Georgia Gulf Corp.: Slow Construction Market Hurts Profit

Company's acquisition of housing products manufacturer contributes to fourth-quarter loss.

Georgia Gulf Corp.'s October 2006 acquisition of vinyl building and construction products manufacturer Royal Group Technologies Ltd. contributed to a fourth-quarter net loss in 2006, the company reported when its quarterly results were released April 2.

The Atlanta-based maker of commodity chemicals and polymers and IndustryWeek Best 50 Manufacturer for 2006 posted a $47.2 million net loss in the fourth quarter compared with an $18.7 million profit recorded during the year-earlier period. The company attributes the loss to a slow construction market combined with declining sales in its chlorovinyls business. Chlorovinyls are used for such applications as siding, windows, fencing and decking, pipe and pipefittings, IV bags and wire coatings. Even with the quarterly decline, company President and CEO Ed Schmitt remains optimistic.

"As the construction industry emerges from its downturn, we will be well along in the execution of our integration plan and well positioned to serve our markets," said Schmitt in a statement. "We continue to pursue additional opportunities to improve the company and reduce debt."

Georgia Gulf already has sold the majority of Royal Group's non-core businesses, including most of its window-coverings operations. The company plans to sell the remaining non-core businesses in 2007. The company expects sales of Royal Group assets to reduce its net debt to approximately $1.4 billion compared with $1.7 billion when it first completed the Royal Group acquisition.

"In just six months we successfully reduced total debt, including our asset securitization by $295 million," Schmitt said.

Georgia Gulf Corp.
At A Glance

Georgia Gulf Corp.
Atlanta, Ga.
Primary Industry: Chemicals
Number of Employees: 1,123
2005 In Review
Revenue: $2.27 billion
Profit Margin: 4.20%
Sales Turnover: 2.27
Inventory Turnover: 10.73
Revenue Growth: 3.06%
Return On Assets: 9.91%
Return On Equity: 35.60%

The company announced its plan to buy Royal Group for C$1.7 billion on June 9, 2006, to gain market share in the PVC building materials industry. Royal Group is headquartered in Toronto, Canada, with sales primarily in North America. Its products include custom profiles and window and door systems, outdoor products, pipe and fittings, building systems, moldings and millwork and siding and accessories. In February, Georgia Gulf changed the name of its newly acquired division to Royal Group Inc. and adopted five divisional brand symbols to accompany products in marketing materials.

"This new brand architecture will be consistently used in marketing materials to help those who have had a positive experience with one of our products readily identify others that they can utilize," Schmitt said when the change was announced. "It will help us build brand identity for our broad line of PVC building and home improvement products, and in turn help us to develop sales for Royal Group and its distributors."

The company will use the tag line "Great Ideas Taking Shape" to accompany Royal brand symbols.

"We want the industry to know that our strategic focus encompasses development of innovative, durable, low-maintenance building, construction and home-improvement products," Schmitt said.


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