US Georgia Gulf expects flat-to-lower 2010 amid pricing struggles

18 February 2010 16:45  [Source: ICIS news]

HOUSTON (ICIS news)--Georgia Gulf expects flat-to-lower adjusted earnings in 2010 as deteriorating pricing conditions, more plant turnarounds and a drop in inventories will more than offset improved polyvinyl chloride (PVC) margins, the US chlorovinyls and aromatics producer said on Thursday.

Speaking during an earnings conference call with investors, chief executive Paul Carrico said his company - which posted adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of $161.5m (€117.9m) in 2009 - would likely only have earnings in the $140m-160m range for 2010 as a result of a number of factors.

Higher feedstock natural gas values were one reason for the lower projection, with Carrico saying he anticipated prices in the $6/MMBtu range, up from Wednesday’s close on the NYMEX of $5.386/MMBtu.

In addition, electrochemical unit (ECU) values are projected lower, two plant turnarounds are scheduled compared with one in 2009, and inventory holding gains in the company’s aromatics segment from 2009 are not expected to continue, Carrico said.

On the positive side, PVC margins were expected to rebound from historically low 2009 levels, and the company’s outdoor building products segment was poised to benefit from a slight increase in US and Canadian housing starts, Georgia Gulf said.

Moreover, the company said it would benefit from projected GDP growth of more than 2% at a minimum in both the US and Canada for 2010.

“This year is going to be a step up in some areas,” Carrico said. “But to say robust [as some have] would be an overstatement.”

In PVC, Carrico said export availability has been strong in the first quarter, but indications were that it would likely decline somewhat in the second and third quarters before picking up again at the end of the year. The middle quarters will be supported by an increase in domestic demand, he said.

Carrico also noted that his company’s cost-reduction efforts initiated in 2009 would be fully realised in 2010.

In its fourth-quarter results released Wednesday, Georgia Gulf reported a 6% decline in net sales, led by a 37% drop in chlorovinyls segment sales due to lower prices.

Aromatics sales dropped 9% in the quarter.

Meanwhile, Georgia Gulf’s full-year net sales fell 31%, primarily due to lower prices resulting from lower feedstock and energy costs amid lower volumes, particularly in aromatics, the company said.

Following its earnings release, Georgia Gulf traded up 23 cents, or 1.4%, to $16.20/share in Thursday mid-morning trading on the New York Stock Exchange.

($1 = €0.73)

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By: Ben DuBose
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