Dow: As Oil Fluctuates, What Will Be in Q3? - Todd Sullivan

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Dow: As Oil Fluctuates, What Will Be in Q3?
Aug 13, 2008 07:22 AM UTC

Todd Sullivan

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DOW		08/13/08	-3.53%	09/04/08

Via Long Investment Ideas from Seeking Alpha:

Let's look at the information gleamed from Dow chemical's (DOW) Q2's release and call and do a little projection for Q3.

In the call the following exchange was had:
Jeffrey Zekauskas - JPMorgan

Good morning. On average shouldn't your raw material costs be down sequentially in the third quarter? Natural gas has gone from -- I don't know -- $12 to $9 and oil has come from $135 to $125?

Geoffery E. Merszei - Executive Vice President and Chief Financial Officer; Member of the Board of Directors

Yeah Jeff, this is Geoffrey here. Just to take oil, Brent crude average price as of this morning, let's say, $124, $125. At today's level it is still higher than our average cost during the first quarter. The average cost in the first quarter was around $122. I'm using crude as a reference point. And we are already towards the end of the first month of one-third of the quarter. So if you use an average rate for the third quarter of let's say around $125, $126 then you are talking about over $0.5 billion additional cost for the company to absorb.

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