Dow's (DOW) Capacity Expansions to Support Demand & Innovation

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Dow Inc. DOW has announced a series of incremental, high-return capacity expansions to cater to the growing demand across key end markets. All of the expansions support sustainable solutions and continue to grow faster than GDP.

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In its Consumer Solutions business, several key growth projects are planned to come online globally throughout 2021 and are expected to increase the capacity of a variety of materials. These include Silicone elastomers, polymers, sealants, pressure-sensitive adhesives and thermally conductive materials as well as CatHEC (cationic hydroxyethylcellulose) polymers and PEGs (polyethylene glycols). These will have a wide range of usage in reducing carbon footprint.

These projects ride on the back of the company’s prior investments in its Consumer Solutions business, consisting of more than 20 key debottleneck, efficiency improvement and growth capital projects across 2019 and 2020.

As part of its capital expenditure targets, the company has chalked out a number of investments. To increase production in its Polyurethanes & Construction Chemicals unit, it plans to raise the propylene glycol (PG) capacity at the existing facility in Map Ta Phut, Thailand, by 80,000 tons per year, taking up the total capacity to 250,000 tons per year. The facility, which is expected to come online in 2024, will be the largest of its kind in the Asia Pacific. It also has plans to build an integrated MDI distillation and pre-polymers facility in Freeport, TX, with a view to support the increasing demand for downstream polyurethane systems products. The project is expected to further strengthen Dow’s leading positions in construction, consumer and industrial markets.

Dow noted that it is keen on driving innovation and growth, and thereby dedicated to investing in differentiated silicone and specialty material assets. The increased PG capacity optimizes its existing framework and enables sustained growth in high-value applications, allowing it to better serve its customers in fast-growing markets.

Shares of Dow have surged 49.6% in a year, outperforming the industry’s growth of 46.2%. The company’s estimated earnings growth rate for the current year is pegged at 326.5%.

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The company, in its last earnings call, noted that it expects its businesses to benefit from the ongoing economic recovery, supported by the progress in vaccine distribution and tight market fundamentals. It is well placed for sustained value creation throughout this year and beyond, on the back of its geographic scale, advantageous cost positions, differentiated feedstock flexibility, leadership position in high-growth markets and top-quartile cash generation.

Zacks Rank & Other Stocks to Consider

Currently, Dow carries a Zacks Rank #2 (Buy).

Other top-ranked stocks in the basic materials space are Cabot Corporation CBT, Avient Corporation AVNT and Univar Solutions Inc. UNVR, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cabot has a projected earnings growth rate of 125.9% for the current year. The company’s shares have soared around 53.4% in a year.

Avient has a projected earnings growth rate of 64.1% for the current year. The company’s shares have jumped nearly 81.8% in a year.

Univar has a projected earnings growth rate of 35.2% for the current year. The company’s shares have gained 36.8% in a year.

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