W.R. Grace earnings slip in 3rd quarter

But Columbia firm's sales are up 12.7%


W.R. Grace & Co., the Columbia-based chemical and building products maker, said third-quarter sales climbed 12.7 percent even as net income fell by about a third as a result of one-time gains in the year-earlier quarter and the fallout from Hurricanes Katrina and Rita.

Net income for the quarter that ended Sept. 30 was $32.1 million, or 48 cents per share, compared with $48 million, or 72 cents per share, in the year-earlier quarter. The 2004 quarter included a $50 million pretax gain from a litigation settlement, and the most recent quarter's results include a $16 million favorable change in estimated tax liabilities.

The company, which filed for bankruptcy protection in April 2001 after being hit with tens of thousands of asbestos-injury claims, said sales climbed to $653.4 million, compared with $579.9 million in the year-earlier quarter.

Grace's shares closed up 20 cents, or nearly 3 percent, to $7.52 per share in trading yesterday on the New York Stock Exchange.

Grace supplies chemical catalysts used by oil refineries, many of which were temporarily shut down during the two hurricanes that ravaged the Gulf Coast. The forced shutdowns resulted in a temporary loss of sales to those customers. A handful of those refineries remain shut down as a result of storm damage.

At the same time, the company has been hit with higher costs for raw materials, including natural gas and other petroleum-based products used in the manufacture of chemicals.

"We don't believe that's going to be mitigated materially anytime soon, which has changed fairly dramatically the cost of producing the materials we make over the last 12 months," said Robert M. Tarola, Grace's chief financial officer, referring to the higher materials costs.

One of Grace's production facilities in Lake Charles, La., was shut down for two weeks as a result of power outages caused by Rita. The outages resulted in higher production and distribution costs as the company shipped products from other, more distant plants to meet demand. The company also incurred higher costs to support displaced workers, all of whom survived the storm.

Tarola said the company has raised prices to make up for the higher costs and is looking for ways to reduce expenses.

"Driving double-digit sales growth in the face of the hurricanes and a bit of a slowdown in the European economy, in particular, we feel was a good accomplishment," he said.

Grace continues to deal with legal tangles related to its sale of asbestos products in decades past. The company incurred third-quarter legal costs of $5.5 million to defend current and former company executives under federal indictment on charges of knowingly exposing residents of Libby, Mont., to asbestos that sickened hundreds. The company previously operated a mine in Libby that produced vermiculite ore used to make fire-retardant insulation and other building products.

Grace also continues to work on a revised bankruptcy reorganization plan that was filed in November 2004 with the U.S. Bankruptcy Court for the District of Delaware. The plan is being challenged by lawyers representing people who claim property damage or personal injuries from asbestos-containing products the company produced. The court is currently trying to estimate Grace's future asbestos liability.


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