Cabot reports lower profits in challenging environment

Boston, Massachusetts – Cabot Corp. has posted a 4.8% decline in earnings for its reinforcement materials segment for the financial year ended 30 Sept, due mainly to the challenging Chinese business environment.

Earnings for the segment, which supplies rubber and speciality carbon blacks for the rubber and plastics industries, fell to $266 million (€240 million) during the 12-month period, on 22.5% higher sales of $1.8 billion, Cabot reported 5 Nov.

“While fiscal 2019 results are not what we originally expected, we delivered a strong fourth quarter of adjusted EPS and largely offset various headwinds to achieve solid full year operating results,” said Cabot president and CEO Sean Keohane.

Keohane attributed the fourth quarter performance of the segment to the favourable price/mix achieved from 2019 customer agreements and lower fixed costs.

These activities, he said, helped to mitigate the impact of “ongoing weakness in the Chinese business environment, continued softness in global automotive production and de-stocking across many of our value chains.”

Looking ahead to the first quarter of 2020, ending 31 Dec, Keohane said in an earnings call, the company expects a sequential decline in EBIT due to lower volumes and higher fixed costs. 

The Cabot boss attributed the expected lower volumes to normal seasonality as well as customers delaying orders as they manage their year-end balance sheets in the current difficult economic environment. 

The company expects higher fixed due to the timing of scheduled plant turnarounds and maintenance during the quarter. 

Cabot also anticipates the business environment to remain challenging in China throughout the first quarter (started 1 Oct).

Commenting on the full year forecast for fiscal 2020, Keohane said “for reinforcement materials we feel good about how the business is performing despite a difficult environment in Asia.” 

According to the chief executive, management actions taken over the past few years have structurally improved the profit levels in the business. 

While utilisations remain generally favourable, Keohane warned of the rising costs of environmental compliance and marine regulation Marpol 2020 changes. 

*Comments in transcript sourced from Seeking Alpha.