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Dow Chemical Co (DOW-N), the largest U.S. chemical maker by sales, reported a lower-than-expected quarterly profit on Thursday as demand for chlorine, plastics and electronic parts plunged around the world.
Demand dropped sharply in April, with only mild improvement in May and June, and planned shutdowns at two large, profitable plants hurt profit, Dow Chemical chief executive Andrew Liveris said in an interview.
"A company like ours is an economic bellwether for a reason," he said. "The macroeconomics are weaker. We really don't see much improvement for at least 12 months."
The results were weakest in Europe, as it has been for the company in recent quarters and for many of its peers.
"The euro zone issues continue to provide a domino effect, economically speaking, around the world," Liveris said.
Demand for Chinese exports is also slipping, Liveris said.
"I went to China three times in the quarter, and I could see it as I was traveling that they were fundamentally very worried about exports to Europe, and they were shutting down factories," Liveris said.
For the second quarter, Dow reported net income of $649 million US, or 55 cents per share, compared with $982 million, or 84 cents per share, a year earlier.
Analysts expected earnings of 64 cents per share, according to Thomson Reuters I/B/E/S.
Revenue dropped 10 percent to $14.51 billion. Analysts expected $15.69 billion in revenue.
Sales fell in all Dow's businesses except agricultural sciences, where demand for pesticides and other farming products jumped during the North American spring planting season.
The results were reported a day before the opening ceremony for the London Olympics, for which Dow is a global sponsor.
Dow is hosting 480 customers in London, and Liveris said he would meet with many of them to help boost sales.
Dow's sponsorship has been controversial because of the company's connection to a gas leak in 1984 in Bhopal, India. As many as 25,000 residents of Bhopal died in the aftermath of a leak at a pesticide factory that was owned by a unit of Union Carbide, which sold the facility in 1994. Dow bought Union Carbide in 2001.
Since then, India, Amnesty International, Greenpeace and some members of the British Parliament have demanded Dow increase a $470-million compensation package that Union Carbide paid victims in 1989. Some British politicians have recently asked London Olympic organizers to cancel Dow's sponsorship, saying it damages the Olympic's reputation.
Liveris said he doesn't believe the controversy would harm the goodwill Dow expects by being an Olympic sponsor. He expects the 10-year sponsorship deal will bring in $1 billion in revenue by supplying material used to make Olympic facilities.
"When your name is up there and you're basically at an iconic event like the Olympics, you're not going to please 100 percent of the people 100 percent of the time," Liveris said.
"The 480 customers that we will have in the next two weeks, their ability to participate with Dow in this magnificent event is all the goodwill I really need because they'll buy more products from Dow."