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Dow Chemical Co (DOW)

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Tuesday 29 January, 2008

Dow Chemical Co

Final Results

FOR MORE INFORMATION:

Media Contact            Analyst Contact
Bob Plishka              Jeff Tate
The Dow Chemical Company The Dow Chemical Company
2030 Dow Center          2030 Dow Center
Midland, MI 48674        Midland, MI  48674
+1 989 638 2288          +1 989 636 1375

January 29, 2008

                Dow Reports Fourth Quarter and Full-Year Results
      Record Quarterly Sales Reflect Broad-based Price and Volume Increases
                    2007 Earnings Among the Company's Highest


                         Fourth Quarter 2007 Highlights

· Sales for the fourth quarter set a new Company record, rising 16 percent
  from the same period last year to $14.2 billion.

· Earnings for the quarter were $0.49 per share. Excluding certain items,
  earnings for the quarter were $0.84 per share. Earnings in the fourth quarter of
  2006 were $1.00 per share.  Excluding certain items, earnings for that quarter
  were $0.98 per share (see supplemental table at the end of the release for a
  description of these items).

· Compared with the same quarter of 2006, price increased 12 percent, with
  gains in all operating segments and geographic areas.

· Volume was up 4 percent compared with the fourth quarter of last year, with
  improvements in all operating segments and in every geographic area outside of
  North America. Asia Pacific recorded volume gains of 10 percent, and Europe
  6 percent.

· Purchased feedstock and energy costs climbed $1.7 billion compared with the
  fourth quarter of last year, the largest year-over-year increase in the
  Company's history.

· Equity earnings increased 21 percent year-over-year, totaling $294 million
  for the quarter.

                            2007 Full-Year Highlights

· 2007 sales increased 9 percent compared with 2006, setting a new record for
  the Company of $53.5 billion.

· Dow reported full-year earnings of $2.99 per share. Excluding certain
  items, earnings for the year were $3.76 per share. Earnings for 2006 were
  $3.82 per share. Excluding certain items, earnings for 2006 were $4.25 per share
  (see supplemental table at the end of the release for a description of these
  items).

· Equity earnings rose 17 percent compared with 2006, to $1.1 billion,
  exceeding $1 billion for the first time in the Company's history.

                                     Comment

Andrew N. Liveris, Dow's chairman and chief executive officer, stated:

"This was a good quarter … a quarter in which our entire organization responded
with speed and discipline to an unprecedented run-up in feedstock and energy
costs, raising price to mitigate much of the $1.7 billion year over year
increase. And our focus on price did not come at the expense of volume. Volume
gains were reported in all operating segments, a testament to our price/volume
management capabilities."

                          3 Months Ended    12 Months
                             Dec. 31          Ended
                                             Dec. 31
(In millions, except       2007     2006     2007     2006
for per share amounts)
Net Sales                  $14,227  $12,236  $53,513  $49,124
Net Income                 $   472  $   975  $ 2,887  $ 3,724
Earnings per Common Share  $  0.49  $  1.00  $  2.99  $  3.82
Earnings per Common Share  $  0.84  $  0.98  $  3.76  $  4.25
Excluding Certain Items


Review of Fourth Quarter Results

The Dow Chemical Company (NYSE: DOW) reported sales of $14.2 billion for the
fourth quarter of 2007, 16 percent higher than in the same period last year,
setting a new quarterly sales record.

Net income for the quarter was $472 million, reflecting the impact of net after-
tax charges of $334 million related to restructuring activities and
purchased in-process research and development related to recent acquisitions,
partially offset by a reduction in the provision for income taxes related to a
change in the legal ownership structure of EQUATE. This compares to net income
of $975 million in the fourth quarter of 2006, which included a net gain of
$21 million for certain items (see supplemental table at the end of the release
for a description of these items). Dow reported earnings for the current
quarter of $0.49 per share, including a $0.35 per share charge for the items
referenced above.  This compares with earnings in the fourth quarter of 2006 of
$1.00 per share, including a net benefit of $0.02 per share for the items
referenced above.

Year over year, volume was up 4 percent, with all operating segments showing
increases. Stronger demand in Europe, Asia Pacific, Latin America and India,
Middle East and Africa ("IMEA") more than offset continued softness in North
America. Price was 12 percent higher than the fourth quarter of 2006, with
increases in all operating segments. These price gains largely offset
significant increases in purchased feedstock and energy costs, which were
31 percent higher than the same period last year.

Selling, Administrative and Research and Development ("SARD") expenses increased
11 percent year over year, including the addition of SARD expenses in recently
acquired Performance businesses. The increase also reflects a disciplined
investment strategy to build markets, expand product offerings, and establish
brands in several of Dow's high value, market-facing businesses.

Equity earnings were $294 million, up 21 percent year over year including record
quarterly contributions from EQUATE, MEGlobal and Compañía Mega.

"This was a good quarter … a quarter in which our entire organization responded
with speed and discipline to an unprecedented run-up in feedstock and energy
costs, raising price to mitigate much of the $1.7 billion year over year
increase. And our focus on price did not come at the expense of volume," said
Andrew N. Liveris, Dow's chairman and chief executive officer.

"Volume gains were reported in all operating segments, a testament to our
price/volume management capabilities. Higher equity earnings, including strong
contributions from companies with advantaged feedstocks, underscored the value
of joint ventures in our overall strategy. With two-thirds of our sales outside
of the United States, we were well placed to capture growth opportunities
around the world."

Performance Plastics

In the Performance Plastics segment, fourth quarter sales of $3.97 billion
represented a 12 percent increase over the same period last year. Price and
volume both increased 6 percent, with gains in every geographic area outside
North America. Polyurethanes posted volume gains reflecting recent acquisitions
in Europe and strong sales in Asia Pacific. Dow Epoxy reported strong demand
globally for industrial coatings, but saw lower demand in North America for
architectural coatings used in housing, and building and construction
applications. Dow Automotive showed price and volume gains globally, driven by
growth in foam applications as manufacturers responded to consumer demand for
thicker and firmer seats. The Specialty Plastics and Elastomers business posted
increases in price and volume, led by growth in Asia Pacific for polymers used
in information technology equipment. Demand for telecommunications fiber optic
cables in the Wire and Cable business increased as well. Fourth quarter EBIT(1)
for the Performance Plastics segment was $158 million, including charges of
$184 million for restructuring.  This compares with EBIT of $347 million in the
fourth quarter of 2006, which included a charge of $85 million related to a
loss contingency for a fine imposed by the European Commission associated with
synthetic rubber industry matters.

Performance Chemicals

Sales in Performance Chemicals rose to $2.13 billion for the fourth quarter of
2007, an increase of  6 percent compared with $2.00 billion posted in the same
period last year. Globally, price was up    4 percent while volume increased
2 percent. Price was up in all geographic areas and across all businesses.
Volume was up in Europe, Latin America and IMEA. Designed Polymers showed price
and volume gains globally, due in part to gains in the food, pharmaceutical and
paint industries served by Dow Wolff Cellulosics. Demand for biocides used in
oilfield applications was up as well, as oil extraction activities in North
America and Latin America increased. In Specialty Chemicals, industry
conditions for acrylic monomers remained very challenging, due to a rapid
increase in propylene costs and lower demand, as customers drew down inventory
levels. While earnings at Dow Corning remained strong, an extended outage at
OPTIMAL unfavorably impacted equity earnings for the segment. Performance
Chemicals reported EBIT of $124 million for the fourth quarter, which included
restructuring charges of $85 million and a $2 million favorable adjustment to
purchased in-process research and development.  In the same period last year,
EBIT was $293 million, which included a restructuring charge of $1 million.

Agricultural Sciences

The Agricultural Sciences segment posted record fourth quarter sales of
$864 million, 6 percent higher than the same period in 2006, reflecting both
organic growth and growth from acquisitions.  Volume was up 2 percent and price
up 4 percent, with price gains in all geographic areas and volume increases in
Latin America, Asia Pacific and Europe. Seed sales increased substantially from
the same period last year due to strong farm commodity prices, increasing
demand for biofuels, higher 2007 farm incomes and grower confidence. Herbicide
sales in Latin America grew significantly compared with the same period last
year, while new products penoxsulam and aminopyralid continued to ramp-up.
Integration of new acquisitions Agromen, MTI and Duo Maize are progressing
well. The business continued to make strategic investments to accelerate new
product development and commercialization. Fourth quarter EBIT for Agricultural
Sciences was a loss of $38 million, which included restructuring charges of
$77 million.  This compares with EBIT of $38 million in the fourth quarter of
2006.

Basic Plastics

Basic Plastics sales rose 18 percent in the fourth quarter to $3.49 billion from
$2.94 billion in the same period last year. Price increased 17 percent and
volume increased 1 percent. Price was up in all geographic areas and across all
polymer families. Polyethylene and Polypropylene posted double-digit price
gains in Europe, IMEA, Latin America and North America. Volume in the segment
was up in Asia Pacific, Europe and Latin America, more than offsetting a
decline in North America.  Volume gains were achieved despite the sale of
Polyethylene and Polypropylene assets in South Africa and the shut down of
Polystyrene and Polyethylene capacity in Sarnia, Canada, in 2006.  Polyethylene
reported growth in specialty packaging applications, while underlying demand
for Polypropylene was down due to slowdowns in the housing and automotive
sectors in North America. Polystyrene saw margin expansion in the quarter due
to a moderation in benzene costs.  Disciplined price and volume management
across the segment helped to overcome substantial increases in feedstock and
energy costs. Equity earnings were down $11 million year over year due to lower
earnings at Equipolymers and Siam Polyethylene, which offset very strong
results at EQUATE.  EBIT for the Basic Plastics segment was $394 million,
including restructuring charges of $88 million.  In the same period last year,
EBIT was $461 million.

Basic Chemicals

Basic Chemicals sales for the quarter increased 24 percent year over year to
$1.63 billion from $1.32 billion in 2006. The segment recorded a 5 percent gain
in volume and a 19 percent gain in price. Double-digit price increases were
realized in Europe, Latin America and North America driven by supporting
industry fundamentals for ethylene glycol used in the manufacture of
polyethylene terephthalate and polyester, and for caustic soda in the pulp and
paper and alumina industries. In the Chlor-Vinyl business, weak demand for PVC
in North America, combined with higher raw material costs, pressured margins
for vinyl chloride monomer. The Ethylene Oxide/ Ethylene Glycol business had
double-digit price increases as planned and unplanned industry outages drove
price to record levels. Equity earnings in the Basic Chemicals segment
increased to $135 million in the fourth quarter of 2007, up from $78 million in
the year ago period. The increase reflects strong results at MEGlobal and
EQUATE, which more than offset a decrease in equity earnings from OPTIMAL. The
segment reported fourth quarter EBIT of $309 million, which included a
restructuring charge of $7 million. This compares with EBIT of $194 million in
the fourth quarter of 2006, which included a restructuring charge of
$19 million.

Review of Results for 2007

Dow reported record annual sales of $53.5 billion in 2007, 9 percent higher than
last year's record of $49.1 billion. Price rose 7 percent, with increases in
every operating segment and in all geographic areas. Volume was up 2 percent,
with gains in all segments except Basic Chemicals, and in all geographic areas
except North America and IMEA. The gains in price and volume helped to offset
an increase for the year of $2.5 billion in purchased feedstock and energy
costs.

Net income for the year was $2.9 billion, which included certain items with a
net unfavorable impact of $735 million. This compares with net income for 2006
of $3.7 billion, which included a net unfavorable impact of $417 million from
certain items during that year. Earnings per share were $2.99 in 2007 and $3.82
in 2006. Excluding certain items in both periods, earnings per share were $3.76
in 2007, down from $4.25 in 2006 (see supplemental table at the end of the
release for a description of certain items).

The Company also posted record equity earnings of $1.1 billion, with strong
contributions from Dow Corning, EQUATE, MEGlobal, and OPTIMAL.

Commenting on the Company's outlook, Liveris said: "In 2007, we continued to
face significant headwinds in purchased feedstock and energy costs, which
increased to $24.6 billion for the full year … three times what we paid in
2002. However, despite these headwinds, 2007 was a strong year for the Company,
as we recorded our third highest earnings ever.* For 2008, there is some
uncertainty in the economic outlook for the United States. With two-thirds of
our sales outside the United States, our global footprint will allow us to
continue to capture growth in key regions of the world, such as Brazil, Eastern
Europe/Russia, India, and China. In addition, as we continue to implement our
strategy, our focus will be on financial discipline and price/volume management
which, coupled with the strong performance of our joint ventures, is expected
to bring another solid year of earnings for Dow."

· Dow will host a live Webcast of its fourth quarter earnings conference call
  with investors to discuss its results, business outlook and other matters today
  at 10:00 a.m. ET on www.dow.com.

(1)  Earnings before interest, income taxes and minority interests ("EBIT"). A
reconciliation of EBIT to "Net Income Available for Common Stockholders" is
provided following the Operating Segments table.

*Excluding certain items. See supplemental table at the end of the release for a
description of these items.

About Dow

With annual sales of $54 billion and 46,000 employees worldwide, Dow is a
diversified chemical company that combines the power of science and technology
with the "Human Element" to constantly improve what is essential to human
progress. The Company delivers a broad range of products and services to
customers in around 160 countries, connecting chemistry and innovation with the
principles of sustainability to help provide everything from fresh water, food
and pharmaceuticals to paints, packaging and personal care products. References
to "Dow" or the "Company" mean The Dow Chemical Company and its consolidated
subsidiaries unless otherwise expressly noted. More information about Dow can
be found at www.dow.com

Use of non-GAAP measures: Dow's management believes that measures of income
excluding certain items ("non-GAAP" measures) provide relevant and meaningful
information to investors about the ongoing operating results of the Company.
Such measurements are not recognized in accordance with accounting principles
generally accepted in the United States of America ("GAAP") and should not be
viewed as an alternative to GAAP measures of performance. Reconciliations of non-
GAAP measures to GAAP measures are provided in the Supplemental Information
tables.

Note: The forward-looking statements contained in this document involve risks and
uncertainties that may affect the Company's operations, markets, products,
services, prices and other factors as discussed in filings with the Securities
and Exchange Commission. These risks and uncertainties include, but are not
limited to, economic, competitive, legal, governmental and technological
factors. Accordingly, there is no assurance that the Company's expectations will
be realized. The Company assumes no obligation to provide revisions to any
forward-looking statements should circumstances change, except as otherwise
required by securities and other applicable laws.

Supplemental Information
Description of Certain Items Affecting Results

Fourth Quarters of 2007 and 2006
In December 2007, the Company's Board of Directors approved a restructuring plan
that includes the shut down of a number of assets and organizational changes
within targeted support functions to enhance the efficiency and cost
effectiveness of the Company's global operations. As a result, the Company
recorded restructuring charges totaling $590 million in the fourth quarter of
2007.  The charges included asset write-downs and write-offs of $422 million,
costs associated with exit or disposal activities of $82 million and severance
costs of $86 million. In addition, in the fourth quarter of 2007 the Company
recorded an $8 million favorable adjustment to restructuring charges originally
recorded in the third quarter of 2006. The net impact of the charges is shown as
"Restructuring charges" in the consolidated statements of income. Also in the
fourth quarter of 2007, the Company recorded a favorable $2 million adjustment
to purchased in-process R&D, originally recorded in the third quarter of 2007
related to the acquisition of Wolff Walsrode. In December 2007, the Company
changed the legal ownership structure of its 42.5% interest in EQUATE
Petrochemical Company K.S.C. As a consequence, the Company recorded a
$113 million reduction in the provision for income taxes in the fourth quarter
of 2007.

In the fourth quarter of 2006, earnings were favorably impacted by a reduction
in Union Carbide's asbestos liability of $177 million. Earnings in the fourth
quarter of 2006 were unfavorably impacted by the recognition of a loss
contingency of $85 million for a fine imposed by the European Commission related
to synthetic rubber industry matters (included in "Sundry income - net"), and an
adjustment of $12 million to the third quarter 2006 "Restructuring charges"
described below.

A table showing the impact of these items by operating segment is included with
the Operating Segments tables.

The following table summarizes the impact of certain items recorded in the three-
month periods ended December 31, 2007 and 2006, and previously described in this
section:

Certain Items             Pretax        Impact on      Impact on
Impacting Results       Impact (1)      Net Income      EPS (3)
                                           (2)
                        Three Months   Three Months   Three Months
                           Ended          Ended          Ended
In millions,            Dec.   Dec.     Dec.   Dec.     Dec.   Dec.
except per share        31,    31,      31,    31,      31,    31,
amounts                 2007   2006     2007   2006     2007   2006
Restructuring charges   $(582) $(12)    $(436) $ (7)   $(0.46) $(0.01)
Purchased in-process        2     -       (11)    -     (0.01)    -
research and
development charges
Asbestos-related            -   177        -    112       -      0.12
credit
Loss contingency            -   (85)       -    (84)      -     (0.09)
related to EC fine
Change in EQUATE legal      -    -        113    -       0.12     -
ownership structure
Total                   $(580) $ 80     $(334) $ 21   $ (0.35)  $0.02

(1)  Impact on "Income before Income Taxes and Minority Interests"
(2)  Impact on "Net Income Available for Common Stockholders"
(3)  Impact on "Earnings per common share - diluted"


Years ended December 31, 2007 and 2006
In addition to the items described above for the fourth quarter of 2007,
earnings for 2007 were unfavorably impacted by pretax charges totaling
$59 million in the third quarter for purchased in-process research and
development related to the acquisition of assets of Agromen, Exelixis, Duo Maize
and Maize Technologies International and the acquisition of Wolff Walsrode, all
in 2007. Earnings in 2007 were further impacted by a charge of $362 million
against the provision for income taxes related to a change in German tax law
enacted in August 2007, which reduced the German income tax rate, resulting in a
reduction in the value of the Company's net deferred tax assets in Germany.

In addition to the items described above for the fourth quarter of 2006,
earnings for 2006 included pretax restructuring charges totaling $579 million in
the third quarter associated with plans to shut down a number of assets around
the world as part of the Company's drive to improve the competitiveness of its
global operations. The charges included asset write-downs and write-offs of
$327 million, costs associated with exit or disposal activities of $171 million
and severance costs of $81 million. The impact of these charges is shown as
"Restructuring charges" and is reflected in the results of various segments.

A table showing the impact of these items by operating segment is included with
the Operating Segments tables.

The following table summarizes the impact of certain items recorded in the
twelve-month periods ended December 31, 2007 and 2006, and previously described
in this section:

Certain Items Impacting    Pretax        Impact on       Impact on
Results                  Impact (1)     Net Income        EPS (3)
                                            (2)
                           Twelve         Twelve       Twelve Months
                        Months Ended   Months Ended        Ended
In millions, except per Dec.   Dec.    Dec.   Dec.     Dec.   Dec.
share amounts           31,    31,     31,    31,      31,    31,
                        2007   2006    2007   2006     2007   2006
Restructuring charges   $(578) $(591)  $(436) $(445)   $(0.46) $(0.46)

Purchased in-process      (57)   -       (50)    -      (0.05)    -
research and
development charges
Asbestos-related credit    -     177      -     112      -       0.12
Loss contingency           -     (85)     -     (84)     -      (0.09)
related to EC fine
German tax law change      -     -      (362)    -      (0.38)    -
Change in EQUATE legal     -     -       113     -       0.12     -
ownership structure
Total                   $(635) $(499)  $(735) $(417)   $(0.77) $(0.43)

(1)  Impact on "Income before Income Taxes and Minority Interests"
(2)  Impact on "Net Income Available for Common Stockholders"
(3)  Impact on "Earnings per common share - diluted"


Financial Statements (Note A)

                                   The Dow Chemical Company and
                                           Subsidiaries
                                  Consolidated Statements
                                         of Income
                                                   Three        Twelve
                                               Months  Ended  Months  Ended
                                                Dec.    Dec.    Dec.    Dec.
                                                 31,     31,    31,     31,
In millions, except per share                   2007    2006    2007    2006
amounts      (Unaudited)
Net Sales                                      $14,227  $12,236  $53,513  $49,124
Cost of sales                                   12,533   10,499   46,400   41,526
Research and development expenses                  354      308    1,305    1,164
Selling, general and
 administrative expenses                           493      453    1,864    1,663
 Amortization of intangibles                        21       13       72       50
 Restructuring charges (Note B)                    582       12      578      591
 Purchased in-process research and
 development charges (credit) (Note C)             (2)        -       57        -
 Asbestos-related credit (Note D)                    -      177        -      177
 Equity in earnings of
 nonconsolidated affiliates                        294      242    1,122      959
 Sundry income - net                                62       50      324      137
 Interest income                                    29       57      130      185
 Interest expense and
 amortization of debt discount                     161      154      584      616
Income before Income Taxes and
Minority Interests                                 470    1,323    4,229    4,972
 Provision (Credit) for income taxes (Note E)      (27)     324    1,244    1,155
 Minority interests' share in income                25       24       98       93
Net Income Available for Common Stockholders      $472     $975   $2,887   $3,724

Share Data
 Earnings per common share - basic               $0.50    $1.02    $3.03    $3.87
 Earnings per common share - diluted             $0.49    $1.00    $2.99    $3.82
 Common stock dividends declared per
 share of common stock                           $0.42   $0.375   $1.635    $1.50
 Weighted-average common shares                  945.4    958.5    953.1    962.3
 outstanding - basic
 Weighted-average common shares                  957.5    971.1    965.6    974.4
 outstanding - diluted
Depreciation                                     $ 520   $  486   $1,959   $1,904
Capital Expenditures                             $ 764  $   657   $2,075   $1,775

Notes to the Consolidated
Financial Statements:

Note A: The unaudited consolidated financial statements reflect all
adjustments which, in the opinion of management, are considered
necessary for a fair presentation of the results for the
periods covered.  These statements should be read in conjunction with the
audited consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2006.  Except as otherwise indicated by
the context, the terms "Company" and "Dow" as used herein mean
The Dow Chemical Company and its consolidated subsidiaries.

Note B: In August 2006, Dow's Board of Directors approved a plan to shut
down a number of assets around the world as the Company
continues its drive to improve the competitiveness of its
global operations. As a result, the Company recorded restructuring
charges totaling $591 million in 2006. The charges included asset
write-downs and write-offs, severance costs, contract termination fees,
costs for asbestos abatement and environmental remediation,
and pension curtailment costs and termination benefits associated
with Dow's defined benefit plans.  In the fourth quarter of
2007, the Company recorded an $8 million favorable adjustment to the
2006 restructuring charges.

In December 2007, Dow's Board of Directors approved a
restructuring plan that includes the shut down of a number of assets and
organizational changes within targeted support functions to
enhance the efficiency and cost effectiveness of the Company's global
operations. As a result, the Company recorded restructuring
charges totaling $590 million in the fourth quarter of 2007.  The charges
included asset write-downs and write-offs, severance costs,
contract termination fees, and costs for environmental remediation.

Note C: During the third quarter of 2007, pretax charges totaling $59
million were recorded for estimated values assigned to purchased
in-process research and development. $50 million was related
to recent acquisitions within the Agricultural Sciences segment;
$9 million was related to the acquisition of Wolff Walsrode
on June 30, 2007.  In the fourth quarter of 2007, the Company recorded
a $2 million adjustment to the charges.

Note D: In December 2006, Union Carbide reduced its asbestos-related
liability $177 million based on a new study completed in the fourth
quarter by Analysis, Research & Planning Corporation
using historical claims data for Union Carbide and Amchem.

Note E: In August 2007, a change in German tax law, which included a
reduction in the German income tax rate, was enacted. As a
result, the Company adjusted the value of its net deferred
tax assets in Germany and recorded a charge of $362 million against
the provision for income taxes in the third quarter of 2007.

In December 2007, the Company changed the legal ownership
structure of EQUATE Petrochemical Company K.S.C., a 42.5 percent
joint venture, resulting in a $113 reduction of the
provision for income taxes in the fourth quarter of 2007.

                                   The Dow Chemical Company and Subsidiaries
                                    Consolidated              Dec.   Dec.
                                   Balance Sheets              31,    31,
In millions      (Unaudited)                                  2007   2006
Assets
Current Assets
 Cash and cash equivalents                                   $1,736  $2,757
 Marketable securities and
 interest-bearing deposits                                        1     153
 Accounts and notes receivable:
      Trade (net of allowance for doubtful
 receivables - 2007: $118; 2006: $122)                        5,944   4,988
      Other                                                   3,740   3,060
 Inventories                                                  6,885   6,058
 Deferred income tax assets - current                           348     193
 Total current assets                                        18,654  17,209

Investments
 Investment in nonconsolidated affiliates                     3,089   2,735
 Other investments                                            2,489   2,143
 Noncurrent receivables                                         385     288
 Total investments                                            5,963   5,166
Property
 Property                                                    47,708  44,381
 Less accumulated depreciation                               33,320  30,659
 Net property                                                14,388  13,722

Other Assets
 Goodwill                                                     3,572   3,242
 Other intangible assets (net of accumulated
 amortization - 2007: $721; 2006: $620)                         781     457
 Deferred income tax assets - noncurrent                      2,126   4,006
 Asbestos-related insurance receivables - noncurrent            696     725
 Deferred charges and other assets                            2,621   1,054
 Total other assets                                           9,796   9,484
Total Assets                                                $48,801 $45,581


Liabilities and Stockholders' Equity
Current Liabilities
 Notes payable                                              $ 1,548 $   219
 Long-term debt due within one year                             586   1,291
 Accounts payable:
      Trade                                                   4,555   3,825
      Other                                                   1,981   1,849
 Income taxes payable                                           728     569
 Deferred income tax liabilities - current                      117     251
 Dividends payable                                              418     382
 Accrued and other current liabilities                        2,512   2,215
 Total current liabilities                                   12,445  10,601

Long-Term Debt                                                7,581   8,036
Other Noncurrent Liabilities
 Deferred income tax liabilities - noncurrent                   854     999
 Pension and other postretirement benefits-noncurrent         3,014   3,094
 Asbestos-related liabilities - noncurrent                    1,001   1,079
 Other noncurrent obligations                                 3,103   3,342
 Total other noncurrent liabilities                           7,972   8,514
Minority Interest in Subsidiaries                               414     365
Preferred Securities of Subsidiaries                          1,000   1,000
Stockholders' Equity
 Common stock                                                 2,453   2,453
 Additional paid-in capital                                     902     830
 Retained earnings                                           18,004  16,987
 Accumulated other comprehensive loss                          (170) (2,235)
 Treasury stock at cost                                      (1,800)   (970)
 Net stockholders' equity                                    19,389  17,065
Total Liabilities and Stockholders' Equity                  $48,801 $45,581

See Notes to the Consolidated Financial Statements.

                    The Dow Chemical Company and Subsidiaries
                                Operating Segments

                                               Three Months     Twelve
                                                  Ended       Months Ended
                                                 Dec.    Dec.    Dec.    Dec.
                                                 31,     31,     31,     31,
In millions      (Unaudited)                     2007     2006   2007    2006
Sales by operating segment
 Performance Plastics                          $3,968    $3,546  $15,116 $13,944
 Performance Chemicals                          2,126     1,999    8,351   7,867
 Agricultural Sciences                            864       814    3,779   3,399
 Basic Plastics                                 3,488     2,944   12,878  11,833
 Basic Chemicals                                1,630     1,315    5,863   5,560
 Hydrocarbons and Energy                        2,042     1,562    7,105   6,205
 Unallocated and Other                            109        56      421     316
 Total                                        $14,227   $12,236  $53,513 $49,124

EBIT(1) by operating segment
 Performance Plastics                         $   158   $   347  $ 1,390 $ 1,629
 Performance Chemicals                            124       293      949   1,242
 Agricultural Sciences                            (38)       38      467     415
 Basic Plastics                                   394       461    2,006   2,022
 Basic Chemicals                                  309       194      813     689
 Hydrocarbons and Energy                          (44)        -      (45)      -
 Unallocated and Other                           (301)       87     (897)   (594)
     Total                                    $   602   $ 1,420  $ 4,683 $ 5,403

Certain items (reducing) increasing
EBIT by operating segment (2)
 Performance Plastics                         $  (184)    $( 85) $  (180) $ (327)
 Performance Chemicals                            (83)       (1)     (92)    (12)
 Agricultural Sciences                            (77)        -     (127)      -
 Basic Plastics                                   (88)        -      (88)   ( 16)
 Basic Chemicals                                   (7)      (19)      (7)   (184)
 Hydrocarbons and Energy                          (44)        -      (44)      -
 Unallocated and Other                            (97)      185      (97)     40
     Total                                   $   (580)    $  80  $  (635) $ (499)

Equity in earnings of nonconsolidated affiliates by
operating segment (included in EBIT)
 Performance Plastics                        $     13     $   8  $    68  $   89
 Performance Chemicals                             83        93      382     368
 Agricultural Sciences                              3         -        4       1
 Basic Plastics                                    35        46      176     173
 Basic Chemicals                                  135        78      405     241
 Hydrocarbons and Energy                           25        17       87      85
 Unallocated and Other                              -         -        -       2
     Total                                   $    294    $  242 $  1,122  $  959

(The Company uses EBIT (which Dow defines as earnings before interest,
1income taxes and minority interests) as its measure of profit/loss for
)segment reporting purposes.  EBIT includes all operating items related
 to the businesses and excludes items that principally apply to the
 Company as a whole.  A reconciliation of EBIT to "Net Income Available
 for Common Stockholders" is provided below:

                                        Three Months     Twelve
                                           Ended      Months Ended
                                          Dec.   Dec.    Dec.    Dec.
                                           31,   31,     31,     31,
                                          2007   2006    2007    2006
 EBIT                                     $602   $1,420  $4,683  $5,403
 + Interest income                          29       57     130     185
 -  Interest expense and
 amortization of debt discount             161      154     584     616
 -  Provision for income taxes             (27)     324   1,244   1,155
 -  Minority interests' share
 in income                                  25       24      98      93
 Net Income Available for
 Common Stockholders                      $472   $  975  $2,887  $3,724

(2)See Supplemental Information for a description of certain
items affecting results in 2007 and 2006.


                 The Dow Chemical Company and Subsidiaries
                Sales Volume and Price by Operating Segment

                                 Three Months Ended      Twelve Months Ends
                                   Dec. 31, 2007             Dec. 31,2007

Percentage change from prior year      Volume  Price Total  Volume  Price  Total
Operating segments
 Performance Plastics                      6%     6%   12%      2%     6%     8%
 Performance Chemicals                     2%     4%    6%      2%     4%     6%
 Agricultural Sciences                     2%     4%    6%      9%     2%    11%
 Basic Plastics                            1%    17%   18%      1%     8%     9%
 Basic Chemicals                           5%    19%   24%    (1)%     6%     5%
 Hydrocarbons and Energy                   6%    25%   31%      3%    12%    15%
     Total                                 4%    12%   16%      2%     7%     9%


                           Sales by Geographic Area
                                               Three Months     Twelve
                                                  Ended      Months Ended
                                                Dec.    Dec.    Dec.    Dec.
                                                 31,     31,     31,     31,
In millions      (Unaudited)                    2007    2006    2007    2006
Sales by geographic area(1)
 North America                                $5,224  $4,782  $20,498  $20,431
 Europe                                        5,267   4,240   19,614   16,776
 Asia Pacific                                  1,668   1,464    6,186    5,364
 Latin America                                 1,599   1,372    5,745    5,058
 India, Middle East and Africa                   469     378    1,470    1,495
 Total                                        14,227  12,236   53,513   49,124


(1)Beginning with the earnings release for the second quarter of 2007, the
 Company is providing a more detailed breakdown of its sales by
 geographic area. Prior to the change, the geographic breakdown included
 sales to customers in the United States, Europe (which included the
 Middle East and Africa) and Rest of World (which included the Indian
 subcontinent). With the new breakdown, sales to customers in the Indian
 subcontinent, the Middle East and Africa are reported together on a
 separate line, and sales to customers in Europe for prior periods have
 been adjusted to reflect the realignment. North America includes sales
 to customers in the United States and Canada.


                 Sales Volume and Price by Geographic Area
                                 Three Months Ended      Twelve Months
                                                             Ended
                                   Dec. 31, 2007            Dec. 31, 2007
Percentage change from prior year      Volume  Price Total  Volume  Price  Total
Geographic areas
 North America                           (2)%    11%    9%    (2)%     2%     0%
 Europe                                    6%    18%   24%      5%    12%    17%
 Asia Pacific                             10%     4%   14%      8%     7%    15%
 Latin America                             5%    12%   17%      7%     7%    14%
 India, Middle East and Africa            18%     6%   24%    (9)%     7%   (2)%
     Total                                 4%    12%   16%      2%     7%     9%