The Dow Chemical Company (DOW), Praxair, Inc. (PX): Interesting Investing Opportunity in These Chemical Companies

Page 1 of 2

The global chemical industry, which is valued at nearly $3 trillion, has grown at a steady pace in the last decade. Global chemical production rose 2.6% in 2012 whereas it increased 3.8% in 2011. The reason for this slowdown was the European debt crisis and the subsequent weak demand for chemical products in the global market. However, this industry is in recovery mode, with the after-effects of the European debt crisis easing off.

The global chemical industry output is expected to grow by 4.3% in 2013 and by 4.7% in 2014. Here are three leading U.S.-based chemical companies in terms of market cap. Here’s an analysis of whether these companies can further consolidate their respective positions.

The Dow Chemical Company (NYSE:DOW)

A chemical company going strong

K-Dow Petrochemicals was supposed to be a $17.4 billion joint venture between The Dow Chemical Company (NYSE:DOW) and Petrochemical Industries Company, or PIC. The joint venture was signed in July 2008. However, PIC called off the deal in December 2008. Dow sued PIC and was subsequently awarded $2.2 billion as arbitration charges by an international court in May 2012. Dow received a direct cash payment of $2.2 billion from PIC in May 2013.

A part of this cash will be used by the company to pay off its debt. It plans to reduce its debt by $2 billion in 2013. This will help The Dow Chemical Company (NYSE:DOW) reduce its annual interest expense by $100 million this year. It will also decrease its debt to equity ratio to below 0.67 in 2013. This would be a decrease of 31.5% from 2012.

Sadara Chemical is a 50-50 joint venture between The Dow Chemical Company (NYSE:DOW) and Saudi Arabian Oil. Sadara Chemical secured about $10.5 billion of project financing in June 2013. These funds, along with $2 billion raised in April 2013, will be deployed for the construction of a chemical complex in Saudi Arabia. This complex has an estimated production capacity of 3 million metric tons of plastics and specialty chemicals. Production will commence in the second half of 2015. This project is expected to generate average annual earnings of $500 million for first 10 years after its start-up.

Banking on agricultural revenue

E. I. du Pont de Nemours launched a new $40 million corn and sunflower seed production facility in Stasi, Ukraine in June 2013. Ukraine is renowned for its mineral-rich black soil, which enhances agricultural yield. It is among the top countries in the world in terms of percentage of total land suitable for agriculture, or arable land; of Ukraine’s total land area, about 55% is arable. The U.S. Department of Agriculture has predicted that Ukraine will become one of the top three world exporters of corn and coarse grains in the next two years.

DuPont is a market leader in corn seeds and the second-largest producer of sunflower seeds in Ukraine. The new plant is one of the biggest seed production plants in Ukraine. It has the capacity to supply 5,000 tons of corn seed and 2,000 tons of sunflower seed annually to Ukraine and other countries. This increased capacity will help it improve its market share in the Ukrainian seed market.

Cyazypyr is an insecticide which is used to control chewing and sucking pests. This insecticide was launched by DuPont in Argentina in 2012 and in Canada and China in 2013. Rynaxypyr is another insecticide used for chewing pest control. Rynaxypyr had a significant impact on the company’s agricultural segment, which grew 14% quarter-over-quarter to $4.7 billion in the first quarter of 2013. Rynaxypyr had sales of $750 million in 2012. Rynaxypyr and Cyazypyr have a combined annual sales potential of more than $1 billion in the next two years.

Adding fizz with acquisition

Praxair, Inc. (NYSE:PX) has two major hydrogen production projects this year. In June 2013, it started a hydrogen plant in Port Arthur, Texas. The capacity of this plant is 150 million standard cubic feet per day, or scfd. Praxair has another hydrogen plant in St. Charles, Louisiana, which will be operational in July this year. This plant has a capacity of 120 million scfd.

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!