JAMES MOONEY - OM GROUP INC (OMG)
CEO Interview - published 11/08/2001

DOCUMENT # NAM202

JAMES P. MOONEY is Chairman of the Board and Chief Executive Officer of
OM Group, Inc., a position he has held since 1991. OM Group, Inc. is a
leading, vertically integrated international producer and marketer of
value-added, metal-based specialty chemicals, with operations on five
continents and annual sales of approximately $6 billion. From 1979-1991,
Mr. Mooney was President and Chief Executive Officer of Mooney
Chemicals, Inc. Mr. Mooney managed the family-held $5 million business
of Mooney Chemicals, Inc., until it reached $55 million and merged with
Kokkola Chemicals, a division of Outokumpu Chemical Oy of Finland, to
form OMG in 1991. His professional associations include the National
Paint and Coatings Association; National Federation of Paint Technology,
and Chemicals Management Council (past Officer and Chairman); and the
American Chemistry Council. He is the Chairman of the Cobalt Development
Institute and currently serves on the Board of Trustees of the Cleveland
Clinic Foundation. He has received various honors including Entrepreneur
of the Year in 1996 and most recently was awarded the 2000 George S.
Dively Entrepreneurship Award by the Harvard Business School Club. Mr.
Mooney received a BA in History from Quincy University.  

Sector: specialty chemicals

TWST: What's happened at OM Group since the beginning of the year that
investors should focus on?

Mr. Mooney: I think investors should focus on significant trends, and in
our business, some of the trends are moving toward stricter
environmental laws, which favor investors and OMG. For example, we're
active in hydrogen de-sulferization, catalytic converters for auto
catalysts, natural gas conversion to liquid fuels, fuel cells,
rechargeable batteries and hybrid electric vehicles. Those are trends
that significantly put us in a strong growth position for the future. We
sell to many old economy industries such as plating, ceramics, coatings,
tires, stainless steel, heat stabilizers and inks. But we also sell to
many new economy industries. In addition to environmental applications,
we have applications in memory disks, electronics, superalloys, diamond
tools and hard metal tools. So it's a nice combination between old
economy and new economy. We also have a very strong new product
development program, which enhances our position to grow earnings per
share on a consistent and reliable basis.

TWST: As you look at this array of markets that you operate in, where do
you see the biggest opportunity over the next two or three years?

Mr. Mooney: We sell to about 30 different industries where we are a
small portion of a customer's total cost, but critical to their
performance. The biggest opportunities for us are to seek out changes
and trends in the industries where we can be a major factor, and long
term that would be in fuel cells, hybrid electric vehicles, rechargeable
batteries, electronic applications, superalloys and hard metal tools.
Those would all be areas of alternative energy sources and new trends
and opportunities.

TWST: What is OM Group's real expertise?

Mr. Mooney: Our expertise is applying our unique vertical integration in
separating, refining and processing metals into metal-based specialty
products. If you look at the company today, OM is the largest consumer,
refiner and producer of cobalt in the world. We're the largest producer
of nickel inorganics, electroless nickel and nickel powders in the
world. We're the world's 3rd largest processor of platinum group metals
into functional materials. As you can see, all of these opportunities
are metal-based. So OM is among the three largest US specialty chemical
companies in North America. But it is very focused on metal-based
specialty applications.

TWST: Who are you competing with in the marketplace?

Mr. Mooney: We really focus on what we do best, and that's why we focus
on our customer, not our competitors. We focus on value-added concepts
and on our customers' needs down the road. For example, we sell cobalt
for steel-belted radial tires to all of the major tire companies.
However, every customer uses a very specific and different product. It's
not the same product to a different customer. It's very focused and
specifically driven to the performance standards that the customer is
striving for. So it's not a matter of competition. It's really a matter
of how well you take care of your customer.

TWST: As you look out at the marketplace, what is it that gives you an
edge in taking care of the customer? Is it the focus?

Mr. Mooney: I think we have a lot of competitive advantages. The biggest
and most unique competitive advantage we have is our metal separation
capability. We can separate many metals, refine and process them to
applications in various industries on a global basis. For example, we
take material from the 'Big Hill,' in the Democratic Republic of the
Congo, and we extract the cobalt out of it. We have numerous
applications for cobalt, as we're the largest consumer and refiner of
cobalt in the world. But we can also extract out the copper and make a
copper product that is extremely high purity ' it's 99.99% pure. We have
a sold-out position. So we separate the copper and the cobalt from the
'Big Hill' project. In addition to that, we're taking out germanium. We
will supply 20% of the world's germanium-based products starting in the
year 2002. So it's a very exciting competitive advantage that we have '
a vertical integration where we can separate metals. In addition,
because we consume and produce large quantities of PGM products and
materials on a global basis, we have leverage in the PGM markets. We
also have leverage in new economy products, which we talked about
earlier.  Our breakdown of sales on a global basis is 56% into Europe,
25% into the Americas, and 19% into Asia. You can see we have a
tremendous opportunity to expand our capabilities in North America,
South America and the Asian region. So those are competitive advantages
that we have in the marketplace. We're set up to do those things and now
we have to perform them.

TWST: You stressed the refining capability. Is this a patent capability,
or can anybody do this?

Mr. Mooney: Not everybody can do the refining because it's metal
separation. And you have to maximize every pound of material that you
get. So when we take material out of the 'Big Hill,' that product has
been sitting there for 30 years. It's with our unique technology that we
can take all the metals out and extract them at a reasonable cost, so
that our customers can use them in driving higher value customized
products for their customers.

TWST: So it really is a unique technology.

Mr. Mooney: Yes, separating metals is a very unique technology.

TWST: As you look out, is this the big opportunity for you, the 'Big
Hill' project, and bringing that into the market space?

Mr. Mooney: Base metals represent about 74% of our profits today, and
the 'Big Hill' is a big portion of that. But down the road, we think we
can bring in other raw materials that will enhance our precious metals
business ' platinum, palladium, silver and gold. We think we'll be able
to optimize our raw material position. We also think that we have
tremendous opportunities in customizing products down the road for auto
catalysts, electronics and rechargeable batteries, all of which are very
strong growth areas for OM. Rechargeables for lithium, cobalt and
hydroxide batteries for cell phones, computers and laptops are rapidly
growing markets. But let's not forget about the rechargeable 42-volt
battery going into the auto industry down the road. It's a nickel-based
product that uses both nickel and cobalt. Those are two of our strengths
that we have. Long term, air travel is going to be stronger and safer as
time goes on. We plan on being a player in superalloys and in jet
engines. Our applications for cobalt, nickel, and superalloys are
critical. We have a good opportunity there.

TWST: If we put all this together, what kind of goals have you set for
the company for the next two or three years?

Mr. Mooney: If you look at our track record, we've been pretty
consistent. Over the past five years, our earnings per share have
increased at a compounded annual growth rate of about 17%. We've had a
26% compounded sales growth, a 22% compounded net income growth and a
21% compounded total return growth. We would be disappointed if we
didn't exceed those in the next five years.

TWST: How sensitive is the business to the economy?

Mr. Mooney: I think every business is sensitive to the economy. What we
have to do is be sensitive to trends and changes, to new product
opportunities, to new raw material positionings and to developing
processes that make us more efficient and lower our operating cost.
Those are our biggest challenges of the future. You can look at every
economy and even during its good economy, people are saying, 'You know,
we can't get our margins or our selling prices up. There are too many
competitors.' And during a bad market, they're saying, 'Oh, the market's
bad.' We're not interested in reading articles about how the economy is
bad. We're interested in seeing what we can do to develop our customers'
strengths and drive shareholder value.

TWST: So you can hopefully work your way through tough times.

Mr. Mooney: We have every time and we will continue to do so.

TWST: Do you have the management team in place that you need to
accomplish these goals?

Mr. Mooney: That's a very good question. From a management standpoint, I
think that we're making the changes. We've had a very strong growth
record, as you can see by the numbers. Developing a key management team
for the future is always a critical issue within our organization. We
try to encourage our associates to develop the skills they are going to
need three to five years down the road to meet the needs of the company,
our customers and our shareholders.

TWST: Are there any holes in the management team that need to be filled
today or are you comfortable with what you have onboard?

Mr. Mooney: No management team is perfect, and we're far from it. We
realize that we have to always continually improve on what we're doing.

TWST: How would you describe the culture that you've tried to develop at
OM?

Mr. Mooney: The culture of our company is entrepreneurial. It's
shareholder-driven. It's driving performance for our customers so that
they can compete in the marketplace in a successful way. It's operating
with our suppliers in an open and honest relationship to develop long-
term goals together to meet customer needs. We operate with about 4,500
associates and with a run rate right now of about $5.9 billion. So you
can see that's a pretty lean organization.

TWST: As we look down the road, are acquisitions likely to play any role
for you?

Mr. Mooney: Acquisitions are a key part of our business. If you said,
what are the five things that we have to do well, the critical issues
that our company has to accomplish in order to be successful,
acquisitions would be one of them. We have grown over the past with
strong acquisitions. We also have to improve our production capability,
to be able to make more types of products to meet the flexibility of our
customers' needs. We have to develop new products and continually seek
out new-to-market applications. We have to leverage the proprietary
processes we have in metals separation and processing value-added
products. We have to make technology improvements in our existing
businesses, then continually optimize the assets that we're managing. If
we do those, we will have a very well-defined vision strategy.  In
addition, we have to have a strong operating strategy. Our operating
strategy circles around volumes, product mix, selling prices, raw
material positioning, and SG&A. And it's a combination of our vision
strategy and our operating strategy that drives the company short term
and long term. That's why we've been able to meet estimates for the past
eight years.

TWST: When you look at acquisitions, what are you looking for at this
point? Is it new products or is it geography?

Mr. Mooney: No. When we look at acquisitions, we want to make sure that
they're base metal- and precious metal-based. We want to make sure that
we can leverage our metal technology in refining, separating and
processing. We want it to serve niche markets that offer global
expansion capabilities. We want to decommoditize opportunities. We want
10%-15% earnings per share growth rate and we want it to have a strong
potential for new products.

TWST: So you've got some clear definition then when you go and look at
potential acquisitions.

Mr. Mooney: It's very focused. Metal-based, just like we said.

TWST: When you look at the balance sheet, do you have the funding that
you need to accomplish your goals?

Mr. Mooney: So far to date, we've been able to manage our balance sheet
very well. We've restructured our balance sheet a number of times in the
last five years. And we'll continue to do so down the road.

TWST: When you say, 'restructured' it, why has that been necessary?

Mr. Mooney: When you take on new debt, you've got to be able to service
your debt, bring down your debt and sometimes you have to expand the
number of shares that you have. You also have to have accretive deals to
make sure that the shareholders are protected and continue to share in
the growth, because that's why they invest in us.

TWST: When you look at the company today, what's the biggest risk? What
keeps you awake at night?

Mr. Mooney: I would say that we want to make sure that we have the
proper feedstocks today and tomorrow for our raw material positioning
and metal separation. We want to make sure that we continually drive new
products to market. We want to make sure that our volumes increase in
coordination with our delta over metal and margin increases. We want to
continually reduce our operating costs and drive up our return on
capital. And the most important of all those things is we're here to
drive shareholder value. That's what keeps me awake.

TWST: Is there any political risk in the sourcing of some of your
products?

Mr. Mooney: I think political risk is something all businesses must
address. We can look here and abroad. There are always political
environments that we have to be cognizant of. And I think we've done a
good job of managing those.

TWST: How do you feel about the value the market is putting on the
company today?

Mr. Mooney: I can never be a true analyst of the value of the company.
My job and role and responsibility is to drive shareholder value and
earnings per share and let the market take care of itself.

TWST: Do you think the market has a clear understanding of the strength
of your position?

Mr. Mooney: That's why we're talking today. We want to make sure that
it's clear and we want to do a better job of communicating it. We
realize the company is growing rapidly, and as it grows, we have to
continually tell our story. So this has been a fine opportunity that you
have provided us.

TWST: On a summary basis, what would be the two or three reasons you'd
give people to take a look at the company today?

Mr. Mooney: I would say the company has strong and consistent growth,
averaging a compounded annual growth rate of 17% for the last five
years. We have met our earnings estimates on an annual basis every year
for the last five years. We continue to grow and our stock price
continues to reflect the growth.

TWST: Thank you. (TM)

JAMES P. MOONEY
 Chairman & CEO
 OM Group, Inc.
 50 Public Square
 Suite 3500
 Cleveland, OH 44113
 (800) 321-9696 - TOLL FREE
 (216) 781-0083
 (216) 781-0902 - FAX
 www.omgi.com
 e-mail: kmarks@omgi.com
Each Executive who is the featured subject of a TWST Interview is
offered the opportunity to include an Investors Brief or other highlight
material to be provided and sponsored by and for the company. This
interview with James P. Mooney, Chairman & CEO of OM Group, Inc., is
accompanied by an Investors Brief containing corporate information.

Copyright 2001 The Wall Street Transcript Corporation
All Rights Reserved


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