Dow Chemical's integrated strategy is costing shareholders billions of dollars, and executives should work harder to boost results and transparency, activist investor Daniel Loeb has asserted.

In his most detailed comments about the company since adding it to the portfolio of his $14.3 billion hedge fund Third Point portfolio in January, Loeb on May 1 praised management for taking some positive steps but made clear that he thinks more work needs to be done.

The largest U.S. chemicals company by sales could make an additional $2.5 billion annually in EBITDA if it focused more on selling ethylene, propylene and other basic petrochemicals on the open market and less on using these materials to make foams, glues and other consumer products, Loeb said.

"Management needs to focus on what is driving this underperformance and how to cure it," the activist investor wrote in a letter sent to investors and selected news agencies, adding that "Dow's integrated strategy does not maximize profits."

Loeb contrasted Dow with rival LyondellBasell, and wondered why, despite Dow's far higher production capacity, the two companies generate essentially the same EBITDA in their respective basic chemicals businesses.

Shares of LBI, which only emerged from Chapter 11 bankruptcy protection in 2010, have more than doubled in the past two years. That company, Loeb wrote, is focused on being the lowest cost commodity petrochemical producer," a strategy he said Dow should emulate.

Although Dow increased its dividend in January and promised to become more transparent, the hedge fund executive said the dividend remains below pre-recession levels and he believes "CEO Andrew Liveris and other executives "could do more to be transparent."

In Loeb's view, that goal would not be achieved by joining the Feedstocks & Energy and Performance Plastics segments, as the company suggested it could do on its first quarter earnings call.

He also blasted what he called Dow's opaque pricing. The company sells material at cost between units, while Exxon Mobil and other large chemical producers typically sell basic chemical in-house at market rates, better helping investors gauge an ethylene plant's profitability, he pointed out, but in his view, "the priority should be to implement a consistent, market-based transfer pricing methodology across and within all segments so shareholders can clearly understand each business unit's underlying profitability."

Third Point holds about 5.1% of the Dow's outstanding shares, according to Thomson Reuters data.