Cordy Gains Vacuuming Up Alberta After Flood
Cordy Oilfield Services Inc. (CKK) and Aecon Group Inc. (ARE) are among companies poised to benefit from rebuilding in Alberta after record flooding caused an estimated C$5 billion ($4.76 billion) in damage.
Business is up 60 percent in the environmental division of Calgary-based Cordy since floods inundated southern Alberta on June 20, said Lindsay Williamson, general manager of the unit. Cordy sent 85 trucks to suck up sewage in Calgary including from the Scotiabank Saddledome where flood damage forced the cancellation of a show by the rock band Kiss during the Calgary Stampede, a festival that starts tomorrow.
“There are a lot of people like myself who benefit from the work side, but also take the hit on the personal side because I’m one of the victims,” Williamson said in a phone interview on June 27. Cordy will have drained about 450 buildings once it’s finished in High River, the town hardest hit by the flood where several inches of water entered Williamson’s home, he said.
Alberta’s economic growth is forecast to expand by 3 percent in 2013 instead of 2.5 percent due to the rebuilding from as much as C$5 billion in damage, according to Toronto-Dominion Bank economists led by Jonathan Bendiner.
Sales of flooring and drywall are already surging in Alberta at Home Depot Inc. (HD), the company said. The upside for builders including Aecon, Churchill Corp. (CUQ) and PetroWest Corp. (PRW) will be spread over six to nine months, said Maxim Sytchev, analyst at Dundee Securities Corp.
“Whether it’s roads, bridges, a lot of stuff will have to be rebuilt,” Sytchev said in a phone interview from Toronto on June 28.
Communities across southern Alberta are draining water from buildings and starting repairs after more than a foot (30 centimeters) of rain fell in two days last month, forcing evacuations across the region, including about 75,000 of Calgary’s 1.1 million residents. Four people in the province died due to the flood, police said.
The provincial government said the floods were the worst in the Alberta’s history, declaring a state of local emergency in 25 communities. Albert Premier Alison Redford announced C$1 billion in initial flood relief and said plans to balance the provincial budget next year would be delayed. The province is “not focusing on” meeting deficit-reduction targets, Finance Minister Doug Horner said in a June 26 phone interview.
Cordy has dropped 27 percent this year, compared with a 2.3 percent decline for the Standard & Poor’s/TSX Composite Index, according to figures compiled by Bloomberg. The shares rose 8.6 percent to 19 Canadian cents at 10:18 a.m. today in Toronto. Aecon has risen 4.9 percent this year, while Churchill has declined 4.1 percent.
The “lion’s share” of damaged assets will be probably be replaced, with work beginning in the second half of 2013, TD economists led by Bendiner said in a June 26 note.
Following the floods, Home Depot stores in Alberta brought in at least 45 truckloads of emergency supplies including wet-vacs, pumps and generators, according to Frank Logie, manager for Home Depot Canada in Alberta.
Home Depot consulted with U.S. stores that handled rising demand after Hurricane Sandy slammed into the northeast U.S. shore, Logie said in a phone interview from Calgary on July 2. Sandy was the deadliest non-Southern U.S. hurricane since Agnes in 1972, according to the U.S. National Oceanic and Atmospheric Administration.
“We got a really good indication of where the business grew and how we could anticipate the needs of Calgarians,” Logie said.
Cleanup from Sandy brought business to companies including Clean Harbors Inc. (CLH) of Norwell, Massachusetts. Storm cleanup contributed $12 million in revenue to the environmental remediation and waste management firm in the fourth quarter, helping to boost sales 2.4 percent during the period, James Rutledge, the company’s president, said on Feb. 20, according to a transcript of the fourth quarter earnings call. Rutledge didn’t immediately return a phone message yesterday.
Aecon, based in Toronto, is exposed to Alberta, deriving 32 percent of its revenue from the province, according to Dundee’s Sytchev, as well as Calgary-based Churchill, a construction company that gets 58 percent of sales from the province. PetroWest, a provider of civil construction services based in Grand Prairie, Alberta, may also be poised to gain from additional work, he said.
“It’s probably too early days to figure out what opportunities there are for Aecon in the rebuilding efforts,” Vince Borg, a company spokesman, said in a July 2 phone interview from Toronto.
Churchill, involved in pumping water, has offered equipment to reconstruct the Stampede grounds and will probably install electrical transformers, though some of the work is being done for free, Andrew Apedoe, a spokesman for Churchill, said in a phone interview on July 2. “We, right now, do not look at this as an opportunity to profit,” Apedoe said.
Ian Hogg, vice-president of business development and corporate affairs at Calgary-based PetroWest, didn’t return a phone message seeking comment.
Bank of Montreal is also looking to increase its 2014 economic forecast for Alberta due to rebuilding. However it’s cutting annual growth by 0.7 percent this year due to losses from the flooding, Robert Kavcic, senior economist, said in an e-mail on June 26. The flood probably knocked out as much as 0.3 percent of Canada’s gross domestic product in June, he said.
The natural disaster had a profound economic impact on Calgary merchants as spending dropped 46 percent during the flood week at businesses in the evacuation zones, Moneris Solutions Corp., which provides electronic payment services, said yesterday in a statement. Spending in areas not evacuated also fell 22 percent in the same period, Moneris said.
Businesses seeking to rebuild may also face labor shortages as residents and companies compete for tradespeople, said Tang Lee, a professor of architecture at the University of Calgary who has studied natural disasters. The tab to repair a single basement can range from C$5,000 to C$100,000, Lee said.
“Typically whenever there’s a flood it’s quite devastating,” Lee said in a July 2 phone interview, predicting a protracted period of reconstruction. “It’s not several months, it may be a year or two or more.”
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