Shares of several chemical companies fell Tuesday after industry leader Dow Chemical announced its second set of wide-ranging price increases...
GRAND RAPIDS, Mich. — Shares of several chemical companies fell Tuesday after industry leader Dow Chemical announced its second set of wide-ranging price increases in less than a month, again trying to offset record costs for energy and raw materials.
Dow said it will raise the prices of its products by as much as 25 percent next month after implementing across-the-board price increases of up to 20 percent June 1.
The company makes everything from the propylene glycols used in antifreeze, coolants, solvents, cosmetics and pharmaceuticals, to acrylic acid-based products used in detergents, wastewater-treatment and disposable diapers. Its products are sold in 160 countries.
When Dow raises prices, the increase is felt across dozens of industries that buy its chemicals and plastics to manufacture products ranging from diapers to automobiles.
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Dow says it is trying to survive. Competitors such as Rohm & Haas and Celanese also have recently raised prices for their customers.
“We have to get them back to reinvestment levels where we can continue to build our business and to be there for the future,” said Dow spokesman Chris Huntley.
The chemical maker’s profit margins shrank from 9.8 percent in 2005 to 7.6 percent in 2006, and to 5.4 percent last year. During the 12-month period that ended March 31, the margin narrowed to 5.1 percent, according to Capital IQ.
Dow said it’s also adding a freight surcharge for North American customers of $300 per shipment by truck and $600 per shipment by rail effective Aug. 1. Those surcharges will spread to other regions later this year.
Meanwhile, the company is idling or reducing production at some manufacturing plants and taking cost-cutting measures at its automotive plants that have been hurt by a dreadful year for U.S. automakers.
The company had not yet worked out the details of its cost-cutting plan, Huntley said, “but it will certainly involve some people reductions, it will involve looking at how we can reduce costs around facilities, overhead and the external spending component.”
Dow has automotive facilities throughout the U.S. as well as overseas.
Chairman and Chief Executive Andrew Liveris said the steps are “extremely unwelcome but entirely unavoidable” as global energy costs surge.
Dow shares fell $1.04, or 2.8 percent, to close at $36.58. Shares also declined for competitors such as Celanese, Rohm and Haas, DuPont Co. and Sigma-Aldrich.
The company in April reported a 3 percent drop in quarterly earnings. At the time, Dow said it considered that a strong showing in the face of a 42 percent jump in raw materials, called feedstock, and energy costs.
“We expect earnings to remain pressured,” Deutsche Bank analyst David Begleiter wrote Tuesday in a note to investors.
Associated Press business reporter Jeff Karoub in Detroit contributed to this story.