Hurricanes Hurt the Bottom Line

Chemical firms affected by Hurricanes Katrina and Rita continue to anticipate lower sales and earnings as the season for reporting the latest quarterly results approaches.

But there is a silver lining in the clouded outlook. Once the effort to rebuild and repair homes and infrastructure along the U.S. Gulf Coast gets under way, construction material procurement will include chemical, plastic, fiber, and elastomer purchases of between $5 billion and $10 billion, according to a report from Eldib Engineering & Research, Berkeley Heights, N.J.

In the meantime, the industry’s financial pain is real. Cabot estimates that equipment damage, repairs, and lost sales as a result of Hurricane Rita will reduce earnings by $5 million when it reports quarterly results.

Praxair says it suffered only minor property damage, but business interruption, shutdown, and start-up costs, along with higher energy and distribution costs because of Katrina and Rita combined, will reduce operating earnings by $15 million to $18 million. Sterling Chemicals says that during shutdown before Rita arrived, a fire at its Texas City, Texas, plant caused up to $10 million in damage to one of two styrene lines.

Even many miles from where Rita came ashore, BASF says its Altimira, Mexico, facility has been unable to obtain key raw materials for the production of styrenics. The disruption of transportation networks has led the firm to declare force majeure for a number of items including polystyrene, acrylonitrile-butadiene-styrene, and styrene-butadiene copolymers.