(Adds Dow's response to lawsuit, updates stock price)

 
   DOW JONES NEWSWIRES 
 

Dow Chemical Co. (DOW) swung to a fourth-quarter net loss, taking restructuring charges as its manufacturing customers delayed purchases amid a worsening economic decline.

The chemical giant also filed its response to Rohm & Haas Co.'s (ROH) breach-of-contract lawsuit that is seeking to force Dow to complete its proposed $15.3 billion acquisition of the specialty-chemicals maker. Dow denied all conditions to its obligation to close have been satisfied and that the unforeseeable economic and credit crisis has "made it impossible" to seal the deal without "jeopardizing the very existence of both companies."

It also denied that it had breached the agreement, "intentionally or otherwise" or that Rohm had suffered a "material adverse effect" in its business.

Dow shares were off 4.1% at $10.60 in premarket trading as the company's fourth-quarter results were well below analysts' downbeat expectations. The shares have lost nearly half their value the past month and a half.

The chemical industry has been slipping as the spreading economic malaise has hurt demand for the basic chemicals and plastics used in most industrial and consumer goods, even in once hot markets like China.

"As we enter 2009, we are assuming that the late-2008 demand levels will continue for several quarters and possibly beyond," said Chairman and Chief Executive Andrew Liveris on Tuesday. He said since many of its customers are running on low inventory, once a recovery begins, perhaps in the second half of the year, that "recovery could be rapid."

Meanwhile, Dow reported a fourth-quarter net loss of $1.55 billion, or $1.68 a share, compared with year-earlier net income of $472 million, or 49 cents a share. The latest quarter included $1.02 a share in charges from its restructuring and goodwill write-downs, among other items.

Revenue fell 23% to $10.9 billion as volume slid 17%, reflecting lower demand in all its operating segments and geographic markets.

Analysts polled by Thomson Reuters expected earnings of 7 cents a share on $13.37 billion in revenue.

Chemical makers have been trying to rein in costs by slashing production and laying off workers, with some filing for bankruptcy. Dow has announced plans to cut 5,000 full-time jobs, or 11% or its work force, close 20 plants and sell several businesses. Liveris also had suggested that Dow's dividend may be at risk.

"We are planning for a global recession throughout 2009 and will continue to take actions on managing our cash and controlling our costs with the same intensity that we demonstrated in the fourth quarter," he said Tuesday.

The industry has been struggling amid weak sales for commodity chemicals, as well as high energy and other financing costs. Dow has pursued Rohm as part of its plan to expand into the higher-margin specialty chemicals business.

-By Tess Stynes, Dow Jones Newswires; 201-938-2473; tess.stynes@dowjones.com

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