Back to: http://www.toledoblade.com/apps/pbcs.dll/artikkel?Avis=TO&Dato=20010218&Kategori=BUSINESS06&Lopenr=10218011&Ref=AR -------------------------------------------------------------------------------- Article published Feb 18, 2001

Natural-gas prices singe firms’ profits Small businesses as well as large feel the burn

BY JANE SCHMUCKER BLADE BUSINESS WRITER

Be it bread or blacktop, a car wash or a petunia plant, prices are up because of unprecedented increases in the cost of natural gas.

Consumers, however, are far from the only ones feeling the heat. Profits at many local companies have been lower - or nonexistent - in recent months because of the high cost of gas.

Owens-Illinois, Inc., said higher energy costs reduced its profits by $40 million, or 17 cents a share, in 2000. Natural gas, which is used to heat the sandy mixture that makes glass to more than 2,800 degrees, accounts for the bulk of O-I’s energy expenditure. The company’s first quarter 2001 earnings also will be hurt by energy prices.

At the North Star/BHP Steel Ltd. minimill near Delta, the bill for January’s natural gas was $1.6 million - $900,000 more than the mill had budgeted months before. The mill burns natural gas to melt scrap and to heat slabs of steel for rolling.

Some of its key natural gas contracts expired in January just as natural gas prices peaked. President Jim Jonasen said the minimill’s February bill will be a third lower than the January bill, but it still will be 50 percent higher than expected months ago.

With steel selling for its lowest price in decades, the mill cannot pass along its higher gas costs. "We were unprofitable so it just made us more unprofitable," Mr. Jonasen said.

Wonder Bakeries, which has a plant in Northwood, raised its bread prices 10 to 15 percent in December largely because of increased costs of natural gas to operate ovens and of gasoline for delivery trucks.

The bread-price increase has affected sales for Interstate Bakeries Corp., the Kansas City, Mo., Wonder Bread owner, which also operates Brown’s Bakery in Defiance. Prices for some competing products have not increased. Interstate’s higher natural gas costs have chopped profits by millions of dollars per quarter, said spokesman Mark Dirkes.

Owens Corning’s tactic to minimize its natural gas costs was to form a joint venture with Enron’s energy management group. Although OC has some long-term natural gas contracts at prices lower than this winter’s highs, its prices doubled between 1999 and 2001 and the company spends millions of dollars a year on natural gas, said Chuck Dana, a vice president. The joint venture and energy-savings measures are targeted to save OC $120 million over 10 years.

For many area businesses, the natural gas bills don’t have the heft of the large companies but nevertheless have a big impact.

Sandkuhl Clay Works, Inc., just south of the Allen County line, laid six employees off after Christmas because of high prices for natural gas, which President Leslie Sandkuhl said normally accounts for 60 percent of its manufacturing costs.

The company, which makes chimney flues, decorative chimney pots, and industrial products, often has natural gas bills of $25,000 a month. If it had operated as usual in January, the bill might have been as much as $75,000.

"It would have eaten up all our profit, so there was no sense in running," Mr. Sandkuhl said. "Rather than make something just to be making something, we decided it was better to shut down for awhile."

The shutdown because of high energy costs was the first that Mr. Sandkuhl can recall for the company that has been in the same location in Kossuth for well over 100 years. Mr. Sandkuhl said he plans to recall the six employees March 1.

Hecklinger Greenhouse, Inc., a wholesale bedding plant grower in East Toledo, plans to raise its prices by 7.5 percent because of natural gas costs that soared this winter just as the company’s gas contract ended. Owner Mark Hecklinger said he expects similar increases from many of his local competitors.

"People in this area talk together and we’ve come to the conclusion that if we don’t go up, we’ll go out of business," he said.

He predicted his buyers - mainly garden centers - will pass the increase along to consumers.

In the meantime, Mr. Hecklinger has turned down the heat. He usually keeps impatiens at 63 degrees, but he’s cut back to 58 degrees this year, knowing that he must watch the plants much more closely for signs of stress.

At Affordable Auto Detailing in Maumee, Dorothy Parma increased all prices by 10 percent in January. Her monthly bill for natural gas, which heats her one-woman shop, increased by $70. Without a price increase, Ms. Parma said she would have had to work at least five more hours a month just to keep pace with that expense.

H.P. Streicher, Inc., which produces blacktop paving material, expects the price of blacktop to jump 2 to 10 percent from last year when construction season begins, said President Kurt Smith. The firm doesn’t use natural gas in the coldest months of the year, when the commodity is usually the most costly. But it does use gas during the construction season at its Dorr Street plant to fuel a dryer that heats a mixture of sand and stone to produce blacktop.

Still, he said, "I’m very, very, very glad we’re not living in California."

-- Martin Thompson (mthom1927@aol.com), February 18, 2001