OM Group Q1 net income jumps 35.8% to US$30.7M, net sales rise 9% to US$331.3M, driven by sustained growth across all three operating segments
May 5, 2011
– OM Group, Inc. (NYSE:OMG - News) today announced financial results for the first quarter ended March 31, 2011.
Net sales in the first quarter were $331.3 million, 9 percent higher than the same period in 2010. The increase was driven by sustained growth across all three of the company’s operating segments, including a full quarter of sales and strong demand within the Battery Technologies segment, higher cobalt volume in the Advanced Materials segment, and volume growth for semiconductor and printed circuit board end markets in the Specialty Chemicals segment. Net income was $30.7 million in the first quarter of 2011, or $1.00 per diluted share, compared with $22.6 million, or $0.74 per diluted share, during the year-ago period. Income from continuing operations in the first quarter of 2011 was $1.01 per diluted share, compared with $0.74 per diluted share last year.
“We are pleased to report that we are picking up in 2011 where we left off in 2010, as demand remains strong across most of our global end markets,” said Joseph Scaminace, chairman and chief executive officer. “Equally important is the fact that we continue to translate our strong top-line results into profitable bottom-line growth and positive cash flow from operations. This financial strength gives us the flexibility to continue to fund our growth for both the near and longer term.”
Gross profit grew 14 percent as higher volumes and lower manufacturing expense offset unfavorable pricing and mix, resulting in an improvement in gross margin to 24.8 percent of sales from 23.7 percent last year. SG&A increased 11 percent due to an increase in sales activity, higher employee compensation and benefit costs, and increased professional services fees, partially offset by an environmental-related insurance recovery. Operating profit rose to $37.8 million (11.4 percent of sales) from $31.9 million (10.5 percent of sales) last year.
Income tax expense in the first quarter of 2011 was $5.7 million, resulting in an effective tax rate of 15.5 percent. This is lower than the effective tax rate of 2010, excluding discrete items, due to the mix of earnings, a reduction in U.S. losses, an improved ability to record tax benefits related to those losses and the impact of foreign currency exchange rate movements. The first quarter of 2010 income tax includes discrete tax benefits totaling $4.0 million (company portion is $2.8 million).
BUSINESS SEGMENT RESULTS (all comparisons with the first quarter of 2010)
* Net sales were $180.1 million, up 6 percent
* Product sales volumes rose 2 percent as growth in powder metallurgy, ceramics and chemical offset a decrease in battery materials; other volume increased 27 percent due to higher copper contained in the mix of raw material feed
* Operating profit was $32.1 million (17.8 percent of sales), up 10 percent on higher cobalt volume, increased contribution from by-product sales, and lower manufacturing and distribution expense
* Net sales were $120.6 million, up 5 percent
* Demand was higher in the semiconductor and printed circuit board end markets, while volumes fell in Advanced Organics due to the closure of the Manchester, England facility
* Operating profit was $13.7 million (11.4 percent of sales), down $1.6 million due primarily to unfavorable price / mix and higher SG&A
* Net sales were $31.0 million, up 67 percent primarily due to full-quarter results in the 2011 period while only two months were included in the 2010 period
* Revenue improved in all end markets on increases in demand and customer deliveries, particularly in aerospace and defense
* Operating profit improved to $2.1 million on volume growth, favorable price / mix, and $1.5 million in purchase accounting adjustments in 2010 that did not recur in 2011
“Given our current sense of the year ahead, we maintain a positive outlook for the business and the markets we serve,” said Scaminace. “Our portable power and electronic chemicals growth platforms should continue to benefit from increasing global demand for electronics. In addition, strength in industrial production and an initial recovery in construction should benefit our powder metallurgy and coatings end markets, respectively. That said, we continue to closely monitor several issues that could meaningfully impact our results in the second quarter or the balance of the year, including the industrial recovery in Japan following the natural disasters, continued fluctuation in foreign currency exchange rates that impacts not only our revenue and operating profit, but also our tax rates, and the weakening fundamentals in the supply and demand dynamics within the global cobalt market. And of course, our second quarter results will be affected by the annual maintenance shutdown of our Kokkola, Finland manufacturing facility.”
For purposes of this release, discussions related to income from continuing operations or net income pertain to amounts attributable to OM Group, Inc. common stockholders.
Presentation of Non-GAAP Financial Information
The Company is including certain non-GAAP financial measures, including Income from continuing operations attributable to OM Group, Inc. and Earnings per common share – assuming dilution, both as adjusted for special items. “Income from continuing operations attributable to OM Group, Inc. – as adjusted for special items” is a non-GAAP measure used in this release. It is defined and reconciled to what management believes to be the most comparable U.S. GAAP measure in a schedule attached to this release. The Company believes that the non-GAAP financial measure facilitates a comparative assessment of the Company's operating performance and will enhance investors' understanding of the performance of the Company's operations during 2011 and of the comparability of the 2011 results to the results of the relevant prior period. Such non-GAAP financial measures are unique to the Company and may not be employed by other companies. The non-GAAP financial information should not be construed as an alternative to reported results determined in accordance with U.S. GAAP.
OM Group has scheduled a conference call and live audio broadcast on the Web for 10 a.m. Eastern time today. Investors may access the live audio broadcast by logging on to http://investor.omgi.com. A copy of management’s presentation materials will be available on OMG’s website at the time of the call. The company recommends visiting the website at least 15 minutes prior to the webcast to download and install any necessary software. A webcast audio replay will be available on the “Investor Relations - Presentations” page of the company’s website three hours after the call.
ABOUT OM GROUP, INC.
OM Group, Inc. is a leading global solutions provider of specialty chemicals, advanced materials, electrochemical energy storage and unique technologies crucial to enabling our customers to meet increasingly stringent market and application requirements. The company serves a wide variety of sectors, including rechargeable batteries, electronic devices, cutting tools, petrochemical catalysts, electronics manufacturing, industrial coatings, defense, aerospace, and medical devices. Headquartered in Cleveland, Ohio, OM Group operates manufacturing facilities in the Americas, Europe, Asia and Africa. For more information, visit the company's Web site at http://www.omgi.com.