Cabot reports excellent quarter for rubber blacks

ERJ staff report (DS)

Boston, Massachusetts - Eduardo Cordeiro, chief Financial officer at Cabot Corp said, “During 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, “Our reduced manufacturing costs were due to lower plant maintenance and increased inventory levels.”

In response to a question, Patrick Prevost, CEO, said, “in 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.”

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