Dow Inc. Takes Drastic Measures to Counter Stagnant Sales
Profits Plummet, Job Cuts Loom
Dow Inc.’s fourth-quarter earnings fell woefully short of Wall Street expectations, prompting the material sciences company to announce a massive restructuring effort. The company will slash 1,500 jobs globally, equivalent to 4% of its workforce, in a bid to cut costs and stay afloat amidst stagnant sales.
Cost-Cutting Measures
The layoffs are part of a broader plan to reduce costs by $1 billion, citing “persistently weak macroeconomic conditions.” This move is a stark reminder of the company’s struggles to adapt to the current economic landscape. Dow’s shares took a hit, plummeting nearly 8% in morning trading, as investors reacted to the news.
Disappointing Earnings
The company posted a loss of $35 million in the fourth quarter, with adjusted per-share profits coming in at zero. This marks a significant decline from last year’s earnings of 43 cents per share and falls short of the 24 cents-per-share profit analysts had predicted. The full-year picture is equally bleak, with profits of $1.71 per share, down from $2.24 in 2023.
Sales Slump
The packaging and specialty plastics business, which accounts for over half of Dow’s revenue, has been a significant drag on sales. The segment saw a 6% decline in the fourth quarter and a similar drop for the full year. Total sales for the quarter fell by almost 2%, while full-year sales decreased by 3.6% to $43 billion, down from $44.6 billion in 2023.
Restructuring Efforts
Dow expects to incur charges of $250 million to $325 million in the first quarter for severance and related costs. CEO Jim Fitterling emphasized the need for proactive cost-cutting measures, stating, “While these decisions are difficult, we must continue to take proactive actions to reduce costs while we navigate through this ongoing slower-than-expected macroeconomic recovery.”
A Familiar Pattern
This is not the first time Dow has resorted to drastic measures. Almost two years ago, the company announced plans to cut 2,000 jobs, equivalent to 5% of its workforce, in an effort to reach $1 billion in savings. It remains to be seen whether these efforts will be enough to turn the tide for Dow Inc.
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