The Dow Chemical Company (DOW) announced that it plans to use a part of a recent payment from the Petrochemical Industries Company of Kuwait (PIC) to pay down up to $2 billion in debt this year. Dow recently received $2.2 billion in cash as damages from PIC as the latter withdrew from a $17.4 billion joint venture ("K-Dow Petrochemicals") in 2008.
Dow is looking for ways to reduce its debt and its actions are expected to deliver more than $100 million in annual interest expense savings once complete. The actions are also expected to bring Dow’s net debt to total capital ratio to well below 40%. These represent Dow’s consistent and prioritized uses of cash.
Dow also remains optimistic that through these plans it will be able to restore its debt to capital ratios to pre-2008 crisis levels. The approach also enables Dow to increase its earnings and provide future shareholder remuneration.
The latest move brings Dow's current debt-reduction activities in the second quarter of 2013 to nearly $1.6 billion and the company has planned additional debt-reduction activities of up to $400 million for the second half of the year.
Dow reduced its debt by over $900 million in the first quarter 2013. It continues its cost-reduction efforts under its “Efficiency for Growth” program. Dow’s cost-containment measures and restructuring initiatives are expected to fetch a combined annual savings of $2.5 billion with $1 billion expected this year.
Dow currently holds a Zacks Rank #3 (Hold).
Other companies in the chemical industry having favorable Zacks Ranks are Shin-Etsu Chemical Co., Ltd. (SHECY), Celanese Corporation (CE) and Methanex Corporation (MEOH). All of them retain a Zacks Rank #1 (Strong Buy).
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