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Fix euro crisis, broadsided U.S. industrials warn

Dow Chemical CEO Andrew Liveris says the global economy is being driven down by the recession in Europe.


The wide effects of Europe's economic crisis were on display on Thursday as several large U.S. manufacturers joined a growing chorus warning of slowing global growth.

"World economic activity saw marked deterioration throughout the second quarter, driven primarily by Europe's persistent recessionary conditions," said Andrew Liveris, chief executive of Dow Chemical. The plastics and chemical maker said second-quarter net income dropped 34 per cent due to weak performance in Europe and the effects of the stronger dollar.

United Technologies, which makes elevators and jet engines, cut its outlook for full-year sales and earnings "in light of the slowing global economy [and] a weaker euro" as it reported higher quarterly profit but lower sales.

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3M, the producer of Post-it notes and Scotch tape, also cited "challenging economic conditions and the strong U.S. dollar" in reporting a sales drop in the quarter.

The companies were the latest U.S. groups to warn about the impact of Europe's economic turmoil, slowdowns in emerging economies including China and the decelerating recovery in the U.S. on demand for a wide range of industrial and consumer products.

"Sustained uncertainty in the world economy continues to present a challenging operating environment, and this quarter was no exception. Weak demand due to a slowdown in global growth drove declining prices," Mr. Liveris of Dow said.

Dow's net income fell more than a third to $649-million (U.S.), or 55 cents a share, from $982-million, or 84 cents a share, a year ago. Wall Street analysts had expected 65 cents a share.

Revenues dropped 9.6 per cent to $14.51-billion, missing Wall Street estimates as European sales fell 10 per cent. Sales were down across Dow's divisions, with the exception of agricultural sciences, which was lifted by demand for pesticides and corn seed.

Dow's shares fell 3.7 per cent to $29.16 on Thursday morning in New York.

At United Technologies, chief executive Louis Chênevert said 2012 earnings were expected at $5.25 to $5.35 a share, down from a previous estimate of $5.30 to $5.50. The sales outlook was cut $1-billion to $58-billion.

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UTC's net income in the second quarter rose to $1.33-billion, or $1.62 a share, from $1.32-billion, or $1.41 a share last year, ahead of market expectations.

But sales declined 4.6 per cent to $13.8-billion as demand slipped for Otis elevator equipment and spare engine parts from its Pratt & Whitney division.

UTC said on Wednesday it was selling its Hamilton Sunstrand industrial products business to finance its expansion in aerospace through the purchase of aircraft parts maker Goodrich. The $16.5-billion Goodrich deal is expected to be approved by regulators on Thursday and close by the end of the week.

UTC shares rose 1.1 per cent to $73.44 on Thursday morning.

3M's net income rose slightly to $1.17-billion from $1.16-billion but sales slipped 2 per cent to $7.5-billion. The company maintained its full-year profit forecast of $6.35 to $6.50 a share, and shares rose 2.4 per cent to $90.91 in morning trade on Thursday.

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