July 23, 2020 / 10:21 AM / 13 days ago

Dow signals choppy recovery from pandemic blow, plans cost cuts

(Reuters) - Dow Inc chief executive officer said on Thursday it would probably take a couple of years for the chemical maker’s volumes and margins to rebound to pre-coronavirus levels, and laid out additional cost-cutting plans to cope with its fallout.

FILE PHOTO: The Dow Chemical logo is displayed on a board above the floor of the New York Stock Exchange shortly after the opening bell in New York, U.S. on December 22, 2015. REUTERS/Lucas Jackson/File Photo

The company posted its first quarterly loss since its separation from the erstwhile DowDuPont conglomerate and forecast third-quarter sales below estimates, sending its shares down 4%.

“We are in the beginning phases of what is likely to be an uneven recovery...,” Chief Financial Officer Howard Ungerleider said on a post-earnings call.

Extended economic lockdowns shifted the inflection point for demand recovery in key markets and geographies into June, Dow said, though volumes in Asia rose 13% sequentially as China reopened.

Dow will not raise its capital spending until volumes and margins climb back up to pre-pandemic level, Chief Executive Officer James Fitterling said on the call.

The company will look to cut another $150 million of operating expenses during the year and target over $300 million in improvements to annual core earnings by the end of next year through job cuts. It also expects asset sales to contribute to earnings.

Dow forecast third-quarter revenue of between $8.5 billion and $9 billion, below estimates of $9.2 billion, according to Refinitiv IBES data.

The company, which had about 36,500 employees at the end of 2019, expects to take an unspecified charge in the current quarter from the restructuring.

Overall volumes fell 9%, while local prices declined 14% in the second quarter, primarily due to a plunge in crude and gas prices, while the pandemic led to a surge in demand for food packaging materials and health and hygiene, as well as home care and pharma products.

Adjusted quarterly loss of 26 cents per share was smaller than analysts’ estimate of 30 cents.

Reporting by Taru Jain; Editing by Sriraj Kalluvila

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