Cabot's earning improve in Q3 as feedstock price lag takes effect
ERJ staff report (DS)
Boston, Massachusetts -- Cabot Corp improved its earnings by over 40 percent in the third quarter through higher margins and strong volumes in carbon black.
In its results statement, the company said, "Rubber Blacks profitability increased compared to the third quarter of 2007 on strong unit margins as price increases matched feedstock cost increases for most of the quarter. Volumes were stable (down 1%) with weaker demand in Western Europe and continued softness in North America offset by strong Asia Pacific volumes, particularly in China. Sequentially, profitability improved on strong unit margins ($13 million contribution) and increased overall volumes (up 2%). The time lag of feedstock related pricing adjustments in the Company's rubber blacks supply contracts and the immediate recognition of feedstock costs in North America due to the use of LIFO accounting had an unfavorable impact of $10 million versus $13 million in the third quarter of 2007 and $15 million in the second quarter of 2008.
For its carbon black business, Cabot reported sales of $537 million for the three months ended 30 June 2008, up from $399 million a year earlier. Profits were up bya factor of three, to $33 million, compared with $11 million in the same period a year ago.
For the nine months ended June 2008, carbon black business sales grew to $1511million (from $1226 million), while profits fell to $70 million comparedto $101 million a year earlier. Cabot said this was due to the lag effect of increasing feedstock prices.
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Press release from Cabot
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