CABOT CORP Q2 FY2025 earnings call

• Strong Q2 results with adjusted earnings per share of $1.90, up 7% YOY. Combined first half adjusted EPS grew 10% YOY.
• Tariff impacts: Businesses largely insulated by in-region production, but some cross-border sales exposed to tariffs; plan to pass on tariffs via pricing adjustments. Customers cautious on inventory due to tariff uncertainty.
• Countermeasures: Working with customers, product optimization, $30M in cost savings, adjusted capital projects with CapEx now $250M-$275M.
• Company strengths: Balanced geographic footprint, strong cash generation, investment-grade balance sheet, committed management team.

Reinforcement Materials: EBIT was $131 million in Q2, down 12% year-over-year. Volumes were negatively impacted by lower tire demand. Regionally, volumes were down 9% in Americas, 8% in Asia Pacific, and 1% in Europe. Performance Chemicals: EBIT was up 61% compared to Q2 2024, driven by improved margins and higher volumes, particularly in fumed silica. Volumes in the segment have stabilized and reconnected to underlying demand drivers. Battery materials product line had year-over-year volume growth of 10% in the first half of fiscal 2025.

• Revised full-year adjusted EPS guidance to $7.15-$7.50, down from prior due to tariff uncertainty.
• Expect cash generation to remain strong, with 5% dividend increase and share repurchases of $100M-$200M in fiscal 2025.
• Reinforcement Materials volumes now expected to decline low-single-digit for fiscal year; Performance Chemicals volumes expected low-single-digit growth.

• Tariff uncertainty causing cautious customer order patterns and inventory management.
• Slowing GDP outlook and lower energy prices negatively impacting energy center revenue and yield improvement projects.

Q: John Roberts asked about reinforcement volumes swinging from plus low-single digit to down low-single digit for the year.

A: Volumes varied by region; Americas down due to South America and tire imports, Asia down due to normalized Lunar New Year, Europe flat. Second half expected stronger but uncertain due to different year-ends.

Q: Jeff Zekauskas asked about Reinforcement Materials volumes split, price dynamics, and energy center revenues.

A: South America volumes down sharply, pricing largely flat in contracts, Asia Pacific spot market margins steady; energy center revenues flat in Q2, expected mid-single-digit million headwind in second half due to lower energy prices.

Q: Josh Spector asked about Performance Chemicals seasonal trends and cost savings cadence.

A: Seasonal trends like spring-related applications normal, but customer caution on inventory; $30M cost savings with about one-third recognized in Q2, two-thirds expected in second half.

Q: Daniel Rizzo asked about capacity utilization and CapEx.

A: Capacity utilization varies by region; North America low 80s, Europe upper 80s, Asia Pacific high but expected to pull down. CapEx $250M-$275M with growth investments paced to market demand.