W.R. Grace again warns of weaker earnings growth

It says rising costs, weak euro will hurt more than expected

January 19, 2001|By Kristine Henry | Kristine Henry,SUN STAFF

W. R. Grace & Co. issued its second earnings warning in as many months yesterday, saying a weak euro and rising prices for natural gas and raw materials will hurt profits more than was previously thought.

The Columbia chemical maker also said that asbestos-related litigation could prompt it to take a charge in the fourth quarter.

Last month, Grace officials warned that its target of 12 percent to 15 percent earnings growth last year wasn't likely to be reached.

Instead, it said, it expected earnings growth of 10 percent to 12 percent.

Taking that into account, analysts on average had been expecting Grace, which also operates a chemical plant in South Baltimore, to earn $1.84 a share last year.

The company says investors should shave that by 3 to 5 percentage points.

"As we've said, we knew the fourth quarter would be difficult but expected more strength on the sales line. Economic trends in key markets hurt us, as did the delay of construction projects due to severe weather," particularly in the United States and the United Kingdom, Paul J. Norris, W. R. Grace's chairman, president and chief executive officer, said in a statement.

"As a result, annual revenue growth will be approximately 2 percent to 4 percent over 1999."

Norris was unavailable for further comment.

Grace is particularly concerned about the euro because almost 29 percent of its sales last year came from Europe.

Grace's shares have fallen more than 70 percent over the past 52 weeks because of fears about its liability related to asbestos lawsuits.

The company could be forced to pay about $1 billion in damages from lawsuits stemming from insulation the company made several decades ago that contained the cancer-causing material.

Owens Corning, another asbestos defendant, filed for Chapter 11 bankruptcy protection last year.

Shares of Grace, which made yesterday's announcement after the markets closed, were up 6 cents yesterday to $3.81.

Grace beat analysts' estimates in October by reporting third-quarter net income of $34 million on sales of $395 million, compared with income of $42 million the prior year on sales of $372 million.

For all of 1999, Grace had earnings of $136 million on sales of $1.47 billion, after a 1998 loss of $184 million on sales of $1.46 billion.

The company plans to release this year's fourth-quarter and full-year earnings after the markets close Jan. 29.

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