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8 June 2012 | Adam Leach
Oil and gas equipment services firm Halliburton has warned investors that higher prices for guar gum will reduce its profit margins.
The US business said that fears over future shortages of the gum, which is used by the company in the process of hydraulic fracturing or fracking to extract gas from shale, has increased demand and the price of guar beans has risen more rapidly than expected. Guar gum is made by grinding the guar bean and is also used in the food industry to increase dough yield and as a thickener in toothpaste. India is the prime source of the beans, accounting for around 80 per cent of global supply.
A statement from the company published yesterday said: “The price of guar gum has inflated more rapidly than previously expected due to concerns over the potential for shortages for the commodity later in 2012. As such, the costs have impacted the company's second quarter North America margins more than anticipated.”
Halliburton said margins in its North American operations will be 5-5.5 per cent lower than last year, compared with its previous estimate of 2-2.5 per cent lower.
The business said it will seek “relief from customers” in order to mitigate the impact. It will also look to increase the use of synthetic substitutes and other guar alternatives.