Bloomberg News

Georgia Gulf Profit Falls Amid U.S. Housing Slump

March 02, 2007

Georgia Gulf Corp. (GGC:US), the biggest North American maker of vinyl window frames, said profit last year fell to $1.35 to $1.50 a share amid a housing slump, implying a fourth-quarter loss wider than analysts' estimates. The stock fell to the lowest in four years.

The annual report was delayed partly because of a review of discontinued operations related to the Oct. 3 purchase of Royal Group Technologies Ltd., Atlanta-based Georgia Gulf said today in a regulatory filing. The fourth-quarter net loss was $1.28 to $1.43 a share. Net income (GGC:US) in 2005 was $2, including fourth- quarter profit of 55 cents.

Chief Executive Officer Edward Schmitt increased Georgia Gulf's sales of products made from polyvinyl chloride, or PVC, used in construction, including pipe and vinyl fencing, with his $1.08 billion acquisition of Royal. Residential construction fell at an annual rate of 19 percent in the fourth quarter, the Commerce Department said this week.

``Fourth-quarter earnings appear worse than anticipated,'' Banc of America Securities analyst Kevin McCarthy said in note to clients. ``The primary culprit is weakness in PVC resin and related fabricated products linked to residential construction.''

U.S. plants that make PVC ran at 75 percent of capacity in the fourth quarter, a five-year low, McCarthy said. PVC factories ran at 94 percent of capacity in the third quarter, he said.

Shares Slump

Shares of Georgia Gulf fell 88 cents, or 4.7 percent, to $18.01 in New York Stock Exchange composite trading, the lowest since March 2003. They have dropped 38 percent in the past year. Full financial results probably will be announced within 15 days, the company said.

Excluding 85 cents a share in costs related to the Royal Group acquisition, 2006 profit was $2.20 to $2.35 and the fourth-quarter loss was 73 cents to 88 cents a share, McCarthy said. He rates the shares ``neutral'' and had estimated a fourth-quarter loss of 23 cents.

BB&T Capital Markets analyst Frank Mitsch said in a report that the fourth-quarter loss, excluding some items, was 61 cents to 76 cents a share, compared with his estimate of a 5 cent loss. Mitsch, who rates the shares ``underweight,'' cut his 2007 profit forecast to break even from $2.

Other costs in the quarter included 12 cents a share from discontinued operations and 44 cents related to Royal debt and lower sales at a legacy chemical business, the company said.

Excluding some items, Georgia Gulf was forecast to earn $2.83 a share in 2006, the average estimate (GGC:US) of seven analysts surveyed by Bloomberg. The fourth-quarter estimate was for a loss of 24 cents, according to the survey.

Net income in the nine months ended September was $2.78 a share, the company said Oct. 26.

To contact the reporter on this story: Jack Kaskey in New York at jkaskey@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net


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