Alberta wildfire singes companies beyond energy sector

By Euan Rocha and Allison Lampert
TORONTO/MONTREAL, May 25 (Reuters) - The wildfire that has
ravaged northern Alberta and cut Canadian crude output by 25
percent is set to crimp corporate earnings beyond the oil patch,
especially hitting the rail and hospitality sectors.
The fire, which has caused an estimated $50 million a day in
lost production for oil sands companies near the evacuated city
of Fort McMurray, has also caused pain to large companies that
serve the sector and smaller ones catering to thousands of
industry workers.
Canadian National Railway Co CNR.TO has said it ran a
freight train to Fort McMurray for the first time since May 3.
It typically operates three trains a week to the city.
Separately, the Bank of Canada came out with a more hawkish
statement on Wednesday on how the economy will be hurt by damage
from the wildfires. The central bank said the wildfire disaster
will shave 1.25 percentage points off economic growth in the
second quarter.
"The wildfires in Alberta continue to delay oil production
restarts, weighing on petroleum product shipments tied to the
region," said Susquehanna rail analyst Bascome Majors.
The effect on Canadian National and Canadian Pacific Railway
Ltd CP.TO results will be limited since crude-by-rail accounts
for a relatively small part of their revenues, Majors said.
Canadian National said crude oil represented just over 1
percent of car loadings in the first quarter. Canadian Pacific's
crude shipments have fallen 70 percent, 87 percent and 77
percent, respectively, over each of the last three weeks,
according to company data.
With the combination of the wildfire and weak commodity
prices challenging the railroads, Seaport Global Securities
noted that the latest weekly data showed Canadian crude-related
rail shipments fell 35 percent from last year and total Canadian
rail volumes slid 18.6 percent.
Parts of the hospitality sector will also be hurt.
The Blacksand Executive Lodge owned by Horizon North
Logistics Inc HNL.TO , a provider of camps and lodges for oil
sands workers, was completely destroyed by the fire.
Temple Hotels Inc TPH.TO , which owns and operates 29
hotels, has nearly one-third of its properties in Fort McMurray.
Analysts said near-term earnings will be hurt due to the fire,
though they noted it could benefit when reconstruction begins.
Losses for property insurers like Intact Financial Corp
IFC.TO and Aviva Plc AV.L are likely to be capped, wrote
Wells Fargo (NYSE:WFC) analyst Elyse Greenspan, who expects the largest
share of the losses to fall on European reinsurers and Everest
Re Group Ltd RE.N .
She noted that estimates pointed to overall insured losses
topping out at close to $7 billion.
The fire has also crippled small business owners in Fort
McMurray as only a trickle of its 90,000 evacuated residents
will begin to return in early June.
"It's really challenging for us right now. Even if we
reopen, what sort of business will we get?" said Joycelyn
Reece-Reid, co-owner of A&J's Fashions. "All I know is business
just won't be like it was for maybe quite a few years."
Chad Gergley, who owns a wellness clinic and a yogawear
business in the city, said 25 percent of his employees do not
intend to return since they have either lost their homes or been
forced to find jobs elsewhere.
"On top of a revenue hit that businesses in town are taking,
we're taking a people hit with employees scattering," he said.
The eventual rebuilding will boost construction activity,
but will take time and is unlikely to result in sustained
growth, said ATB Financial Chief Economist Todd Hirsch, who
believes many small businesses may never return.
"Even though there may be a positive lift to GDP, there's
absolutely nothing economically positive about this fire," he
said.