OM Group, Inc. (OMG)
Q3 2009 Earnings Call Transcript
November 05, 2009 10:00 ET
Joseph M. Scaminace - Chairman and Chief Executive Officer
Kenneth Haber - Chief Financial Officer
Stephen D. Dunmead - Vice President and General Manager, Specialties Group
Gregory J. Griffith - Vice President, Strategic Planning, Development and Investor Relations
Troy Dewar - Director of Investor Relations
Michael Harrison - First Analysis
Rosemarie Morbelli - Ingalls & Snyder
Saul Ludwig - KeyBanc Capital Markets
Previous Statements by OMG
» OM Group Inc. Q2 2009 Earnings Call Transcript
» OM Group Q1 2009 Earnings Call Transcript
» OM Group, Inc. Q4 2008 Earnings Call Transcript
Thank you Sheena and good morning everyone. Welcome to our review of OM Group’s 2009 third quarter results. Joined 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 of Strategic Planning Development and Investor Relations
The copy of the press release we issued earlier this morning as well as the presentation material that accompany our discussion can found on the Investor Relations portion of our website at investor.omgi.com. As a comments made this morning by any of the participants on the call may include forward-looking statements based upon specific assumptions and subject to uncertainties and factors which are difficult to predict. Actual results could differ materially from those express 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 apply to this call.
At this time I will turn the call over to Joe Scaminace.
Joseph M. Scaminace
Thank you Troy, and good morning everyone. Last year at this time we entered a major global economic decline. This downturn affect to all markets and all region. And led to drastically lower top line and bottom line performance for our company. Now a year later, there are indications that the worst is over. In the case of OM Group many of our end markets are seeing sequential growth. This growth is occurring in battery, semi conductor, printed circuit board and memory disk. As driven impart by inventory restocking we are also seeing positive trends in underlying demand.
Customer orders are certainly running than we expected in the first half of this year and we experience in the first half of this year. And while this may be a sign that we are entering a gradual economic recovery, there still enough mix data to keep us from getting overly optimistic in the near term. For example there is evidence that end market demand is still slow in automotive, construction and industrial production. In addition some of the some increase in demand is attributable to the unprecedented stimulus by governments around the globe, this may not be sustainable.
In addition to improving trends in end market demand we also experienced benefit from a positive trend in the cobalt reference price. Since bottoming at the end of 2008 the cobalt reference price has risen steadily throughout 2009. And now the most recent quote is just under $20 per pound. This up tick has provided some benefit on a sequential basis. Throughout the year we’ve discussed the actions we’ve taken to address this downturn. We moved early, quickly and decisively to enhance profits by reducing cost dramatically and managing cash. These measures contributed to stronger third quarter results and we are seeing the benefits of our actions.
The next step in our profit enhancement program is already well underway. We are today announcing restructuring action in the advanced organic business. This specialty chemical business serve several markets, including the tire market, the coatings market and various chemical end markets.
All of our customers in these markets have been hit hard during the recent economic downturn, especially our tire customers. Additionally, the coating sector is facing challenges from legislative and regulatory action as well as decreased customer demand. These factors have contributed to global overcapacity for the products we supply to these markets.
Additionally, new competitors have entered the rubber adhesion promoter product line creating additional oversupply. And as a result there has been a meaningful decrease in both demand and profitability in these markets. There is one other factor which contributed to our decision. End market demand is shifting away from our European manufacturing footprint and moving toward Asia. We therefore determined that now is the time to reduce our capacity, realign our operations and get more cost out. These restructuring actions demonstrate our results to act quickly and substantially to improve our cost structure.
I’m proud of the hard work our employees have shown during this difficult period. Taking cost out is never easy, but our actions are essential to meeting the challenges we face in this difficult operating environment. And in tough calls are certainly essential to delivering the type of performance that we’ve reported this morning.
Excluding restructuring charges, the specialty chemical segment achieved year-over-year growth in operating profits. It’s worth noting that today we are as strong financially that at any time in our company’s history. We are debt free and have more than $300 million in cash on hand. We generated positive cash flow in every quarter since the downturn, including the the last quarter of 2008 all the way to the last quarter.