Georgia Gulf Corporation (GGC) is a leading North American manufacturer and marketer of two integrated chemical product lines, chlorovinyls and aromatics. Its key products are chlorine, caustic soda, vinyl chloride monomer (VCM), polyvinyl chloride (PVC), cumene, phenol and acetone. Under the Royal Group brand, Georgia Gulf manufactures a complete line of custom and other vinyl-based building and home improvement products.
GGC overpaid for Royal Plastics, a supplier of housing products. The acquisition was entirely financed with debt, and the company is now in danger of violating debt covenants. The remaining product lines of the company are suffering from overcapacity. The company is expected to report losses in the near term on the back of rising feedstock and energy costs.
Demand for the company's products is also expected to remain weak due to the downturn in the US housing and auto markets. Moreover, the company may need to sell its assets to comply with the debt covenants. As a result, we have a Sell rating with a target of $2.50.
Read the full analyst report on GGC
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