The road to profitability has lowered OM Group's earnings for now, but will show higher profits within three years, company executives insist.
The OM Group is moving away from commodity chemicals and into engineered products including batteries and magnetics.CLEVELAND, Ohio -- OM Group on Wednesday reported lower net profits for the third quarter compared to a year ago as the long-time rare earth commodity supplier continues its transition to becoming a manufacturer of magnetic and battery technologies and specialty chemicals.
That transition has included selling off parts of the company that focused on commodity sales of chemicals, while acquiring other companies and selling off the least profitable parts of them, as well. The strategy has made it difficult to compare results quarter over quarter.
OM Group is now a supplier of highly engineered technologies to the automotive, electronic, aerospace and defense industries.
For the three months ending Sept. 30, the company reported net income or profit of $6.4 million, or 20 cents per share, on sales of $263 million.
That compares to net income of $12.2 million, or 38 cents per share, on sales of $266 million during the third quarter of 2013.
Sales during the quarter were higher in battery technologies, but lower in magnetic technologies, mostly because of a European economic slowdown.
Gross income for the third quarter -- before expenses including taxes and other bookkeeping expenses associated with the company's reorientation as a diversified industrial manufacturer -- was $33 million.
OM Group finished the quarter with $107 million in cash and no debt. The company adjusted its expected full-year adjusted earnings before bookkeeping expenses to $115 million, down from previously predicted $120 million, because of slowdowns in Europe.
OM Group also Wednesday announced it would acquire Rhode Island-based Ener-Tek International, Inc., a designer and maker of lithium-ion and silver-zinc cells and batteries. The company's customers are in the defense and aerospace industries.
"This acquisition reflects our strategy of building out our existing business platforms with complementary acquisitions," Joe Scaminace, chairman and CEO, said in a written statement. "Ener-Tek is a perfect fit for our Battery Technologies platform, enabling us to better serve our battery customers with a wider range of innovative solutions. The acquisition is expected to be accretive to our profitability and generate an attractive return on investment."
He predicted higher profits beginning in late 2015 and developing steadily through 2017.
Scaminace and other top executives discussed the results Wednesday in a live teleconference with analysts, publicly available on the company's website. To access the teleconference, click here.