Cabot Corporation provides update on current demand environment.
Cabot Corporation (NYSE: CBT) provided an update on the current demand environment and the impact on its business segments.
Sales volumes in the Performance Chemicals segment for April and May 2023 were 13% lower than the same months of 2022 with declines across all product lines, except Battery Materials, where volumes continued to grow year-over-year, driven by an improvement in electric vehicle sales in China.
While sales volumes in the third fiscal quarter in the Performance Chemicals segment have been improving sequentially as compared to the second fiscal quarter, the pace of improvement has been slower than what the Company expected.
Sean Keohane, Cabot President and Chief Executive Officer, said:
We are not seeing the anticipated pace of recovery in China after a challenging March quarter in the Performance Chemicals segment.
“In addition to the weakness in China, we continue to see soft demand on a global basis across many of our key end markets, including construction and consumer applications. Given these factors, we now expect EBIT in this segment in the third fiscal quarter to be only modestly higher than the second fiscal quarter.”
In the Reinforcement Materials segment, volumes were down 8% for April and May 2023 as compared to the same months of 2022, with declines across all regions and principally in the replacement tire market.
Keohane continued, “Despite the demand environment, we are seeing the expected quarterly year-over-year improvement in pricing and product mix from our calendar year 2023 customer agreements in the Reinforcement Materials 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.”
“Although we continue to expect stronger adjusted earnings per share in the second half of the fiscal year as compared to the first half, the magnitude of this increase will be less than we previously expected and 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.
“We continue to anticipate a robust operating cash flow for the full fiscal year. We are focused on reducing costs in the near-term and we believe our investments have us well positioned for long-term growth. I look forward to providing a more fulsome update on our business outlook and fiscal year adjusted earnings per share guidance on our third quarter earnings call in early August.”
Keohane concluded, “Despite the near-term macro-economic challenges, I feel very good about the long-term growth of the company. We have a Reinforcement Materials segment that I believe is structurally at a different earnings level with more consistent operating results. We remain excited about our leadership position in Battery Materials and the long-term secular growth opportunity this offers.”
“We expect the Company’s cash flow to enable us to continue to fund strategic growth investments, while also returning cash to shareholders. While the Performance Chemicals segment is facing some near-term headwinds, we expect the underlying end markets to grow over time to support the needs of various transportation, infrastructure and consumer applications.”
“So while fiscal 2023 is proving to be more challenging than we expected due to the macro-economic weakness and a prolonged destocking cycle, I believe we will exit the year with fourth quarter financial results that set us up well for earnings growth and achievement of our 3-year target for adjusted earnings per share as outlined at our 2021 Investor Day.”
About Cabot Corporation
Cabot Corporation (NYSE: CBT) is a global specialty chemicals and performance materials company headquartered in Boston, Massachusetts. The company is a leading provider of reinforcing carbons, specialty carbons, battery materials, engineered elastomer composites, inkjet colorants, masterbatches and conductive compounds, fumed metal oxides and aerogel. For more information on Cabot, please visit the company’s website at cabotcorp.com. The Company regularly posts important information on its website and encourages investors and potential investors to consult the Cabot website regularly.
Cabot Corporation Provides Update on Current Demand Environment, Boston, June 15, 2023
