Hurricanes Hurt Bottom Line, but Rebuilding Will Likely Aid It

Chemical firms affected by Hurricanes Katrina and Rita continue to anticipate lower third-quarter sales and earnings. But there is a silver lining in the clouded outlook. Once the effort to rebuild homes and infrastructure along the U.S. Gulf Coast gets under way, construction material procurement will include chemical, plastic, fiber, and elastomer purchases of $5 billion to $10 billion, according to a report from Eldib Engineering & Research. In the meantime, the industry's financial pain is real. Cabot estimates that equipment damage, repairs, and lost sales as a result of Rita will reduce earnings by $5 million. Praxair says it suffered only minor property damage, but hurricane-related costs will reduce operating earnings by $15 million to $18 million. Sterling Chemicals says a fire at its Texas City, Texas, plant during its Hurricane Rita shutdown caused up to $10 million in damage. And many miles away, BASF says its Altamira, Mexico, facility has been unable to obtain key raw materials for the production of styrenics, forcing the firm to declare force majeure for a number of items.