by about 25–30% year on year (YOY).
Dow had previously expected a 15–20% YOY demand decline for polyurethanes in the
second quarter.
About two-thirds of the EBITDA impact “can be attributed
to the delayed and slower recovery in the automotive, construction, appliance,
and furniture sectors,” Dow president and CFO Howard Ungerleider said in a
virtual conference presentation this morning. The rest “is being driven by
margin pressure due to lower demand, which is negatively impacting pricing
power, along with MEG softness,” he added.
On the positive side, volumes
in plastics have been “resilient,” and will be roughly flat YOY for the quarter,
according to Ungerleider. The do-it-yourself (DIY) coatings end market has also
held up well, he says. “Solid demand trends continue in the packaging, home
care, industrial and institutional cleaning, and health and hygiene industries,”
Ungerleider adds.
Due to the lower-than-expected demand and profits, Dow
“will be taking further cost actions,” according to Ungerleider. Details of
additional cost reductions have not been disclosed, and will be announced when
the company releases second-quarter earnings. Dow has previously announced plans
to cut over USD1 billion in cost, including reductions in capital expenditure
and operating expenses.
Despite the slow recovery in some end markets,
Dow says that sales are on the rise. “It is encouraging to see the pace of
recovery accelerate in June in almost every value chain in our portfolio,”
according to Ungerleider.
As MRC informed earlier,
Dow Chemical will restart three idled polyethylene (PE) plants in Texas and
Argentina and two elastomers plants in Louisiana as demand begins to rebound.
And the company expects economic recovery to take hold in the second half of
2020 as gradual emergence from coronavirus pandemic-related shutdowns
continues.
According to MRC's ScanPlast report,
Russia's estimated PE consumption totalled 721,290 tonnes in the first four
month of 2020, up by 4% year on year. Low density polyethylene (LDPE) and linear
low density polyethylene (LLDPE) shipments grew partially because of the
increased capacity utilisation at ZapSibNeftekhim.
The Dow Chemical
Company is an American multinational chemical corporation headquartered in
Midland, Michigan, United States. Dow is a large producer of plastics, including
polystyrene (PS), polyurethane, polyethylene, polypropylene, and synthetic
rubber. |
