Get 40% Off
🚀 Our AI Picked 6 Stocks that Jumped +25% in Q1. Which Picks Will Soar in Q2?Unlock full list

Dow forecast disappoints as inflation drags demand

Published 07/21/2022, 06:23 AM
Updated 07/21/2022, 02:36 PM
© Reuters. FILE PHOTO: A Dow sign is seen at the third China International Import Expo (CIIE) in Shanghai, China November 5, 2020. REUTERS/Aly Song/File Photo

By Rithika Krishna

(Reuters) -Chemicals maker Dow Inc projected third-quarter sales below market estimates on Thursday, blaming a global surge in inflation for a demand slowdown and sending its shares down 3%.

The dour outlook could be a barometer of price pressures as Dow's chemicals are used in industries ranging from automobiles and food packaging to electronics.

"We expect inflation to continue impacting global consumer durables demand, including furniture and bedding and appliance end markets," Chief Financial Officer Howard Ungerleider said.

The comments mirror remarks from other companies and underline the toll on Corporate America from decades-high price pressures and a rise in oil rates that are at eight-year peaks.

Dow said higher energy costs were expected to drive a hit of about $125 million in its industrials business and $200 million in its performance materials and coating unit in the current quarter.

The company forecast third-quarter net sales between $14.3 billion and $14.8 billion, the midpoint of which was below market estimates of $14.7 billion, according to Refinitiv data.

In the three months ended June 30, the company's performance was also weighed down by strength in the dollar and an economic slowdown in China due to renewed COVID-19 curbs.

Volumes at two of Dow's three main units fell in the period, with KeyBanc Capital Markets analyst Aleksey Yefremov saying margins at those businesses had declined faster than expected.

© Reuters. FILE PHOTO: A Dow sign is seen at the third China International Import Expo (CIIE) in Shanghai, China November 5, 2020. REUTERS/Aly Song/File Photo

Strong seasonal demand, however, boosted its North American business, helping total net sales rise by 13% to $15.66 billion. Dow's adjusted profit of $2.31 per share was also better than expectations of $2.14.

"Demand (for chemicals) likely remains broadly positive but is showing signs of slower growth through year-end," Jefferies analyst Laurence Alexander wrote in a note.

Latest comments

good constructive story. thanks
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.