Dow Chemical falls amid supply chain, oil price concerns
20:32, 21 October 2021
Shares in chemicals company Dow fell by around 1% to close at a price of $59.26 per share on Thursday, despite reporting substantial revenue gains in its third-quarter earnings.
Net sales increased by 53% year over year, and 7% from the prior quarter to $14.8bn, while operating earnings were $2.75 a share, up from $0.50 a year ago. Dow even reported net income of $1.7bn, up from a $1m loss last year during the comparable quarter.
While those figures surpassed analyst expectations, investors were more focused on high commodity prices and supply chain constraints that limited profitability.
Commodities
Dow supplies commodity chemical products like valuable silicone and polyethylene to create products tied to basic feedstocks and crude oil.
The company’s stock is therefore tied closely to global supply chains, commodity prices, and trade relations – all of which were highly volatile in the prior quarter, with few signs it will abate in the near to medium term.
Oil prices reached multi-year highs during the quarter and supply chains continue to be clogged with ships sitting idle at sea waiting for ports to open.
“Despite higher energy costs and industry-wide value chain disruptions from hurricanes on the US Gulf Coast, our proactive storm preparations enabled us to maintain the safety of our team and operations, and recover quickly,” Jim Fitterling, chairman and CEO, said in a statement.
“Coupled with our global footprint, feedstock flexibility and structural cost advantages, we continued to capture robust end-market demand and price momentum.”
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Dow stock performance
Shares in Dow are up 9.66% on the year but took a negative turn about halfway through the year as concerns over the supply chain issues and oil prices started to ramp up.
The shares peaked at a price of $71.38 in May, but have since fallen by more than 16%.
In 2019, DowDuPont broke off into three separate companies: its chemicals business under Dow, its sciences business under Dupont de Nemours, and its agricultural business called Corteva.
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