Cabot switches to profitability at expense of volume

ERJ staff report (DS)

Boston, Massachusetts -- Cabot Corp. has reported net income of $11 million for the second quarter of 2008, down from $30 million a year earlier. THis was partly due to a charge of approximately $20 million from the time lag of the feedstock related pricing adjustments in the Company's rubber blacks supply contracts.

In commenting, Patrick Prevost, Cabot's President and CEO, said, "Our performance during the quarter did not meet our expectations due to the continued rise of carbon black feedstock costs and weaker than anticipated results in our other businesses. Despite higher feedstock costs, the Carbon Black Business significantly improved profitability compared to the first quarter of 2008. Both the rubber blacks and performance products product lines were able to expand unit margins. Performance products volumes continued to grow at rates in excess of 5%. Unfortunately the increase in raw material costs, once again, led to a significant unfavorable contract lag effect.

Cabot said it is switching its carbon black operations in Europe and South America to focus on high-profit activities, at the expense of volume

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Press release from Cabot