Cabot grows earnings on rubber blacks despite lower sales

Boston, Massachusetts – Cabot Corp. has reported a strong fourth-quarter earnings development within its ‘reinforcement materials’ unit, which primarily supplies carbon black for the tire and rubber industries.

For its final fiscal quarter ended 30 Sept, rubber carbon black earnings (EBIT) increased 23% year-on-year to $134 million (€125 million), Cabot reported 6 Nov.

The increase was principally driven by improved margins from better pricing and product-mix during calendar-year 2023 customer agreements, explained the supplier.

During the quarter, volumes fell 7% year-on-year in Americas and 4% in Europe, Middle East and Africa (EMEA), partially offset by a 3% increase in Asia, driven by China.

For the full-year, the business unit reported an 18% increase in earnings to $482 million over 2022, on 4% lower sales of $2.5 billion.

On the business outlook for 2024, president and CEO Sean Keohane anticipated volume growth "in the low single digits" in fiscal 2024 along with higher pricing and improved product-mix in 2024 agreements.

"We believe that destocking is largely over in our key end markets," continued Keohane, adding that the fourth quarter run-rate "is a good basis" for the reinforcement materials unit.

As for costs, Cabot said it expected higher costs to be partially offset by pricing and product-mix.

Commenting on the 'reinforcement materials business' in general, Keohane said the unit's "record" performance was due largely to its local-supply business model.

“The importance of supply security has become even more pronounced given how rising geopolitical tensions have stressed many global supply chains,” Keohane explained.

Noting an improving trend over the past eight years, Keohane said the business was supported by long-term demand for replacement tires as well as “an increasingly tight supply-demand balance in the mature regions.”

“We expect that utilisations in Europe will become even tighter this year as Russian carbon black…will be subject to sanctions starting in July of 2024,” he added.

The Cabot leader also pointed to stricter environmental regulations, which are requiring producers to make “significant abatement investments” for sustainable supply to customers.

These investments, he stated, “raise the barriers-to-entry for additional capacity, roughly doubling the cost of new capacity, and require recovery in the form of price increases.”

As a result of these factors, Keohane said he believed the outlook for Cabot's rubber blacks business underpinned by “favourable long-term demand drivers and a growing requirement for innovation”.