Cabot expects weaker quarter as demand declines

Boston, Massachusetts – Cabot Corp. expects its third quarter results to be negatively impacted by the current low demand environment across all segments.

In the Reinforcement Materials segment, which includes rubber carbon black, volumes were down 8% for April and May 2023 as compared to the year before.

The decline in demand, said Cabot 15 June, was seen across all regions and was principally in the replacement tire market.

Despite the demand environment, Cabot said it is still seeing the expected quarterly year-over-year improvement in pricing and product mix.

This, explained said president and CEO Sean Keohane, stems from the 2023 customer agreements in the segment.

“We continue to expect these pricing and product mix benefits to drive strong growth in year-over-year segment EBIT results in the third and fourth fiscal quarters,” he added.

Furthermore, the business unit is expected to deliver stronger adjusted earnings per share in the second half of the fiscal year, started 1 Oct 2022, compared to the first half.

However, Keohane said the “magnitude” of the increase will be less than what was previously expected.

“We are no longer expecting adjusted earnings per share for fiscal 2023 to be in the range of $6.10 to $6.50,” Keohane said without giving new figures.

While anticipating a “robust operating cash flow” for the full year, Cabot said it is now focusing on “reducing costs in the near-term”.

Overall, Keohane said, he felt “very good about the long-term growth of the company”, despite the near-term macro-economic challenges.

“We have a Reinforcement Materials segment that I believe is structurally at a different earnings level with more consistent operating results,” he added.

The company also expects its battery materials segment to provide “long-term secular growth opportunity”.

While the Performance Chemicals segment is facing some near-term headwinds, Cabot expects the underlying end markets to grow over time.