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Dow (DOW) to Divest Acetone Derivatives Business to Altivia

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Dow Inc. (DOW - Free Report) has agreed to divest its acetone derivatives business to Altivia Ketones & Additives, LLC, an affiliate of Altivia, a Texas-based privately-held chemicals maker. The financial terms of the deal were not divulged.

The transaction includes production assets in Institute, WV, and site infrastructure, land and utilities. Dow will remain a tenant on the Institute site and retain ownership of specific manufacturing assets. The deal, which is subject to customary closing conditions, is expected to consummate by the end of this year.

The acetone derivatives business makes ketones and carbinols, mainly used in the coatings, adhesive and pharmaceutical industries. Acetone derivatives are used as chemical intermediates and as solvents. Dow said that the deal allows the business to continue reliably and safely serving its customers.

Dow noted that the divestment testifies its disciplined approach to portfolio management. The move is also directly aligned with the company’s more focused portfolio and its objective of driving a higher return on its invested capital.

Dow’s shares are down around 14.6% over the past three months, compared with the roughly 12.7% decline recorded by its industry.


 

Dow’s adjusted earnings of 86 cents per share for the second quarter beat the Zacks Consensus Estimate of 85 cents. Its revenues of $11,014 million, however, missed the Zacks Consensus Estimate of $11,300.9 million.

Dow, in its second-quarter call, said that the pace of global economic growth has slowed as buying patterns remain cautious amid trade and geopolitical uncertainties. In this backdrop, the company remains focused on maintaining cost and operational discipline through cost synergy and stranded cost removal initiatives. The company noted that it is lowering its planned capital spending for 2019 to $2 billion from $2.5 billion in response to the prevailing market environment.  

Dow delivered cost synergy savings of more than $130 million and $45 million of stranded cost removal during the second quarter.

Zacks Rank & Stocks to Consider

Dow currently carries a Zacks Rank #5 (Strong Sell).

Better-ranked stocks worth considering in the basic materials space include Kinross Gold Corporation (KGC - Free Report) , NewMarket Corporation (NEU - Free Report) and SSR Mining Inc. (SSRM - Free Report) .

Kinross has projected earnings growth rate of 140% for the current year and carries a Zacks Rank #1 (Strong Buy). The company’s shares have surged around 70% in a year’s time. You can see the complete list of today’s Zacks #1 Rank stocks here.

NewMarket has an expected earnings growth rate of 16.2% for the current year and carries Zacks Rank #1. Its shares have gained around 18% in the past year.

SSR Mining has an estimated earnings growth rate of 165.2% for the current year and carries a Zacks Rank #2 (Buy). Its shares have rallied roughly 86% in the past year.

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