Cabot sees challenges ahead for carbon blacks

Boston, Masachusetts – Cabot Corp. has reported first quarter results “in line with prior year” at its Reinforcement Materials segment, which supplies carbon blacks.

The quarter ended 31 Dec 2018 saw “successful completion of calendar year 2019 tire customer agreements with volume and price gains in all regions.”

However, president and CEO Sean Keohane also reported “softer automotive demand, customer inventory destocking and a weaker environment in China.”

Global reinforcement materials volumes edged up 1% year-on-year, as increases of 3% in both Asia and the Americas offset an 8% decline in EMEA, Cabot reported 4 Feb

Higher volumes and improved pricing and product mix from our 2018 tire customer agreements were offset by lower margins in China, it added.

Earnings (EBITDA) at Reinforcement Materials fell by 1.3% to $78 million, while EBITDA margins lost three percentage points: falling to 17% for the quarter.

Another negative factor, it said, was a “sharp decline" in feedstock costs toward the end of 2018.

Looking ahead, Keohane said: “Despite the current business environment, we remain confident in our ability to grow earnings this fiscal year.

"We expect customer destocking and the impact on automotive production from new emissions regulations in Europe to have less of an impact in the second quarter.”

While Reinforcement Materials should also benefit from new customer agreements, it still faces “headwinds from a challenging China environment and lower oil prices.”

But, added Keohane: “As the forecast for auto production strengthens and the China economy improves, we anticipate stronger volumes and margins in the second half of our fiscal year.”