Dow Chemical Co said it would cut 500 more jobs as it speeds up cost reductions, ahead of its merger with DuPont, to counter the impact of a strong dollar and weak demand for agrichemicals and seeds. Shares of the company, which reported a better-than-expected quarterly profit on higher margins, rose as much as 4 percent to $44.46 in morning trading.
Dow is targeting an additional $300 million from cost savings in 2016, building on the $345 million it realised last year, Chief Financial Officer Howard Ungerleider said on a post-earnings call. DuPont said last Tuesday it would cut $730 million in costs in 2016, with annual savings adding up to $1 billion. The two companies have said their combination - which will later split into three businesses, focused on material sciences, specialty products and agriculture - will save $3 billion annually.
The job cuts announced on Tuesday takes Dow's total workforce reduction to 2,200, Chief Executive Andrew Liveris said on the call, adding that the company has laid off 1,200 employees so far. Dow employed 49,500 people world-wide in 2015. DuPont, similarly, plans to cut 10 percent of its workforce of about 54,000 employees. Dow also named James Fitterling president on Tuesday. Fitterling, who will continue as COO, will report to Liveris.
The chemical maker is facing renewed pressure from activist investor Daniel Loeb of hedge fund Third Point, who is now calling for the removal of Liveris from the merged company. Loeb, who had previously called for a break-up of the company, sent a private letter to the company's board in December, raising questions about the timing of the DuPont deal, according to the Wall Street Journal. Cost cuts boosted Dow's operating margin by 406 basis points to 20.9 percent in the three months ended December 31. Cost of sales fell 24 percent to $8.81 billion.
Operating EBITDA at Dow's plastics business, its biggest by sales, rose to $1.3 billion from $1.2 billion a year ago, due to historically low crude costs. Excluding a gain of $1.96 per share from the spinoff of Dow Chlorine Products, the company earned 93 cents per share, handily beating the average analyst estimate of 70 cents, according to Thomson Reuters I/B/E/S. Net sales fell 20 percent to $11.46 billion, beating analysts' estimate of $11.2 billion.
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