Director of Equity Financing, FINAM Investment Company, Moscow
The Dow Chemical Company (NYSE:DOW) is expanding its presence in Russia. The company has maintained operations in Russia since 1974 and according to some reports, it currently employs about 90 people supporting its activities in this country. While starting a new construction materials business in Russia is somewhat risky, Dow Chemical's average annual growth rate (about 30%) makes it worth a go.
In January, Dow Chemical started building its first production facility in Russia. The plant, located at Kryukovo, outside Moscow, will produce polystyrene insulation boards for Dow Building Solutions, one of Dow's market-facing business units (this was nicely described in the Around Dow corporate newsletter).
During this time last year, Dow formed a joint venture - Dow Izolan - in the polyurethane systems business. The JV will produce customer-tailored polyurethane products when the big plant opens in Vladimir Oblast, 170 kilometers (approximately 105 miles) north of Moscow. The company cites Kostas Katsoglou, business president, Dow Building Solutions, "Our strategic aim is to establish Dow as an important and integral player in the building industry in Russia. This strategy is built upon our global expertise combined with a strong brand and in-depth product and application knowledge." Construction is booming in Russia and Dow's products fit in nicely with this picture.
Dow is evaluating further investment opportunities and potential partnerships with key domestic energy producers. In particular in 2006 Andrew Liveris, Dow's President & CEO, met with top Gazprom (LON:GAZP) officials. The company noted in its 2006 10-K statement that both Gazprom and Dow are working "jointly on energy-related projects both inside Russia and elsewhere in Europe." Now it seems that these efforts have intensified and the next project would be jointly constructing a petrochemical plant in Russia. Gazprom has been indicated as a possible partner for building the plant. Dow representatives note that Russia currently produces less ethylene than any of Dow Chemical's plants around the world.
From the investor's point of view, some experts note that fact that Dow historically has taken advantage of "commodity cycles" and that Dow Chemical earnings have often plummeted at the end of these cycles. Thus, there is a good reason to believe that Dow will continue implementing its global strategy -- featuring joint ventures all over the world, in Saudi Arabia, Brazil and now Russia.
You can read the original post at Vladimir Kuznetsov's blog, Equity Financing in Russia. The views expressed in this post and on his blog are the personal opinions of Vladimir Kuznetsov, and are reproduced here solely for educational purposes. To read more Russia Blog posts about Russian capital markets, click on the finance section or type www.russiablog.org/finance in your web browser.