3/8/2007

By Jack Kaskey

March 5 (Bloomberg) -- OM Group Inc., the world's largest cobalt producer, said fourth-quarter profit jumped more than fourfold on surging prices at the nickel unit, which was sold last week. Excluding that subsidiary, the company recorded a loss, sending the stock down as much as 7.1 percent. Net income rose to $56.8 million, or $1.93 a share, from $11.6 million, or 40 cents, a year earlier, Cleveland-based OM Group said today in a statement. Excluding the nickel unit, the loss was 58 cents a share.

"Most of the outperformance came from the business they sold," said Dmitry Silversteyn, senior research analyst at Longbow Research in Independence, Ohio. "The ongoing operations were less than some people expected, so the results are probably disappointing."

Profit from nickel jumped sevenfold to $73.8 million as prices more than doubled to $15 a pound. Total sales climbed 14 percent to $172.1 million. The loss from continuing operations widened to $17 million from $101,000, OM Group said.

OM Group fell $3.14, or 6.6 percent, to $44.32 at 12:14 p.m. in New York Stock Exchange composite trading. A close at that price would mark the biggest percentage drop since Nov. 20. Before today, the shares had more than doubled in the past year.

Silversteyn rates the stock "neutral." He had forecast fourth-quarter profit of $1.05 a share. The company sold the nickel unit to Russia's OAO GMK Norilsk Nickel, the world's biggest producer of the metal, for $408 million. The deal closed on March 1.

"Substantive Transformation"

"With the sale of our nickel business now complete, we enter 2007 in the midst of a substantive transformation," Chief Executive Officer Joseph Scaminace said in the statement. "Our path forward will see our return as an industry leader." OM Group plans to use proceeds from the sale to pay down debt and make acquisitions, including potential purchases of companies that make coatings, rubber adhesives, electronic materials and catalysts, Silversteyn said.

The company's average cobalt price rose 49 percent in the fourth quarter to $18.66 a pound from a year earlier. Sales in the fourth quarter of 2005 were $151.5 million.

--Editor: McKiernan

To contact the reporter on this story: Jack Kaskey in New York at +1-212-617-8786 orjkaskey@bloomberg.net