Dow executives say plastics unit is focused and primed for growth

By Rhoda Miel | PLASTICS NEWS STAFF

Posted November 2, 2010

MIDLAND, MICH. (Nov. 2, 1:30 p.m. ET) — In the first weeks after Dow Chemical Co.’s proposed K-Dow joint venture with Kuwaiti officials fell apart in late 2008, the Midland-based company sought out new partners in hopes of resurrecting some kind of deal.

But at the same time, it had another team looking over the plastics operations to determine what it held and how to focus the operations under Dow’s continued ownership.

“We had to look at all of our options,” Dow CEO and Chairman Andrew Liveris said at a Nov. 1 news event in Midland. “For the first six months, finding a replacement for Kuwait was our focus, however we didn’t stand still.”

At the time, the company still wanted to complete its then-pending acquisition of Rohm and Haas Co. – a deal it wrapped up in 2009. By the time it became clear that Dow would not receive the value it wanted for its plastics assets through another joint venture, the firm had a far stronger plan for how it would restructure on its own.

“We chose a different set of pathways that resulted in shutdowns of commodity assets in the United States and shutdowns, especially in Europe, of old capacity,” Liveris said.

Dow’s sale of its Styron business to Bain Capital earlier this year was the last major move it needed. The company now has a business it believes is primed for growth in both key geographic regions and key markets.

“Our plastics portfolio is not in the same form it was when the Kuwait deal was struck,” he said.

Instead, the company is now focused on a specialty polyolefin-based platform with higher value add products that emphasize packaging – including Dow’s low linear density polyethylene films – and materials for the health care industry.

“Where we are now, is in the right range of plastics,” said Jim Fitterling, president of Dow’s plastics and hydrocarbons group.

The company is positioned to take advantage of new capacity from lower cost production in the United States. It also has operations in Asia, Europe and South America where demand is increasing. In Brazil, Dow is investigating manufacturing film from sugar cane, he said.

However, the company may have some minor divestitures or acquisitions in its future as it “fine tunes” its portfolio, Fitterling said, although the company is not discussing any details of what that might involve.

“We are actively working on several possibilities, and any deal that’s in this mix we will do that is in line with our strategic intent,” Liveris said.

Dow also is touting some of its products in emerging markets, such as the use of its Filmtec reverse osmosis membrane in a desalination plant in Israel.

The plant, about 10 miles south of Tel Aviv, will be the largest user of 16-inch membranes in Dow’s history.

And Dow’s Powerhouse solar shingles will go into commercial production in 2011, with preliminary manufacturing from the current research and development facility in Midland.

Dow has started hiring 100 new employees for the Powerhouse production, and will announce plans for a full production site during the spring. It already has said that its preferred location for the plant will be Midland.

The photovoltaic solar cells are printed on a flexible film, which is then injection molded onto a proprietary resin shingle on a Husky press Dow added in 2008. The shingles are watertight and designed to be used alongside asphalt shingles on a standard roofing underlayment, said Dave Parrillo, research and development director for the Powerhouse project.

Roofing crews can install the interlocking shingles with standard roofing nails, which lowers the overall cost of adding solar power to homes.

Dow received Underwriters Laboratories certification for its shingles on Nov. 1, an important key to its commercial launch.

The first residential application is part of a demonstration house in Bay City, Mich., which also includes Dow’s Styrofoam insulation materials.

SOURCE: PLASTICS NEWS

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