Apr 30, 2004 By Sarah Karush Associated Press Writer 3 min read

DETROIT (AP) – Moving forward with a long-term cost reduction plan, Dow Chemical Co. said Thursday it would cut 3,000 jobs globally this year. The announcement came as the company posted a first-quarter profit that was six times that of last year. The chemical giant will reduce its 46,000-person work force by 6.5 percent “through business reorganizations, attrition, shutdowns and divestitures,” chief financial officer J. Pedro Reinhard said in a conference call after the company reported results.

The nation’s largest producer of chemicals and plastics saw its net income rise to $469 million, or 50 cents a share in the January-March period, compared to $76 million, or 8 cents a share last year, the company said.

Wall Street analysts polled by Thomson First Call had predicted earnings of 43 cents per share.

The Midland-based company attributed the gains to improvements in prices, volume and productivity, which Dow said outweighed nearly $100 million in energy and raw-material costs.

Sales increased 15 percent to $9.3 billion, reflecting an 8 percent increase in prices and a 7 percent increase in volume, the company said.

“Significant productivity improvements were achieved in the first quarter, continuing to build on the structural cost reductions of 2003,” Reinhard said. “Broad-based economic recovery in the first quarter resulted in increased volume in all operating segments and geographic areas.”

He said it was the first time that volume was up year-over-year in all operating segments since the second quarter of 2000.

The job cuts announced Thursday are a continuation of a streamlining initiative that Dow announced last year after disappointing results in 2001 and 2002. The company says its plan helped it boost sales and swing to a profit last year.

More than 3,500 jobs were cut last year, and 350 jobs were cut in the first quarter of 2004, Reinhard said.

Dow spokeswoman Leslie Hatfield said she could not say exactly what jobs in which locations were being eliminated.

So far, the cuts have affected “primarily management,” she said. “As restructuring continues, the impact is expected to spread further within the organization.”

Analyst Michael Judd of Greenwich Consultants-Soleil Securities said cost reduction is essential for Dow to remain competitive.

“This is a cyclical industry. You have to really make sure you can keep your costs as low as they possibly can be because you’re having to compete in … relative commodities,” Judd said.

Meanwhile, Dow is being squeezed by rising energy and raw-material costs. That is “a critical issue for the chemical industry and for Dow,” Reinhard said.

Reinhard said the restructuring is expected to cost the company $300 million in 2004 and provide annual savings of $350 million.

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On the Net:

Dow Chemical Co.: http://www.dow.com

AP-ES-04-29-04 1605EDT