DistriConsult - Mastering the art of distribution

For evidence that it is better to be lucky than smart, look no further than Dow Chemical. Its effort to metamorphose from a commodity to a speciality chemical producer nearly brought the venerable company to its knees a year ago when its Kuwaiti partner failed to come up with billions in promised cash for half of its basic plastics business. Meanwhile, Dow could not wriggle out of its top-of-the-market acquisition of Rohm & Haas inked the summer before, the high price and ironclad contract being the result of a bidding war.

While the addition of Rohm’s portfolio may yet prove to be the transformative event chief Andrew Liveris had hoped for, it was largely the maligned plastics businesses Dow wanted to spin off into the aborted joint venture that drove its impressive full-year results on Tuesday. Low feedstock costs stemming from a North American natural gas glut and rising oil prices in the second half of the year opened up an opportunity to export chemicals such as polyethylene to Asia, generating prodigious free cash flow in recent months.

But that is only half the story. If Mr Liveris stumbled as a dealmaker, he has shone as a crisis manager, even if aided by market forces beyond his control. He broke a longstanding taboo by snapping Dow’s 389-quarter-long streak of steady or rising dividends and raised billions through disposals with plenty more to come in 2010. Looking at Dow’s share price, up 160 per cent in a year, one could almost forget it faced a terrifying cash crunch last winter.

Dow continues to tout its “asset light” strategy as the way eventually to boost margins and shareholder returns. This poses a dilemma as plastics continue to generate much-needed cash and will not fetch as much as the Kuwaitis pledged in 2008. Deciding how long the good times will roll and when, or whether, to sell may require equal parts luck and brains.