ERJ staff report (DS)
Boston, Massachusetts - Eduardo Cordeiro, chief Financial officer at Cabot Corp said, â€œDuring the first quarter of 2012, the Rubber Blacks business experienced its second strongest quarter ever, increasing EBIT by $18 million from the first quarter of 2011. The increase was driven principally by higher margins resulting from higher prices and a favorable product mix. These positive factors more than offset the impact of 9 percent lower global volumes.
He added, â€œOur reduced manufacturing costs were due to lower plant maintenance and increased inventory levels.â€
In response to a question, Patrick Prevost, CEO, said, â€œin the past we've indicated that roughly 50 percent of our Rubber Blacks volume would be under contract. And I would say most of these contracts are of an annual tenure and that would still be a good way to think about it today.â€
He added that the supply chain in the rubber blacks business is very lean, with minimal inventory and few warehousing steps between black supplier and end-use point. This means, he noted, that the production of carbon black is very responsive to changes in tyre demand.
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Transcript of analyst call from Seeking Alpha