Cabot "encouraged" by recovery in tire, auto industries

Boston, Massachusetts – Cabot Corp.’s reinforcement materials segment, which supplies carbon black materials to the automotive and tire industries, has seen a strong comeback in the final quarter fiscal 2020, ended 30 Sept.

The “strong sequential demand momentum” in the fourth quarter was largely driven by an improving global economy and steady improvement in the tire and automotive sectors, said president and CEO Sean Keohane in the company's fourth quarter results 24 Nov.

Despite the quarter-on-quarter recovery, the segment posted a 28% year-on-year decline in sales to $325 million (€272 million) during the three months to end of September.  For the full year, segment revenue dropped 30% to $1.2 billion.

Segment earnings before tax (EBIT) for the quarter declined 17% year-on-year to $59 million while full year figures dropped by nearly 40% to $162 million. 

EBITDA (earnings) fell 14.6% to $76 million during the fourth quarter, but earnings margin grew from 20% in the last quarter of 2019 to 23% in 2020. For the full year, earnings were down 31% at $230 million, while earnings margin remained flat at 18%. 

Cabot noted a ‘strong rebound’ in fourth quarter volumes in reinforcement materials, compared to the third quarter, pushing up earnings by 56% – $64 million – sequentially. 

Overall, however, fourth quarter volumes remained 11% below prior-year levels, still reflecting the Covid-19 impact on demand. 

Commenting on the results, Keohane said the segment experienced "a significant sequential improvement in demand... as customers increased their production levels." 

For the year 2021, the company official said he was "encouraged by the pace of recovery we are seeing in the automotive and tire markets." 

“With this momentum, we expect both year-over-year and sequential EBIT improvement as we look ahead to the first quarter of fiscal 2021,” he noted. 

The reinforcement materials segment, Keohane added, is also expected to benefit from improved margins, particularly in Asia.