Dow chief responds to Loeb pressure
Dow Chemical’s management team are “going to be great listeners” to ideas from shareholders on improving the company’s performance, its chief executive Andrew Liveris has promised.
Speaking as the company reported better than expected earnings for the third quarter, Mr Liveris said on Wednesday that he had been continuing to speak with Dan Loeb of Third Point Capital and other shareholders about how to raise Dow’s share price.
He said the company would be trying to improve communication of its financial performance with an investor presentation next month. “We are very motivated to have the share price go northwards,” Mr Liveris said.
He added that Dow was close to reaching a “running rate” of earnings before interest, tax, depreciation and amortisation of $10bn per year “in the near term”. The company first set the objective in 2009.
Third Point, an activist hedge fund, in January revealed it had taken a stake in Dow and called for the group to be broken up, saying it “woefully underperformed” over the past decade.
That proposal was emphatically rejected by Mr Liveris, but Mr Loeb raised the pressure with a detailed critique of Dow’s strategy sent to investors in May.
Third Point’s original proposal was for Dow to be split into two, with a petrochemical business making products such as ethylene and propylene, and another company manufacturing speciality chemicals.
Its subsequent analysis argued that Dow’s “integrated strategy does not maximise profits”, and criticised the company for a lack of disclosure over how its profits were earned.
On Wednesday Mr Liveris denied that he had an “adversarial” relationship with Mr Loeb or other investors, and promised to listen to their analysis, but said he sometimes had to point out to them where they were wrong.
He agreed that the company needed to “show where we’re making money”, and suggested the investor day next month would offer greater clarity.
He added that there were “no sacred cows” in terms of businesses that could be sold. The company has set a target of raising up to $6bn from disposals.
Dow’s underlying earnings per share for the third quarter, excluding one-off costs associated with the planned sale of its chlorine and epoxy business, were 72 cents, up 44 per cent from the equivalent period of 2013.
The star performance came from Dow’s plastics division, which in the US benefits from cheap feedstocks such as natural gas liquids stemming from the North American shale revolution. Its ebitda was up 31 per cent at $1.275bn.
Mr Liveris said the global economic outlook remained “persistently slow and volatile”, but Dow was raising margins through “self-help” to improve efficiency.
He added he expected continuing benefit from Dow’s low-cost position in the US and from its Sadara joint venture with Saudi Aramco in Saudi Arabia, which is scheduled to start production next year.
Other chemicals companies have also faced calls for a break-up.
At DuPont, Nelson Peltz’s Trian has accused the group of “destroying shareholder value” and recommended it split itself into two separate companies.