OMG worth a look?
Good to know this guy did his homework on OMG before putting out a $45 price target.
OMG Upgrade
8:35 AM DJ Keybanc Capital Upgrade om group to
buy from hold.
OMG first change in rating since Oct 2003
OMG Analyst
Saul H. Ludwig, CFA, Equity Research Analyst, McDonald Investments
1-216-443-4646
sludwig@mcdinvest.com
Saul H. Ludwig is a Managing Director, Equity Research Analyst, with McDonald Investments Inc., the investment banking, capital markets and brokerage division of KeyCorp. With McDonald Investments since 1995, he is responsible for all aspects of McDonald's research of the tire & rubber and specialty chemical industries.
Mr. Ludwig was previously Executive Vice President and Director of Research at Roulston & Company in Cleveland, Ohio. Prior to that he was a systems analyst with B.F. Goodrich. Mr. Ludwig earned a Bachelor of Science degree in electrical engineering from Case Western Reserve University in Cleveland and a Master of Business Administration degree from the University of California at Los Angeles.
A Chartered Financial Analyst, Mr. Ludwig is a contributing editor to Modern Tire Dealer magazine and is frequently quoted in leading business publications. Institutional Investor magazine has repeatedly named him to its All-American Research Team. He was also recently recognized by StarMine as a Top 3 Earnings Estimator for the Chemical industry. He is a member of the Cleveland Society of Security Analysts and serves in leadership positions with Ohio Boys Town, National Multiple Sclerosis Society and Park Synagogue.
key.com
Operator: Your next question comes from Saul Ludwig with McDonald Investment.
Saul Ludwig: Hi, good morning guys. On the nickel side with the Weda Bay deal, does part of your write off include your investment in Weda Bay or is that still a live entity?
Thomas Miklich: No, as you say, we had an announcement and Weda Bay made an announcement that we had said that we would no longer support it and that will be part of our write off.
Saul Ludwig: And how much was that investment of Weda Bay?
Thomas Miklich: It’s about 13 to $15 million.
Saul Ludwig: If cobalt were to go down to let’s say 550 for reasons that we don’t now, would you have another inventory write down being that you’ve valued your cobalt inventory at 630?
Thomas Miklich: At 550 again you’d have to take a look at what you’re assumptions are and the mix of that inventory. But as we said earlier in the meeting, we are working on a plan to get that break-even point for Kokkola down from 650 to a lower level. So I can’t answer the question, but certainly every quarter every month that will be looked at based on the cobalt price.
Saul Ludwig: Of your, was it $95 million or so in profit that you are looking for in precious metals next year, how much of that is from auto catalyst versus let’s just say everything else if we put it in two buckets?
Thomas Miklich: Well generally we don’t disclose that information for business considerations. But as you see, the revenue side of it, I mean it is the biggest part of that business. But, you know, generally that’s not something that we will disclose.
Saul Ludwig: Okay and from a management standpoint, are the three guys that are going to head up these three businesses the same people that are there now?
James Mooney: It’s Todd Romance who has moved from nickel over to cobalt that has 20 years experience in the cobalt. He’ll run the complete operations including the refining and all financial responsibilities. It’s Marc Bak who ran our SCM business and turned that around and did an outstanding job. He’s now, as you know, in Harjavalta.
Saul Ludwig: He’s the nickel guy.
James Mooney: He’s the nickel guy and it’s Rick Adante who has come to us in the last 2-1/2 years, will be running the Precious Metals group.
Tom Miklich: I think the thing you’ve got to focus on there Saul is that, based on the new structure, these guys have full P&L responsibility all the way down and I think that was one of the issues that we had is responsibility and accountability was shared. This way it’s going to be in one place and I think it will give us a lot more focus and a lot quicker understanding of what’s happening in the business.
Saul Ludwig: Now Lohman is still going to run the other business?
Thomas Miklich: He’ll run the Metals Management business.
Saul Ludwig: The Metals Management?
Thomas Miklich: Yes.
Saul Ludwig: And does Romance and Bak report into you, Jim, or do they report into that other guy that was hired?
James Mooney: No, they report directly to me and I talk to them on a daily basis and we have changed methods of how they report, what they report, what their objectives are on a monthly basis, what the objectives are in a quarterly basis and we sit down, we try to sit down with Tom on a weekly basis, we’ve done this already and go over what we’re doing currently in the marketplace, what our objectives are currently in the marketplace and Tom) goes over and reviews the financial strategy that we should be implementing throughout the organizations.
Saul Ludwig: And the other thing someone else eluded to this before, you’re going to reduce headcount by 550 people, does that include the businesses that you want to sell, the people that are in that group of the assets that you’re going to sell?
Thomas Miklich: There are some people in there that we’re going to sell, but it’s not a major part of that number.
Saul Ludwig: One at least 550 people, or 500, they were doing something; they were doing something for the organization. Is there going to be a shifting to some of those people to buying surfaces on the outside or are you really going to be able to get along without those 500 people with nothing falling between the cracks?
Thomas Miklich: I believe right now that we’ll be able to get along without them with nothing falling between the cracks. But clearly, the organization is going through a change it hasn’t done before and we’re going to have some bumps in the road, but we’re, you know, we’re tracking everything and doing the best we can to avoid that.
But again, I think we’re even going to go further as we move forward because we have to identify some additional cost savings and I think if you look at the numbers, I mean, you know, you’ll point it out to me I’m sure, that we haven’t taken enough out of the corporate overhead side of it and we’re going to take a look at that.
James Mooney: In addition to that too, that one thing is very important is we have not reduced our financial staffing so that we have better tracking and more complete tracking of information on a daily basis.
Saul Ludwig: Yes, that was my other question about information, systems and controls was an area of high focus, where you are along that curve versus where you want to be.
Thomas Miklich: Well I think where we are, I mean I think we have added good people, you know, even talking with E&Y and the audit committee and the Board, we’re happy with our progress there. We’ve added two very good reporting packages, one that people did in the Precious Metals Group with an enterprise reporting systems.
Ours is just going live at the corporate office. We’ve also put in a budget in planning tool. I think the thing that we have left to do now is to realign the reports coming from those systems to our new management structure and that’s what we’ll be working on next.
Saul Ludwig: And my final question, remember in the third quarter you had some help because you had changed some rebates, or contract changes on what you paid for your raw material supplies in cobalt. You were paying, I don’t know, a certain percentage of the market price. Have those contracts been able to be renegotiated where you can pay a lower percentage of the market price for the cobalt contained product going forward versus what you had been paying up to now?
James Mooney: The going forward rate after the rebate has been established as the new lower cost.
Saul Ludwig: So these savings that you got in the third quarter are going to be replicated?
Thomas Miklich: Yes, but you’ve got to remember, the third quarter was a catch up for what had been done through the years. So that while the savings are there, they’re not as big of an amount going forward. I mean they are significant and it helps us get Kokkola to breakeven with the cost reductions going into the first quarter but the magnitude of it in the fourth quarter is a lot less than the third quarter because of the catch up.
Saul Ludwig: Because of that amount.
Thomas Miklich: Yes.
Saul Ludwig: Okay, great. Thanks a lot.
OMG Upgrade
8:35 AM DJ Keybanc Capital Upgrade om group to
buy from hold.
OMG first change in rating since Oct 2003
NEW YORK, June 29 (New Ratings) - Analysts at KeyBanc Capital Markets upgrade OM Group (ticker: OMG) from "hold" to "buy," while raising their estimates for the company. The 12 months target price is set to $45.
In a research note published this morning, the analysts mention that a rise in cobalt prices from $16.0/lb earlier in the year to $24.5/lb and the company’s retention of a greater share of the high nickel price are important positives for OM Group. The growing popularity of the hybrid electric vehicles would drive the company’s performance over the next five year, since large quantities of nickel and cobalt are used in the batteries of these vehicles, the analysts say.
OMG Analyst
Saul H. Ludwig, CFA, Equity Research Analyst, McDonald Investments
1-216-443-4646
sludwig@mcdinvest.com
Saul H. Ludwig is a Managing Director, Equity Research Analyst, with McDonald Investments Inc., the investment banking, capital markets and brokerage division of KeyCorp. With McDonald Investments since 1995, he is responsible for all aspects of McDonald's research of the tire & rubber and specialty chemical industries.
Mr. Ludwig was previously Executive Vice President and Director of Research at Roulston & Company in Cleveland, Ohio. Prior to that he was a systems analyst with B.F. Goodrich. Mr. Ludwig earned a Bachelor of Science degree in electrical engineering from Case Western Reserve University in Cleveland and a Master of Business Administration degree from the University of California at Los Angeles.
A Chartered Financial Analyst, Mr. Ludwig is a contributing editor to Modern Tire Dealer magazine and is frequently quoted in leading business publications. Institutional Investor magazine has repeatedly named him to its All-American Research Team. He was also recently recognized by StarMine as a Top 3 Earnings Estimator for the Chemical industry. |
