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OM Group Inc. (OMG)
Q2 2009 Earnings Call
August 6, 2009; 10:00 am ET
Joe Scaminace - Chairman, Chief Executive Officer & President
Ken Haber - Chief Financial Officer
Steve Dunmead - Vice President & General Manager of Specialties
Greg Griffith - Vice President of Strategic Planning Development & Investor Relations
Troy Dewar - Director of Investor Relations
Mike Harrison - First Analysis
Rosemarie Morbelli - Ingalls & Snyder
Saul Ludwig - Keybanc
Previous Statements by OMG
» OM Group, Inc. Q3 2009 Earnings Call Transcript
» OM Group Q1 2009 Earnings Call Transcript
» OM Group, Inc. Q4 2008 Earnings Call Transcript
I will now like to turn the call over to Mr. Troy Dewar. Please go ahead, sir.
Thank you, Vanessa. Good morning everyone and welcome to our review of OM Group’s 2009 second quarter results. Joining me this morning are Joe Scaminace, Chairman and Chief Executive Officer; Ken Haber, Chief Financial Officer; Steve Dunmead, Vice President and General Manager of Specialties; and Greg Griffith, Vice President and Strategic Planning Development and Investor Relations.
A copy of the press release we issued earlier this morning, as well as the presentation materials that accompany our discussion can be found on the Investor Relations portion of our website at www.investor.omgi.com.
As a reminder comments made this morning by any of the participants on the call may include forward-looking statements based on specific assumptions and subject to uncertainties and factors which are difficult to predict. Actual results could differ materially from those expressed or implied. A more complete disclosure regarding forward-looking statements can be found at the bottom of our press release or in our Form 10-K and applies to this call.
At this time I will turn the call over to Joe Scaminace.
Thank you, Troy. Good morning everyone and thank you for joining us today. Most of you know the difficult story of the first half. There is no doubt that this year has been tough for us, as well as our customers and our suppliers. The significant downturn in global business activity, coupled with the stress in the financial markets, has sent shock waves throughout every business sector of our company.
As we enter the second half of 2009, most of these challenges still remain. It is true that we are seeing some improvement in a few areas, but the improvement is measured against the stuck conditions of the first quarter. Certain end markets appear to be bottoming out and demand trends are stabilizing or in fact improving.
The destocking that reduced volume levels earlier of this year has subsided. Consequently we’ve seen improvement in sales volumes across some of our end markets, most notably printed circuit board and semiconductor. For example, the top 20 semiconductor suppliers saw a 21% sequential sales increase in the second quarter. They reported that the sales surge was due to the inventory replenishment after severe cutbacks in the fourth quarter of 2008 and the first quarter of 2009.
While we were encouraged by the positive volume trends we’ve seen over the last several months, we do not yet see evidence that we are entering a period of sustained growth in end market demand. We’ve seen some growth that has resulted from stimulus spending, especially in the electronics sector. We’ve also seen stronger demand for commodities coming out of China, which some have speculated is not actually tied to market demand.
The issue for the balance of this year is that these volume increases may not have a lasting impact. The fact remains that the global economic outlook remains very cloudy, and we expect demand to remain unpredictable. Like most companies, it was our belief that entering the second half of 2009, we would have a better read on the longer term growth trends in our end markets; at this point we don’t.
Consistent with this new reality, we’ve reported impairment charges that reflect lower expected cash flows from two of our businesses. These charges also reflect greater uncertainty regarding the realization of those cash flows. Taking these charges was appropriate and necessary. We remain flexible and have reduced costs in response to lower levels of sales volume.
Our actions due to the first half of the year to enhance profitability include headcount reductions, salary freezes, spending cuts and capital project delays. These moves are already benefiting our bottom line and we have contingency plans in place, should market conditions warrant.
From a cash flow perspective, we were once again successful this quarter in generating strong cash flow from our operations. We used our cash to reduce our debt to virtually zero. The financial strength we built, allows us to grow this company profitably and execute our strategy to transform our business model. The end result will be a larger, more profitable company, that will be less dependent on commodity prices and be characterized by a more sustainable and predictable earnings profile.
I will now turn the call over to Ken Haber to walk you through the details of our financial performance.
Thank you, Joe. Good morning to everyone listening. My comments will cover the company’s second quarter 2009 consolidated results, as they compare to the first quarter of 2009 and the second quarter of last year; as shown on page three and page four of the presentation materials that appear on our website.