Dow sees quarterly sales below estimates over weak consumer durables demand

By Sourasis Bose

(Reuters) -Chemicals maker Dow forecast second-quarter sales below expectations on Thursday amid weak demand for consumer durables and continuing uncertainty over the health of European economies.

Retail sales in Germany, Europe's largest economy, fell unexpectedly in February, while the continent's manufacturing activity continued its decline during the first quarter.

Consumer durables demand continues to be muted but the company expects margin expansion in Europe in its industrial intermediates and infrastructure segment, Jeffrey Tate, Dow's chief financial officer, said on a call with analysts.

The Midland, Michigan-based company expects second-quarter sales of about $11 billion, up from the first quarter but below Wall Street estimates of $11.64 billion, according to LSEG data.

"After six quarters of negative earnings revisions, we have now reached a point in the cycle where Dow's market outlook has become marginally more constructive," said Vertical Research Partners analyst Kevin McCarthy.

"However, a relative dearth of prospective free-cash-flow remains a concern among some investors."

Shares of Dow were down 1.5% amid broader market declines.

Dow's net sales declined by 9% to $10.77 billion in the first quarter, hurt by a 10% fall in local prices.

Chemical firms had raised their prices in 2022 to tackle inflation after Russia's invasion of Ukraine tightened feedstock supplies.

However, an uptick in volumes and lower costs of feedstock such as natural gas helped the company top first-quarter profit estimates.

Dow said volumes rose 1%, supported by all regions except Europe, the Middle East, Africa and India.

"In the near-term, demand in key end-markets from packaging and mobility to energy applications are trending sequentially higher," Dow Chief Executive Jim Fitterling said.

The company reported operating earnings per share of 56 cents for the quarter ended March 31, compared with the average analyst estimate of 45 cents.

(Reporting by Sourasis Bose in Bengaluru; Editing by Maju Samuel)