Video: Termite power

By Jane Wells Correspondent
CNBC
updated 9/28/2005 2:50:47 PM ET 2005-09-28T18:50:47

It’s a story that combines the nation’s housing boom, the hurricanes, some stocks and a six-legged creature that no one who owns a house wants to see.

The housing boom has made termite control a thriving, $6 billion business. Several players have a piece of the pest-control pie — chemical makers like Dow, BASF, Bayer, FMC. All but Dow Chemical have seen their stock prices go up this year.

“[This is] a highly fragmented business,” said Steve Good, chief marketing officer at Terminix. “It has about 20,000 competitors of which two companies represent maybe 30, or 35 percent of the [market] share.”

The biggest growth story in the termite control business is likely the companies that actually pull away the wood and look for the insects. Top players include Servicemaster’s Terminix, which with a 20 percent market share is the largest company on the block, followed by Rollins-owned Orkin and Ecolab.

And even as termite swarms have fallen this year, revenues are still up in the mid-single digits for these companies, and earnings are in the double digits. Strong home sales have helped their earnings results. You usually have to have a termite inspection before you can sell your house.

New technologies, training and baits have also played their part in boosting industry profits this year. Orkin, for example, has invested $5 million in a training center.

“Our biggest challenge is the pests,” said Glen Rollins, president and COO of Orkin. “Pests have been around, in the termite’s case, for over 200 million years, so they’re very good at eating wood – they’ve been doing it for a long time.”

Termites love moisture, and historically one of the areas with the most termite infestations has been New Orleans — a place that has seen a lot of moisture lately.

No doubt a lot of termites drowned in hurricanes Katrina and Rita, experts say, but a lot of them just moved up into the attic of a building above the water line, and like flooding termites are not covered by most homeowners’ insurance policies.

Publicly-held post control companies like Terminix and Orkin are very likely to be involved in the cleanup of the Crescent City notes Cindy Mannes, head of public affairs for the National Pest Management Association. Aside from termites, they’re also likely to be busy dealing with rodents, snakes, fire ants and mosquitoes.

Potential risks to the industry include a slow down in the housing market, analysts say, but for the moment business is booming because no matter what you throw at termites, they keep coming back. After all, they’ve survived on Earth since the dinosaur age, and they’re certainly going to live through a hurricane.

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