* China remains a mixed bag, CEO says
* Q2 adj EPS beats analysts' estimates
* Solid Q2 not necessarily a harbinger of Q3: CEO
* CEO implying Dow won't sustain Q2 China growth: analyst
* Shares fall as much as 6 pct
(Adds CEO, analyst comments; updates shares)
July 23 (Reuters) - Dow Chemical Co DOW.N warned of soft
demand in China, raising concerns that the largest U.S. chemical
maker by revenue would not be able to maintain its growth rate
in the key market.
Dow's stock fell as much as 6 percent on Thursday, reversing
course from an increase in premarket trading when the company
reported a better-than-expected quarterly profit due to higher
margins.
"China remains a mixed bag," Chief Executive Andrew Liveris
said on a post-earnings call. "A very solid Q2 for us is not
necessarily a harbinger of Q3 ..."
However, Liveris said demand from the automobiles,
construction, water and food safety industries would continue to
drive demand in China.
China's economy grew an annual 7 percent in the second
quarter, beating estimates. But volatile stock markets and
weakness in key industries have raised concerns that growth in
the world's second-largest economy is cooling.
"Dow had a 14 percent growth rate in China, the CEO probably
was implying that company won't be able to sustain that," UBS
analyst John Roberts said. He estimated emerging markets account
for about a third of Dow's sales.
Dow's sales fell 13.5 percent to $12.91 billion in the
second quarter ended June 30, hurt by a strong dollar and weak
oil prices that are eroding its competitive advantage.
Dow, like other U.S. chemical makers, has benefited from
cheap U.S. shale gas, which is stripped down into ethane to make
ethylene - a key component of plastics and many chemicals.
This cheap fuel had given Dow a cost advantage over its
European rivals dependent on crude oil-derived naphtha. But with
crude prices slipping, that advantage is now eroding.
Still, Dow's margins have held steady due to its
cost-cutting efforts. Margins rose to 19 percent in the quarter
from 15 percent a year earlier.
Dow, which is shifting focus to more lucrative businesses
such as plastics and electronics, said in May it would reduce
its workforce by 3 percent. ID:nL4N0XV2CQ
The company said on Thursday it was on track to lower costs
by $300 million as part of its three-year plan to reduce costs
by $1 billion.
Excluding a $375 million pre-tax charge related mainly to
the job cuts, Dow earned 91 cents per share in the quarter,
beating analysts' average estimate of 83 cents, according to
Thomson Reuters I/B/E/S.
Dow's shares were down 2.8 percent at $48.58 in late morning
trading, easing from a day-low of $47.10.
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GRAPHIC: Dow Chemical vs. DuPont http://graphics.thomsonreuters.com/15/chemical-earns/index.html
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