Advertisement

If you have an ACS member number, please enter it here so we can link this account to your membership. (optional)

ACS values your privacy. By submitting your information, you are gaining access to C&EN and subscribing to our weekly newsletter. We use the information you provide to make your reading experience better, and we will never sell your data to third party members.

ENJOY UNLIMITED ACCES TO C&EN

Business

Katrina's Impact

In hurricane's aftermath, chemical firms face higher costs and lower earnings

by Marc S. Reisch
September 19, 2005 | A version of this story appeared in Volume 83, Issue 38

Chemical producers and analysts are beginning to assess Hurricane Katrina's financial impact, and in most cases the news is not good. Earnings will be pinched in the third quarter, they say, and many firms are now maneuvering to pass along energy and raw material cost increases to customers as quickly as possible.

According to Robert Shrouds, DuPont corporate economist, "Record-high energy prices, which have been further exacerbated by Hurricane Katrina, will be a factor in the global energy outlook for the foreseeable future." Diane Gulyas, DuPont's chief marketing and sales officer, put customers on notice that the company will raise prices across the board in light of rapidly increasing energy and feedstock prices. Other firms hiking prices on a broad range of products include Albemarle, Eastman Chemical, Celanese, and Dow Chemical.

Kevin W. McCarthy, a Banc of America Securities stock analyst, has shaved his earnings estimates for firms such as Dow, DuPont, PPG Industries, Rohm and Haas, Eastman, Nova Chemicals, Westlake Chemical, Albemarle, and Georgia Gulf. He cites "surging costs for energy and raw materials."

The surge is likely to have an even greater effect on chemical firms' earnings than the forced idling of facilities. Dow lost revenue because of the storm. However, CEO Andrew Liveris says, high oil and natural gas costs, exacerbated by Katrina, pose a severe long-term threat to Dow and the entire U.S. chemical industry. "We have no choice but to ask our customers to pay more for our products," he says.

Others are under pressure, too. Hercules, for instance, lost some production time in its Mississippi paper chemical operations because of the storm. But Katrina has exacerbated raw material, utility, and transportation costs across all Hercules' businesses, leading the firm to predict a 5-cent-per-share cut in earnings for the balance of the year.

Advertisement

Article:

This article has been sent to the following recipient:

0 /1 FREE ARTICLES LEFT THIS MONTH Remaining
Chemistry matters. Join us to get the news you need.