Cabot's carbon black margins improve in Q3

Boston, Massachusetts - Profits at Cabot's carbon black business declined in the third quarter of 2006, depite an increased volume and improved margins.

In a statement, Cabot said, "The Carbon Black Business reported operating profits of $23 million compared to $26 million in both the third quarter of 2005 and the second quarter of 2006. Our carbon black product lines had solid volumes during the quarter. Rubber blacks volumes increased by 2% compared to the third quarter of 2005 and by 3% sequentially, and performance products returned to its more historic volume level with a 13% increase sequentially. Progress was made in restoring total variable margin during the quarter with margins in the third quarter of fiscal 2006 equivalent to those in the third quarter of fiscal 2005, but still below the levels seen prior to the recent period of continuously rising feedstock costs. In addition, quarterly operating costs were higher than we have experienced recently and three specific issues combined to reduce profitability by $9 million. First, higher utility costs impacted us by $2 million. Second, we made substantial progress in reducing operating working capital with a $38 million total improvement driven by a $28 million reduction in inventory. This resulted in a $4 million unfavorable impact on earnings from higher fixed costs per unit due to lower production levels. Third, Cabot Japan had higher maintenance costs, which unfavorably impacted us by $3 million.

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Press release from Cabot