Patheon Q4 likely to suffer from hurricane-related plant closures

By Dan Stanton

- Last updated on GMT

Image: iStock/Harvepino
Image: iStock/Harvepino

Related tags North carolina South carolina

Two manufacturing facilities were closed after being hit by Hurricane Matthew earlier this month, according to a Patheon SEC filing.

Tropical storm Matthew brought 75mph winds to the southeastern United States on October 7 and 8, cutting power and flooding roadways which left two of Patheon’s facilities in North and South Carolina temporarily closed.

The news comes after the firm halted production late September​ at a plant in Manati, Puerto Rico follwoing a fire at a power plant on the island resulting in a lack of outage.

“In all three cases, there was no damage to the Patheon facilities,”​ the contract development and manufacturing organisation (CDMO) said in a regulatory filing​ Friday.

Both the Manati and Florence, South Carolina have resumed full operations, the firm said, with the Greenville, North Carolina site expected to resume operations this week.

Greenville provides pharmaceutical development and drug product Services, Manati provides drug product services, and Florence provides drug substances services.

Revenue impact

The full impact of the closures will be detailed in Patheon’s upcoming fiscal fourth quarter 2016 results but firm’s share price has contracted as much as 12% since late September, and analyst Eric Coldwell from Baird Equity Research said this is in part due to concerns over Hurricane Matthew.

“We are unsure how to model these events and management appears to be reserving additional comments until November,”​ he said in a note. “If we simply estimated affected site footage and days offline as a percent of total footage, we might suspect a 2-3% impact to quarterly results, but we doubt that the math is this simple.”

Meanwhile Evercore ISI’s Ross Muken noted that the three facilities may account for as much as 25% of total manufacturing capacity and the closures may negatively impact revenue by up $15m for the quarter.

“The closures are clearly unfortunate - obviously outside of management’s control - for the company heading into the company’s first 4Q earnings and we hope everyone in those areas are ok and have not suffered too much,”​ Muken said.

“We note that these are the types of risk of investing in facility oriented businesses and believe most will look through any revenue downside and focus more on the company’s initial 2017 guidance.”

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