Georgia Gulf Corporation (GGC) recently overpaid for Royal Plastics, a supplier of housing products. The poor housing market has hurt the company. The $1.5 billion acquisition resulted in an equal increase in debt. The company recently renegotiated its debt compliance (leverage and interest coverage) ratios, as the company is in danger of non-compliance. The remaining product lines of the company are suffering from increases in capacity. As a result, we have a Sell rating with a target of $4.
Georgia Gulf reported 2008 first quarter earnings. The company recorded a net loss of $69.5 million or $2.02 per diluted share, compared to a net loss of $34.6 million or $1.01 per diluted share during the comparable quarter in 2007. The net loss includes a write-down for the closing of the Oklahoma City PVC resin plant, costs related to the sale of the outdoor storage buildings business, and other restructuring actions totaling $26.1 million (approximately $0.58 per share).
Net sales were $712.5 million, of which window and door profiles and mouldings segment amounted to $85.8 million, outdoor building products segment amounted to $97.5 million, chlorovinyls segment amounted to $341.2 million, and aromatics segment amounted to $188 million. For 2008, GGC expects EBITDA to be higher than the previous year.
Read the full analyst report on GGC.
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