Dow Chemical announces plant closures, says its savings plan is on track

This morning, the Dow Chemical Company (DOW) announced that its board approved a plan yesterday to shut down a number of manufacturing assets, affecting 100 employees who would be offered other positions. Dow also said it will take a charge related to 2,500 previously announced job cuts. This multibillion-dollar restructuring plan will save more than $100 million a year, Dow said.

The company says the closures of its ethylene and ethylene-derivatives production plants fit into its strategy of reducing its reliance on cyclical and commoditized basic chemicals production, and increasing its focus on less volatile higher-value specialty chemicals.
Andrew N. Liveris, Dow chairman and CEO, announced in the first-quarter conference call Dow's goal to save $2.5 billion by the end of 2010, $1.3 billion of it through its acquisition of Rohm & Haas (ROH), which was completed on April 1.

"Consistent with Dow's practice of active portfolio management, we continue to take quick and aggressive action to right-size our manufacturing footprint, particularly in our basics portfolio," Liveris said in today's statement. Dow, he added, is "Today's steps demonstrate our speed and determination to deliver these savings."

A source close to the company told DailyFinance that Dow's "active management of assets and hands on approach to reducing cost structure is helping the company reduce its debt ahead of time." Dow took on billions in debt to complete the Rohm & Haas acquisition.

Generally, analysts liked the move. "We view the news as incrementally positive for the oversupplied commodity chemicals space," said P.J. Juvekar of Citi. David Begleiter of Deutsche Bank said the news "reflects Dow's focus on executing its transformation strategy ... to deliver more consistent earnings growth."

Dow has stated a target of divesting $25 billion of its assets. Its focus has been on higer-value specialty chemicals and advanced materials, which the Rohm & Haas acquisition helped achieve. Perhaps Warren Buffett's vote of confidence in the company was warranted, despite skepticism for his recent moves.

DOW stock hasn't reacted much to the news.
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