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The Dow Chemical Company (DOW - Analyst Report) has decided on the locations for expanding its four leading Performance Plastics brand franchises. It is part of an investment strategy on the U.S. Gulf Coast to integrate advantaged shale gas. The selected sites are based in Texas and Louisiana and construction will commence shortly.
Dow’s collective, high-return investments are expected to boost revenues and generate roughly $2.5 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA) when the plants are fully operational. Dow will also be able to better address the increasing customer and value chain demand in markets like food packaging, transportation and infrastructure, hygiene and medical, and electrical and telecommunications.
Dow will expand its High Melt Index (HMI) AFFINITY brand polymer franchise in Freeport, Tex. It delivers stronger bonding in hot melt packaging adhesives. ELITE polymer franchise brand, which delivers enhanced durability and flexibility for food packaging, hygiene & medical, and industrial and consumer packaging markets, will also be expanded. These two brands are powered by Dow's proprietary INSITE catalyst technology.
The other brands to be expanded by Dow are NORDEL metallocene EPDM franchise and Low Density Polyethylene (LDPE) family of high performance polymers like AGILITY. They will be expanded in Plaquemine, La.
NORDEL metallocene EPDM franchise is also powered by INSITE and delivers infrastructure, automotive, consumer durables, appliance and electrical and telecommunications markets with highly flexible, heat and chemical resistant polymers that deliver enhanced durability and long service life. AGILITY polymers are faster to process, more stable and deliver improved optics for applications in flexible food packaging.
Dow’s cost-advantaged position and R&D expertise will be leveraged in these expansions to deliver leading edge technology that provides a competitive advantage to the customers in the strategic markets.
Dow posted mixed second-quarter 2013 results on Jul 25. The company’s quarterly profit increased on strength in its agriculture business and a sizable gain from an arbitration case. Adjusted earnings beat the Zacks Consensus Estimate while sales missed.
Gains across agricultural sciences and performance materials were offset by declines in feedstocks and energy and performance plastics. Dow is benefiting from strong fundamentals in agriculture and food markets, and is leveraging its North American feedstock advantage.
A string of innovative products in company’s pipeline adds to its strength and this expansion is expected to augment sales of the company’s Performance Plastics business when they are fully operational in near future.
Dow currently holds a Zacks Rank #3 (Hold).
Other companies in the chemical industry worth considering are Northern Technologies International Corp. (NTIC - Snapshot Report), Cytec Industries Inc. (CYT - Snapshot Report) and Eastman Chemical Co. (EMN - Analyst Report). All of them hold a Zacks Rank #2 (Buy).