Oglebay Norton reports earnings decline, but expects improvement this year
07/25
Second-quarter earnings fell for Oglebay Norton's mineral and Great Lakes shipping operations, but signs are promising for the remainder of the year.
Oglebay Norton reported Tuesday that revenues for its Great Lakes Minerals segment declined to $46.9 million from $50.9 million in the second quarter. Company officials attributed the drop primarily to the timing associated with the start of the shipping season on the Great Lakes.
Overall, Oglebay Norton's revenues for the quarter were $112.6 million compared to $119.5 million in the year earlier period. Revenues for the six-month period were $174.9 million compared to $185.3 million in the prior year six-month period.
The fleet's cargo volume and revenue were down nearly 24 percent in the second quarter, mainly because of the loss of iron ore shipments to bankrupt LTV Steel Co., said Michael D. Lundin, Oglebay Norton's president and chief operating officer.
However, the bad news was offset by signs of a promising future.
Both coal and stone shipments have remained stable this year, and operating income for the Great Lakes Mineral segment improved by nearly $1 million quarter over quarter. Revenue was aided by cost reductions at company limestone operations, higher water levels on the Great Lakes, and efficiencies from Oglebay Norton's vessel pooling agreement with American Steamship Co.
"Stone demand to remain solid," Lundin said. "We will continue to realize synergies from both the pooling agreement and its integration with our limestone operations, and we will continue to explore strategic partnerships and alliances."
Oglebay Norton also is benefiting from the start of steel production by International Steel Group, which purchased the steelmaking assets of LTV.
Oglebay Norton negotiated a 15-year agreement with Cleveland Cliffs to transport taconite pellets from Cliffs-operated mines to ISG mills in Gary and Cleveland through its pooling agreement with American Steamship. ISG hopes to produce 5 million to 6 million tons of steel a year, but production should be less than that amount this year.
In addition, Oglebay Norton has secured a deal to handle the transfer of all pellets in the Cleveland area. They will be moved across Oglebay's Cleveland Bulk Terminal facility. Financial benefits of this operation should be reflected in third-quarter earnings.
The agreement with Cliffs fits into Oglebay Norton's efforts to secure long-term shipping contracts. Lundin said 80 percent of the fleet's business is composed of multi-year contracts to haul coal, limestone and taconite pellets.
Lundin said Oglebay Norton's marine operations will continue to focus on its pooling agreement with American Steamship Co.
With the pooling arrangement, Oglebay Norton expected to have two to three vessels laid up this season. But due to efficiencies resulting from agreement and changing market conditions, only the steamer Joseph H. Frantz remains in lay-up.
Lundin also said the company remains "on track" in its "due diligence" to buy Erie Sand & Gravel, which operates the vessel Richard Reiss. Due Diligence refers to the last stage of the buying process. Included in the deal is the Reiss, which has been in lay-up this season and is not expected to sail.
Oglebay Norton Company, a Cleveland, Ohio-based company, provides essential minerals and aggregates to a broad range of markets, from building materials and home improvement to the environmental, energy and metallurgical industries. Building on a 149-year heritage, its vision is to become the premier growth company in the industrial minerals industry. The company's website is located at www.oglebaynorton.com.
Reported by: Al Miller