GRAND RAPIDS, Michigan (AP) _ Dow Chemical Co. said Thursday

that despite record sales and two double-digit price increases

unveiled in the second quarter, its profit for the period fell 27

percent, in large part because of sharply higher costs for energy

and raw materials.

The world's second-largest chemical company said its net income

for the three-month period ended June 30 was $762 million, or 81

cents per share, compared with $1.04 billion, or $1.07 per share,

in the same period last year. Revenue rose 23 percent to a company

record $16.38 billion.

Analysts expected Dow to report earnings of 85 cents per share

on sales of $14.9 billion, according to a survey by Thomson

Financial.

Dow also said it expects the U.S. economy to weaken for the rest

of the year while the outlook for the global economy remains

uncertain.

``Despite this, our results have demonstrated that our strategy

for diversification on a global and end-use market basis has

allowed us to manage through these challenging times,'' Andrew N.

Liveris, Dow's chairman and chief executive officer, said in a

written statement.

The company's costs for energy and raw materials surged 42

percent, or $2.4 billion, when compared with the second quarter of

2007, the largest year-over-year increase in its history, he said.

``The surge in oil prices from (the) first to second quarter

added another $1 billion of cost sequentially, and we reacted

quickly by announcing two broad-based price-increase initiatives,

adjusting plant operating rates and implementing additional

cost-cutting measures,'' Liveris said.

Dow announced last month that it was raising the prices of its

products by as much as 25 percent in July after implementing

across-the-board price increases of up to 20 percent on June 1.

Increasing prices helped to offset its higher costs but did not

cover them, the Midland, Michigan-based company said.

In its performance plastics segment, second-quarter sales of

$4.4 billion represented an 18 percent increase over the same

period last year. Sales of performance chemicals were $2.5 billion

for the quarter, a gain of 20 percent.

The agricultural sciences segment posted record sales of $1.4

billion, up 25 percent, while basic plastics sales rose 19 percent

to $3.8 billion and basic chemicals increased 13 percent to $1.6

billion.

Dow makes everything from the propylene glycols used in

antifreeze, coolants, solvents, cosmetics and pharmaceuticals, to

acrylic acid-based products used in detergents,

wastewater-treatment and disposable diapers.

With annual sales of $54 billion and 46,000 employees worldwide,

its products are sold in 160 countries.

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On the Net:

Dow Chemical Co.: http://www.dow.com