By Ernest Scheyder

NEW YORK (Reuters) - Dow Chemical Co posted
a lower-than-expected quarterly profit Tuesday as it idled
several plants to retool for higher production rates, sending
shares of the biggest U.S. chemical maker down nearly 8
percent.

The temporary closing of three plants overshadowed higher
sales across all businesses and regions and hurt profit by 7
cents per share and revenue by $300 million, Dow said.

The plants -- one in Argentina and two in Texas -- had been
operating at low levels during the recession and extra time was
needed to ramp up production, a slow process, the company
said.

The factory in Argentina, Dow's largest polyethylene plant
in Latin America, was closed for 30 days, roughly a third of
the quarter.

"These outages were primarily in higher-margin
geographies," Alembic Global Advisors analyst Charles Neivert
told Reuters. "I don't think consensus was full factoring them
in."

In a positive sign, Dow said its advanced materials
business, which hold assets from the legacy Rohm & Haas and hastwo reporting units, saw sales jump 13.6 percent to $2.73
billion.

Dow hopes to boost annual sales at the unit, which makes
parts for solar panels, televisions and Apple Inc's
iPhone, to $16 billion by 2015.

Yet the units' performance should have been better, as
higher costs, lower margins and increased competition continue
to squeeze Dow's traditional cash cow, its basic chemicals and
plastics businesses, Dahlman Rose & Co analyst Charles Neivert
said

"They need to continue to improve their performance
businesses at a faster rate, because we know the basic plastics
business is coming under pressure going into the second half of
the year," Neivert said.

Dow Chief Executive Officer Andrew Liveris said his view of
the U.S. economy "remains guardedly optimistic."

BY THE NUMBERS

Dow reported net income of $566 million, or 50 cents per
share, compared with a year-earlier loss of $486 million or or
47 cents per share.

Excluding one-time items, earnings were 54 cents per share.
By that measure, analysts expected 56 cents, according to
Thomson Reuters I/B/E/S.

Revenue rose 20.3 percent to $13.62 billion. Analysts
expected $13.69 billion.

Dow cited bad weather in North America and Europe for tepid
results in its agricultural business, where operating income
rose 40 percent.

"The last month of the quarter was much worse than normal
because the season ended so fast," Dahlman Rose's Neivert said.
"The earnings are a bit of a disappointment."

As in the first quarter, Dow's basic plastics unit posted
strong results, with sales up 26.2 percent. The unit's products
go into a wide range of consumer goods, including diapers.

Dow has been trying to spin the unit off into a joint
venture as part of its "asset-light" strategy to focus more on
high-margin specialty chemicals.

The basic chemicals unit, which makes chlorine, one of the
most mass-produced chemicals in the world, saw sales rise 25
percent.

Dow cut its long-term debt, much of which came from the
Rohm & Haas buyout, by 5.5 percent to $18.11 billion.

Earnings from joint ventures, including the Dow Corning
business with Corning Inc, doubled to $244 million.

During the period Dow sold its Styron basic plastics unit
to a private equity firm.

Last month the Midland, Michigan-based company said it
would become a global sponsor of the Olympics, a move it hopes
will boost its standing with the public and net more than a $1
billion in revenue over the next 10 years.

Dow announced a licensing deal during the quarter with
Monsanto Co , whereby Dow's agricultural unit will use
Monsanto's Roundup Ready 2 Yield herbicide trait in its
genetically modified soybeans.

Also during the quarter, Dow shareholders rejected a
"say-on-pay" proposal, despite having approved a similar
measure last year.

Shares of the company fell 7.9 percent to $26.09 in early
trading on the New York Stock Exchange. The stock has traded
between $19.75 and $32.05 in the past 52 weeks.
(Reporting by Ernest Scheyder; Editing by Lisa Von Ahn, Dave
Zimmerman)