The Dow Chemical Company reported sales of $11.5 billion for the second quarter of 2005, a 16 percent increase compared with the same period in 2004. Net income rose 85 percent to $1,265 million, and earnings per share were $1.30, an increase of 81 percent compared with $0.72 per share in the second quarter last year.
Net income for the second quarter included an after-tax benefit of $113 million, equivalent to $0.12 per share, related to the plan to repatriate foreign earnings in 2005, and a pretax charge of $31 million, or $0.02 per share, associated with the Company's early redemption of debt. In the second quarter of 2004, Dow recorded a net pretax gain of $20 million, or $0.01 per share, comprising gains of $563 million from asset divestitures associated with the formation of MEGlobal and Equipolymers, as well as restructuring charges totaling $543 million.
Price improved 20 percent compared with the second quarter of 2004, with double-digit increases in all geographic areas and across most businesses. This enabled the Company to record its tenth consecutive quarter of year-over-year margin recovery despite an increase of almost $900 million in feedstock and energy costs compared with a year ago. Volume was down 4 percent, principally due to the negative impact of divestitures of certain businesses during 2004. Excluding those divestitures, volume dipped less than 1 percent from a very strong quarter in 2004, reflecting reduced demand early in the quarter and the Company's continued focus on price/volume management.
With significantly improved cash flow and a continued focus on financial discipline, Dow was able to reduce debt by more than $1 billion during the second quarter. By the end of the quarter, the Company's gross debt to total capital ratio was approximately 43 percent, 10 percentage points lower than at the end of the same period in 2004. The Company's net debt to capital ratio is now less than 35 percent.
In the Performance Plastics segment, second quarter sales of $2.8 billion were 22 percent higher than the same period last year, with a strong increase in revenue across most businesses. Volume fell 2 percent, negatively impacted by the divestiture of the DERAKANETM business in the fourth quarter of 2004, while price increased 24 percent, led by Polyurethanes, Engineering Plastics, and Epoxy Products and Intermediates. Solid volume growth was reported by the Thermoset Systems business, driven by strong demand for construction, adhesive and sealant applications. Engineering Plastics also saw increased volume, with continued demand for polycarbonate across a range of applications, most notably for optical media, sheet and security products. And in the Epoxy Products and Intermediates business, sales increased significantly across all geographic areas, as the Company maintained its sharp focus on price/volume management. EBIT(1) for the Performance Plastics segment was $436 million, an increase of 63 percent compared with the same quarter of 2004.
The Plastics segment had a good second quarter, with sales climbing 19 percent from $2.3 billion in 2004 to $2.8 billion in 2005. Price increased 22 percent compared with the same period last year, while volume was 3 percent lower, due to the divestiture of the Company's PET/PTA business related to the formation of the Equipolymers joint venture in 2004. Excluding the divestiture, year-over-year volume was flat. Polyethylene volume was up 2 percent, as the business overcame industry inventory de-stocking through a strong focus on price/volume management. The Polystyrene and Polypropylene businesses each reported a slight downturn in volume, but demand for both polymers saw a marked improvement in June. Price and volume trends are now favorable across all three major polymers. The Plastics segment reported EBIT of $575 million for the second quarter, compared with $399 million in the same period in 2004, which included a gain of $124 million from asset divestitures associated with the formation of Equipolymers. Excluding this 2004 gain, EBIT in the second quarter of 2005 was more than double EBIT in the same period last year.