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Dow Chemical's profit handily beats estimates as costs fall

[July 28, 2016] (Reuters) - Dow Chemical Co, the No.1 U.S. chemical maker by sales, reported a better-than-expected quarterly profit as cost cuts helped boost margins.

Dow, which is merging with DuPont <DD.N>, plans to slash costs by $300 million this year. Of that, $90 million was realized in the second quarter.

Dow's operating margin expanded by 160 basis points to 21 percent on an earnings before interest, taxes, depreciation and amortization (EBITDA) basis.

Dow and DuPont have been clearing the decks ahead of the expected closure of their merger this year.

The deal, valued at $130 billion when it was announced in December, is the first step toward breaking the businesses into three separate companies focused on agriculture, material science and specialty products.

DuPont also reported a higher-than-expected quarterly profit on Tuesday, and forecast a 50 percent jump in third-quarter operating earnings as it steps up cost cutting.

Dow's strategy to focus on high-margin products by shedding volatile commodity businesses such as its century-old chlorine business are also paying off.

The company's net income attributable to shareholders nearly tripled to $3.12 billion, or $2.61 per share, in the quarter ended June 30.

Excluding items, it earned 95 cents per share, much higher than the average analyst estimate of 85 cents, according to Thomson Reuters I/B/E/S.

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The Dow Chemical logo is displayed on a board above the floor of the New York Stock Exchange shortly after the opening bell in New York, December 22, 2015. REUTERS/Lucas Jackson

These items included a $2.20 per share gain related to the Dow Corning deal.

However, sales fell 7.4 percent to $11.95 billion.

Dow said in December it would assume full control of Dow Corning, its venture with Gorilla glass maker Corning Inc <GLW.N>.

(Reporting by Swetha Gopinath in Bengaluru; Editing by Sriraj Kalluvila and Kirti Pandey)

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