Cabot Q4 Earnings Call Highlights

Key Points

• Cabot reported fourth-quarter fiscal 2026 adjusted EPS of $1.61 and full-year adjusted EPS of $6.42. It generated $421 million in full-year operating cash flow and returned $243 million to shareholders through dividends and share repurchases.
• Segment results diverged: fourth-quarter EBIT at Reinforcement Materials fell to $87 million from $119 million a year earlier, while Performance Chemicals EBIT rose 43% to $60 million, supported by higher battery-materials and specialty-carbons volumes, improved mix and lower costs.
• Cabot forecast fiscal 2027 adjusted EPS of $6.15 to $6.75 and plans to invest $125 million in battery conductive-additives capacity, with new capacity expected to contribute to earnings starting in fiscal 2028.

Cabot NYSE: CBT reported fourth-quarter fiscal 2026 adjusted earnings per share of $1.61, as strong Performance Chemicals results partly offset lower earnings in Reinforcement Materials. For the full fiscal year, adjusted EPS was $6.42, while the company generated $421 million in operating cash flow and returned $243 million to shareholders through dividends and repurchases.

The call marked Erica McLaughlin’s first earnings presentation as Cabot’s CEO and president. McLaughlin, who has held several roles during her 24 years with the company, said Cabot will maintain its focus on a strong balance sheet, investment-grade credit profile and balanced capital-allocation approach.

“My focus is on investing behind growth opportunities while staying disciplined in how we run the business to deliver long-term value for our shareholders,” McLaughlin said.

Cash Flow, Capital Returns and Balance Sheet

Cabot generated $143 million of operating cash flow during the fourth quarter and $117 million of discretionary free cash flow. Full-year capital expenditures totaled $207 million, including investments to maintain operations and targeted growth spending, according to Interim CFO and Treasurer Steve Delahunt.

During fiscal 2026, Cabot paid $97 million in dividends and repurchased $146 million of its shares. The company ended the year with $254 million in cash and cash equivalents, approximately $1.3 billion of debt and $1.5 billion of liquidity.

McLaughlin said Cabot increased its corporate credit facility to $1.3 billion and completed a $350 million senior-notes offering carrying a 4.95% coupon. The refinancing actions were intended to enhance financial flexibility while maintaining the company’s investment-grade profile.

Segment Results Diverge

Reinforcement Materials generated fourth-quarter EBIT of $87 million, down from $119 million a year earlier. EBITDA was $111 million, representing an 18% margin. The year-over-year earnings decline reflected lower gross profit per ton following calendar 2026 customer-agreement outcomes and a less favorable regional product mix, partially offset by higher volumes.

Global Reinforcement Materials volumes rose 5% from the prior-year quarter, supported by gains in Asia-Pacific and the Americas. The gains included contributions from Cabot’s capacity addition in Indonesia and its acquisition of a reinforcing carbons facility in Mexico from Bridgestone.

The Mexico facility is performing as planned, with integration activities completed, McLaughlin said. The long-term supply agreement with Bridgestone uses a significant portion, though not all, of the facility’s capacity, leaving Cabot able to sell additional volumes into the market.

Performance Chemicals posted fourth-quarter EBIT of $60 million, up 43% from $42 million in the prior-year period. EBITDA increased 30% to $83 million, and the EBITDA margin expanded to 24% from 21%. Higher battery-materials and specialty-carbons volumes, improved product mix and lower costs supported the segment’s performance.

For the full year, Reinforcement Materials produced $379 million of segment EBIT, while Performance Chemicals generated $235 million.

Battery Materials Investments Continue

Cabot’s battery-materials business delivered $43 million in fiscal 2026 EBITDA, with a 26% EBITDA margin. The company attributed the contribution to strong customer demand, higher volumes, differentiated products and its global manufacturing and technology footprint.

Cabot announced a multiyear supply agreement with PowerCo during the year and is investing $125 million to expand conductive-additives capacity in the U.S. and China. That spending figure is net of a $50 million U.S. Department of Energy grant supporting advanced conductive-additives capacity at existing U.S. Cabot sites.

The new capacity is expected to begin contributing to earnings in fiscal 2028. For fiscal 2027, Cabot expects battery-materials EBITDA in the high-$40 million range, as it incurs costs associated with bringing new capacity online.

McLaughlin said the company sees battery demand growing at a projected 15% compound annual rate through 2030. She also cited electronics as a growth area, including fumed silica used in semiconductor polishing slurries and conductive materials for electronic applications. Cabot expects conductive and electronics applications to grow at a 6% to 8% rate over the coming years.

Fiscal 2027 Outlook and Market Conditions

Cabot forecast fiscal 2027 adjusted EPS of $6.15 to $6.75. The outlook assumes an operating tax rate of 28% to 30% and capital expenditures of $200 million to $230 million.

The guidance incorporates a range of demand scenarios and possible outcomes from calendar 2027 customer negotiations in Reinforcement Materials. McLaughlin said approximately one-third of those negotiations have been completed, with results varying by customer.

• Reinforcement Materials first-quarter EBIT is expected to improve modestly from the fourth quarter on a more favorable regional mix, though it is expected to remain below the prior-year quarter.
• Performance Chemicals first-quarter EBIT is expected to exceed the prior-year period on higher volumes but fall $6 million to $8 million sequentially from the fourth-quarter level because of higher costs and seasonal product-mix changes.

Cabot described the tire-production environment as challenging. Industry forecasts call for global tire production growth of 0.3% in calendar 2026 and 0.9% in 2027, with regional differences. Southeast Asia is expected to lead growth, while Cabot cited relatively flat conditions in the Americas and projected declines in China during 2027.

While tire imports into North America and Europe have declined amid tariffs and trade measures, McLaughlin said lower imports have not yet translated into broadly higher tire production in Western markets. In South America, rising imports continue to pressure regional production.

Management said it will prioritize growth with customers in battery, conductive and electronics markets; complete restructuring and cost-optimization actions; advance organic projects; and assess acquisitions that expand scale, geographic access or exposure to high-growth materials while preserving its investment-grade credit rating.

About Cabot (NYSE:CBT)

Cabot Corporation NYSE: CBT is a global specialty chemicals and performance materials company headquartered in Boston, Massachusetts. The company develops and manufactures materials used to improve the performance, durability, conductivity, color and purity of products across a range of industries.

Cabot's products include carbon black used in tires, rubber goods, coatings, plastics and printing inks; specialty carbons and conductive materials for batteries and other applications; and specialty compounds and masterbatches.

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