OM Group Inc. (OMG, Financial) filed Quarterly Report for the period ended 2009-06-30.
OM Group Inc. is a leading international producer and marketer ofvalue-added metal-based specialty chemicals and powders. The company supplies numerous different product offerings -- principally categorized as metal carboxylates inorganic metal salts and metal powders for diverse applications to more a range of different industries. Typically their products represent a small portion of the customer\'s total cost of manufacturing or processing but are critical to the customer\'s product performance. OM Group Inc. has a market cap of $1.07 billion; its shares were traded at around $34.87 with a P/E ratio of 18.7 and P/S ratio of 0.6.
Gross profit decreased to $34.4 million in the second quarter of 2009, compared with $126.0 million in the second quarter of 2008. The largest factor affecting the $91.6 million decrease in gross profit was the decrease in the average cobalt reference price from $45.93 in the second quarter of 2008 to $14.44 in the second quarter of 2009, which resulted in lower Advanced Materials selling prices and reduced gross profit by $59.4 million in the second quarter of 2009 compared with the second quarter of 2008. Also impacting the Advanced Materials segment gross profit was decreased volume ($25.7 million). Advanced Materials was favorably affected by a $6.5 million reduction in manufacturing and distribution expenses due primarily to reduced volume and the Companys cost cutting initiatives that included reductions in discretionary spending, headcount reductions, and decreased employee incentive
The Company recorded tax expense of $3.5 million on pretax losses of $29.8 million for the three months ended June 30, 2009, resulting in a negative effective tax rate. In the three months ended June 30, 2009, the Company recorded discrete tax expense items totaling $1.0 million, which included expense of $1.8 million related to withholding tax on earnings planned to be repatriated from Taiwan, partially offset by a $0.6 million benefit related to GTL in the DRC, of which the Companys share is 55%. Excluding discrete items, the tax rate for the second quarter of 2009 differs from the U.S. statutory tax rate primarily due to the non-deductible $35.0 million goodwill and the $1.2 million intangible asset impairment charges, losses in certain jurisdictions for which there is no tax benefit and income in certain foreign jurisdictions with tax rates lower than the US statutory rate. The Companys effective income tax rate for the three months ended June 30, 2008 was 26.8%. This rate is lower than the U.S. statutory rate due primarily to income earned in foreign tax jurisdictions with lower statutory tax rates than the U.S. (primarily Finland) and a tax holiday in Malaysia, partially offset by tax expense related to foreign earnings repatriation during 2008.
Income (loss) from continuing operations attributable to OM Group, Inc. was a loss of $35.0 million, or $1.16 per diluted share, in the second quarter of 2009, compared with income of $56.6 million, or $1.86 per diluted share, in the second quarter of 2008, due primarily to the aforementioned factors.
Net sales decreased $596.6 million, or 60.2%, primarily due to a $242.8 million decrease from lower product selling prices in the Advanced Materials segment, which resulted from an decrease in the average cobalt reference price in the first six months of 2009 compared with the first six months of 2008, and a $131.2 million decrease from the resale of cobalt metal. The weak economy drove decreases in volume in both Specialty Chemicals ($92.4 million) and Advanced Materials ($78.4 million) as a result of weak end-market demand and customer de-stocking. Copper by-product sales also were lower ($25.8 million) due to the lower average copper price and decreased volume in the first six months of 2009 compared with the first six months of 2008.
Gross profit decreased to $61.0 million in the first six months of 2009, compared with $262.7 million in the first six months of 2008. The largest factor affecting the $201.7 million decrease in gross profit was the changes in the average cobalt reference price during 2008 and 2009. The average cobalt reference price rose from $40.00 at the beginning of 2008 to near $50.00 by the end of the first quarter and averaged $45.93 in the second quarter of 2008. As a result, the first six months of 2008 benefited from higher product selling prices due to the high average reference price for cobalt during this period. The average reference price of cobalt was $13.37 and $14.44 in the first and second quarter of 2009, respectively, which resulted in lower Advanced Materials selling prices and reduced gross profit by $118.4 million as compared to the first six months of 2008. Also impacting the Advanced Materials segment gross profit was decreased volume ($48.3 million) and a decrease in profit associated with copper by-product sales ($11.0 million). The first six months of 2008 was favorably impacted by a $4.0 million gain on cobalt forward purchase contracts. Advanced Materials was favorably impacted by a $9.0 million reduction in manufacturing and distribution expenses due primarily to reduced volume and the Companys cost cutting initiatives that include reductions in discretionary spending; headcount reductions; and decreased employee incentive compensation. In the Specialty Chemicals segment, decreased volume reduced gross profit by $33.5 million. Specialty Chemicals was favorably impacted by a $9.8 million reduction in manufacturing and distribution expenses due primarily to the reduced volume and the Companys cost cutting initiatives described above, partially offset by a $1.8 million charge to reduce the carrying value of certain inventory to market value at June 30, 2009. The decrease in gross profit as a percentage of net sales (15.5% in the first six months of 2009 versus 26.5% in the first six months of 2008) was primarily due to the favorable effect of a rising cobalt price environment in the second quarter of 2008, which resulted in the sale at higher selling prices of products manufactured using lower cost cobalt raw materials as compared to the conditions that existed during the first six months of 2009, which included a lower and more stable price environment and fixed expenses spread over lower sales volumes.
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OM Group Inc. is a leading international producer and marketer ofvalue-added metal-based specialty chemicals and powders. The company supplies numerous different product offerings -- principally categorized as metal carboxylates inorganic metal salts and metal powders for diverse applications to more a range of different industries. Typically their products represent a small portion of the customer\'s total cost of manufacturing or processing but are critical to the customer\'s product performance. OM Group Inc. has a market cap of $1.07 billion; its shares were traded at around $34.87 with a P/E ratio of 18.7 and P/S ratio of 0.6.
Highlight of Business Operations:
Net sales decreased $307.5 million, or 60.2%, primarily due to decreases in the cobalt reference price and decreased volume. The average cobalt reference price decreased from $45.93 in the second quarter of 2008 to $14.44 in the second quarter of 2009, which resulted in lower product selling prices ($126.2 million) and a decrease in cobalt metal resale ($78.5 million) in the Advanced Materials segment. Weak end-market demand drove decreases in volume in both Advanced Materials ($38.1 million) and Specialty Chemicals ($33.7 million). Specialty Chemicals also was impacted by unfavorable selling prices ($12.5 million) as a result of increased price competition in a reduced market-volume environment. Copper by-product sales also were lower ($11.4 million) due to the lower average copper price in the second quarter of 2009 compared with the second quarter of 2008. On a sequential basis, consolidated net sales increased $11.6 million, or 6.1%, in the second quarter of 2009 compared to the first quarter of 2009, primarily due to increased demand in both Advanced Materials and Specialty Chemicals.Gross profit decreased to $34.4 million in the second quarter of 2009, compared with $126.0 million in the second quarter of 2008. The largest factor affecting the $91.6 million decrease in gross profit was the decrease in the average cobalt reference price from $45.93 in the second quarter of 2008 to $14.44 in the second quarter of 2009, which resulted in lower Advanced Materials selling prices and reduced gross profit by $59.4 million in the second quarter of 2009 compared with the second quarter of 2008. Also impacting the Advanced Materials segment gross profit was decreased volume ($25.7 million). Advanced Materials was favorably affected by a $6.5 million reduction in manufacturing and distribution expenses due primarily to reduced volume and the Companys cost cutting initiatives that included reductions in discretionary spending, headcount reductions, and decreased employee incentive
The Company recorded tax expense of $3.5 million on pretax losses of $29.8 million for the three months ended June 30, 2009, resulting in a negative effective tax rate. In the three months ended June 30, 2009, the Company recorded discrete tax expense items totaling $1.0 million, which included expense of $1.8 million related to withholding tax on earnings planned to be repatriated from Taiwan, partially offset by a $0.6 million benefit related to GTL in the DRC, of which the Companys share is 55%. Excluding discrete items, the tax rate for the second quarter of 2009 differs from the U.S. statutory tax rate primarily due to the non-deductible $35.0 million goodwill and the $1.2 million intangible asset impairment charges, losses in certain jurisdictions for which there is no tax benefit and income in certain foreign jurisdictions with tax rates lower than the US statutory rate. The Companys effective income tax rate for the three months ended June 30, 2008 was 26.8%. This rate is lower than the U.S. statutory rate due primarily to income earned in foreign tax jurisdictions with lower statutory tax rates than the U.S. (primarily Finland) and a tax holiday in Malaysia, partially offset by tax expense related to foreign earnings repatriation during 2008.
Income (loss) from continuing operations attributable to OM Group, Inc. was a loss of $35.0 million, or $1.16 per diluted share, in the second quarter of 2009, compared with income of $56.6 million, or $1.86 per diluted share, in the second quarter of 2008, due primarily to the aforementioned factors.
Net sales decreased $596.6 million, or 60.2%, primarily due to a $242.8 million decrease from lower product selling prices in the Advanced Materials segment, which resulted from an decrease in the average cobalt reference price in the first six months of 2009 compared with the first six months of 2008, and a $131.2 million decrease from the resale of cobalt metal. The weak economy drove decreases in volume in both Specialty Chemicals ($92.4 million) and Advanced Materials ($78.4 million) as a result of weak end-market demand and customer de-stocking. Copper by-product sales also were lower ($25.8 million) due to the lower average copper price and decreased volume in the first six months of 2009 compared with the first six months of 2008.
Gross profit decreased to $61.0 million in the first six months of 2009, compared with $262.7 million in the first six months of 2008. The largest factor affecting the $201.7 million decrease in gross profit was the changes in the average cobalt reference price during 2008 and 2009. The average cobalt reference price rose from $40.00 at the beginning of 2008 to near $50.00 by the end of the first quarter and averaged $45.93 in the second quarter of 2008. As a result, the first six months of 2008 benefited from higher product selling prices due to the high average reference price for cobalt during this period. The average reference price of cobalt was $13.37 and $14.44 in the first and second quarter of 2009, respectively, which resulted in lower Advanced Materials selling prices and reduced gross profit by $118.4 million as compared to the first six months of 2008. Also impacting the Advanced Materials segment gross profit was decreased volume ($48.3 million) and a decrease in profit associated with copper by-product sales ($11.0 million). The first six months of 2008 was favorably impacted by a $4.0 million gain on cobalt forward purchase contracts. Advanced Materials was favorably impacted by a $9.0 million reduction in manufacturing and distribution expenses due primarily to reduced volume and the Companys cost cutting initiatives that include reductions in discretionary spending; headcount reductions; and decreased employee incentive compensation. In the Specialty Chemicals segment, decreased volume reduced gross profit by $33.5 million. Specialty Chemicals was favorably impacted by a $9.8 million reduction in manufacturing and distribution expenses due primarily to the reduced volume and the Companys cost cutting initiatives described above, partially offset by a $1.8 million charge to reduce the carrying value of certain inventory to market value at June 30, 2009. The decrease in gross profit as a percentage of net sales (15.5% in the first six months of 2009 versus 26.5% in the first six months of 2008) was primarily due to the favorable effect of a rising cobalt price environment in the second quarter of 2008, which resulted in the sale at higher selling prices of products manufactured using lower cost cobalt raw materials as compared to the conditions that existed during the first six months of 2009, which included a lower and more stable price environment and fixed expenses spread over lower sales volumes.
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