The Tao of Dow Chemical lies within its integrated production of plastics, chemicals, hydrocarbons, and agrochemicals. The largest chemical company in the US and #2 worldwide behind BASF, Dow also makes performance plastics (engineering plastics, polyurethanes, and materials) for Dow Automotive. It uses chlorine-based and hydrocarbon-based raw materials to make 5,000 finished chemical products at 197 sites in 36 countries. The maker of Styrofoam insulation also is the world's #1 producer of chlorine and caustic soda, and a top maker of ethylene dichloride and vinyl chloride monomer (used in making alumina, pulp and paper, soaps, and in construction). Dow also owns 50% of silicone products maker Dow Corning.
As part of its strategy to drive growth, Dow invests heavily in research and development that leads to launching products to meet its customers' and consumers' needs. Another focus of its strategy is forming joint ventures, especially in emerging economies, to build world-scale facilities to make its products and to expand its global footprint.
Investing in the Middle East, Dow formed a joint venture in 2011 with Saudi Arabian Oil Company (Saudi Aramco) to build and operate a $20 billion chemicals complex in Jubail. Dow grew its presence in Saudi Arabia in 2012 with an investment in a plant at Jubail to make raw materials for paint and coating manufacturers in the region and for export markets.
In the US, Dow believes that lower natural gas prices will attract a resurgence in investments in American manufacturing. It plans to invest $4 billion to expand its ethylene and propylene production capacity in the US Gulf Coast region by using lower cost feedstocks available from increasing supplies of shale gas. Dow began constructing a new ethylene production plant in Texas in 2012.
The project includes a new ethylene cracker facility at its Dow Texas Operations site in Freeport. The site is the largest single-company complex in North America and manufactures 44% of Dow products sold in the US and more than 20% sold worldwide.
Both aspects of its strategy resulted in gains for the company in 2011. Dow Chemical's global revenues increased 12% in 2011 (over the previous year), reaching a record of nearly $60 billion. The company experienced double-digit growth in every geographic region and in every operating segment except Electronic and Functional Materials, which was up 9%. Dow also achieved record sales in emerging countries, where it reached $19.4 billion, and in the Asia/Pacific region, where it posted sales of more than $10 billion. In addition, Dow earned a record $1.2 billion from its joint ventures in 2011. Its net income that year was $2.8 billion, up nearly 19% from $2.3 billion in 2010.
Although sales in the first half of the year were positive, global factors such as financial crisis in Europe, high unemployment in the US, and inflation in emerging countries affected sales in the second half. However, Dow realized double-digit price gains in all geographic regions and in most business segments in 2011, driven by an increase in feedstock costs.
In 2012 the company announced a restructuring program designed to accelerate cost reductions. The program would cut 2,400 positions, or 5% of the global workforce, and close down 20 manufacturing plants.
Mergers & Acquisitions
In 2012 the company's Dow Electronic Materials unit acquired Lightscape Materials, a spinoff of SRI International. US-based Lightscape Materials is a research company specializing in phosphor technology, used in LED light-based systems. The acquisition enhances Dow's new LED Technologies unit (formed in 2011), because phosphors are used to enrich color quality in applications such as backlights for LCD displays.
In 2012 Dow formed a joint venture through its Dow Europe unit with Turkish acrylic fiber company Aksa Akrilik Kimya Sanayii. Called DowAksa Advanced Composites, the venture will make carbon fiber and derivatives for industries such as transportation, wind energy, and construction.
In 2011 Dow agreed to form a joint venture with Chinese company Befar Group to produce perchloroethylene, or PCE, a key building block material for non-ozone depleting refrigerants used in industrial, automotive, and consumer applications. The companies will develop a PCE manufacturing facility in Shandong Province, with a target capacity of 40,000 to 80,000 tons per year by 2014 to meet the growing needs of the Chinese market. – less