Dow Chemical Co reported a better-than-expected profit as margins rose for the ninth straight quarter in its plastics business, its biggest, due to low raw material costs.
Shares of the No. 1 U.S. chemical maker by sales rose 3 percent to $49.55 before the bell.
Dow's performance plastics unit has benefited as the shale boom in the United States has kept prices of raw materials such as ethane and naphtha low, giving it an edge over the oil-dependent European petrochemicals industry.
However, the company's petrochemical business in Europe is now poised to benefit from a recent slide in oil prices.
"What used to be a negative becomes a positive," Chief Executive Andrew Liveris told Reuters. "Our naphtha crackers (in Europe) will be making money they weren't a few months ago."
Global benchmark Brent crude is down about 25 percent since June.
Liveris, however, said there could be some "short-term pressure" because of excess supply. Naphtha crackers in Europe account for a third of the company's total capacity.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) in the performance plastics unit rose 31 percent to $1.27 billion in the third quarter ended September.
The unit makes products used by toy manufacturers, car makers and the packaging industry.
Hedge fund titan Daniel Loeb has been urging Dow to separate its commoditized raw material units such as its petrochemical business from its specialty chemicals businesses.
Dow has rebuffed the demand, saying that its raw material divisions help keep costs down at its high-growth businesses.
The company is also adding capacity in the U.S. Gulf Coast and in Saudi Arabia to keep raw material costs low. The first units of Dow's $20 billion joint venture with Saudi Aramco are expected to start operations in the second half of 2015.
Rival DuPont and other chemical makers are also facing investor activism to divest volatile businesses and boost shareholder returns.
Dow, which has unveiled a $4.5 billion share repurchase program, plans to raise as much as $6 billion by selling non-core assets. The company has put up for sale its epoxy business, and some chlorine and derivatives assets, besides three specialty chemical units.
Dow's net income available to common shareholders rose 43 percent to $852 million, or 71 cents per share, in the quarter.
Adjusted profit was 72 cents per share, higher than the average analyst estimate of 68 cents, according to Thomson Reuters I/B/E/S.
Dow, which makes everything from insecticides to plastics, said revenue rose 5 percent to $14.41 billion, beating the average analyst estimate of $14.31 billion.
Up to Tuesday's close, Dow's shares had risen nearly 17 percent over the past 12 months. They closed at $48.21 on the New York Stock Exchange. (Reporting by Swetha Gopinath in Bangalore; Editing by Sriraj Kalluvila)