(By Balaseshan) LSB Industries Inc. (NYSE: LXU) said the Cherokee, Alabama chemical facility of its subsidiary, Cherokee Nitrogen Co., suffered damage from pipe rupture and will limit production until repaired.
The Cherokee Nitrogen facility suffered a pipe rupture causing damage to the heat exchanger portion of its ammonia plant. The company is determining whether damages extend beyond the area where the rupture occurred.
The company said no serious injuries, or environmental impact, resulted from the pipe rupture. Management preliminarily estimates a three to five month outage at the ammonia plant, depending on lead times for repair parts.
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Until the ammonia plant is repaired, the company believes that the Cherokee Nitrogen Facility can produce, on a limited basis, nitric acid and ammonium nitrate solution to be produced from purchased ammonia. The company has notified its insurer of this event.
The company's insurance policy, which provides replacement cost coverage, has a $2.5 million deductible for property damage. The company's business interruption insurance covering certain lost profits and extra expense has a 30 day waiting period.
LSB's principal business activities consist of the manufacture and sale of commercial and residential climate control products, such as geothermal and water source heat pumps, hydronic fan coils and modular geothermal chillers, and large custom air handlers; and the manufacture and sale of chemical products for the agricultural, mining, and industrial markets.
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LXU is trading down 6.53% at $35.65 on Wednesday. The stock has been trading between $24.85 and $45 for the past 52 weeks.