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Axiall Drops as Profit Trails Estimates on Higher Costs

May 8 (Bloomberg) -- Axiall Corp., the vinyl-products maker that changed its name from Georgia Gulf Corp. in January, fell the most in more than three years after posting first-quarter earnings that missed analysts’ estimates amid higher costs.

Axiall declined 16 percent to $47.28 at the close in New York, biggest percentage drop since Oct. 30, 2009.

Adjusted earnings fell to 75 cents a share, Atlanta-based Axiall said today in a statement. The average of nine estimates compiled by Bloomberg was $1.18 a share. The Jan. 28 acquisition of chlorine assets from PPG Industries Inc. helped boost sales 23 percent to $1.06 billion, the company said, trailing the $1.13 billion average estimate.

Adjusted earnings before interest, taxes, depreciation and amortization in the chlorovinyls unit, which has more sales than the other two businesses combined, nearly tripled on the chlorine unit acquisition. Earnings gains were restrained by lower selling prices for resins and higher costs for ethylene, a raw material in the manufacture of vinyl, Axiall said.

“Lower resin sales prices are the big surprise,” Andrew Cash, an analyst at Atlanta-based SunTrust Robinson Humphrey Inc. said in a report today. “Higher-than-expected ethylene costs add to the miss.”

Cash upgraded the shares today to “buy” from “neutral.” He said his estimate for Axiall’s “underlying value” based on normalized free cash flow is unchanged and the share decline “creates a buying opportunity.”

Axiall had a net loss of $3.5 million, or 6 cents a share, compared with net income of $35.3 million, or $1.02, a year earlier.

Axiall is North America’s largest producer of vinyl building products such as siding and PVC pipe.

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

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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