Cabot (US:CBT)2019-08-08 20:26Financial Performance - Net sales for the third quarter of fiscal 2019 were $845 million, a decrease from $854 million in the same period of fiscal 2018 [116]. - Gross profit for the third quarter of fiscal 2019 was $170 million, down from $197 million in the third quarter of fiscal 2018 [116]. - For the nine months ended June 30, 2019, net sales increased to $2,510 million compared to $2,392 million for the same period in fiscal 2018 [116]. - Gross profit for the nine months ended June 30, 2019 was $514 million, a decrease from $561 million in the same period of fiscal 2018 [116]. - Net sales decreased by $9 million in Q3 2019 compared to Q3 2018, primarily due to unfavorable foreign currency translation ($32 million) and lower volumes ($15 million) [117]. - For the first nine months of fiscal 2019, net sales increased by $118 million compared to the same period in fiscal 2018, driven by a favorable price and product mix ($146 million) [117]. - Net income attributable to Cabot Corporation was $32 million in Q3 2019, compared to $88 million in Q3 2018, and $124 million for the first nine months, compared to a net loss of $207 million in the same period of fiscal 2018 [124]. Segment Performance - Total Segment EBIT decreased by $15 million due to lower margins in Performance Chemicals, impacted by weaker pricing in China and Europe [115]. - Total segment EBIT decreased by $15 million in Q3 2019, primarily due to lower volumes and unit margins in Reinforcement Materials and Performance Chemicals [126]. - Sales in Reinforcement Materials decreased by $5 million in Q3 2019 compared to Q3 2018, primarily due to unfavorable foreign currency translation impact of $19 million and lower volumes of $8 million [131]. - EBIT in Reinforcement Materials decreased by $20 million in the first nine months of fiscal 2019 compared to the same period in fiscal 2018, driven by lower unit margins of $24 million and lower volumes of $2 million [131]. - Sales in Performance Chemicals decreased by $23 million in Q3 2019 compared to Q3 2018, primarily due to lower volumes of $13 million and unfavorable foreign currency translation of $10 million [134]. - EBIT in Performance Chemicals decreased by $49 million in the first nine months of fiscal 2019 compared to the same period in fiscal 2018, mainly due to lower volumes of $20 million and lower unit margins of $17 million [134]. - Sales in Purification Solutions increased by $3 million in Q3 2019 compared to Q3 2018, attributed to higher volumes of $3 million and a more favorable price and product mix [135]. - EBIT in Purification Solutions improved by $7 million in Q3 2019 compared to Q3 2018, driven by higher volumes of $1 million and lower fixed costs of $3 million [135]. - Specialty Fluids sales increased by $1 million to $13 million in Q3 2019 and by $32 million to $56 million in the first nine months of fiscal 2019 compared to the same periods in fiscal 2018, driven by higher project activity [138]. - EBIT for Specialty Fluids decreased by $1 million to $2 million in Q3 2019 but increased by $26 million to $24 million in the first nine months of fiscal 2019 compared to the same periods in fiscal 2018, primarily due to higher volumes [138]. Expenses and Income - Selling and administrative expenses decreased by $9 million in Q3 2019 and $15 million in the first nine months of fiscal 2019, attributed to lower incentive compensation and discretionary spending [117]. - Interest and dividend income remained consistent at $2 million in Q3 2019, while it decreased by $2 million to $6 million for the first nine months compared to the same period in fiscal 2018 [117]. - Net income attributable to noncontrolling interests decreased by $3 million in Q3 2019 and $9 million in the first nine months of fiscal 2019, mainly due to lower profitability from joint ventures in China [123]. - Income from continuing operations before income taxes increased by $172 million in the first nine months of fiscal 2019, while total segment EBIT decreased by $38 million [128]. Cash Flow and Investments - Cash and cash equivalents increased by $489 million during the first nine months of fiscal 2019, reaching $147 million, with borrowing availability under revolving credit agreements at $1,278 million [140]. - Cash provided by operating activities totaled $166 million in the first nine months of fiscal 2019, up from $143 million in the same period of fiscal 2018, driven by a net income of $146 million [143]. - Investing activities consumed $33 million of cash in the first nine months of fiscal 2019, primarily due to capital expenditures of $155 million, partially offset by $130 million from the sale of the Specialty Fluids business [144]. - Financing activities consumed $146 million of cash in the first nine months of fiscal 2019, including share repurchases of $144 million and dividend payments of $60 million [146]. - Capital expenditures for fiscal 2019 are expected to be between $230 million and $240 million, focusing on sustaining and compliance projects as well as capacity expansion [144]. Market and Operational Outlook - The company anticipates benefits in Q4 2019 from favorable pricing terms and product mix related to tire customer arrangements and higher volumes from a new plant in Wuhai, China [139]. - The company is not expecting a resolution to the U.S.-China trade dispute, which is anticipated to negatively impact the Reinforcement Materials and Performance Chemicals businesses [139]. - The unfavorable pricing environment in China significantly impacted lower unit margins in Reinforcement Materials [131]. Share Repurchase and Corporate Governance - Cabot repurchased a total of 743,300 shares of its common stock during the quarter ended June 30, 2019 [154]. - The average price paid per share for the repurchases in May 2019 was $41.93, and in June 2019 was $45.19 [154]. - As of June 30, 2019, the maximum number of shares that may yet be purchased under the repurchase plans is approximately 6,605,045 shares [154]. - The Board of Directors authorized the repurchase of up to an additional 10 million shares on July 13, 2018, increasing the total available for repurchase to approximately 11 million shares [154]. - No shares were purchased in April 2019, with a total of 7,348,345 shares remaining available for repurchase at the end of that month [154]. - The total number of shares purchased does not include 3,743 shares withheld for tax payments related to equity awards [154]. Compliance and Risk Management - The company evaluated the effectiveness of its disclosure controls and procedures as of June 30, 2019, concluding they were effective [152]. - There were no changes in internal control over financial reporting during the fiscal quarter that materially affected the company's controls [152]. - Factors that could cause actual results to differ from forward-looking statements include changes in raw material costs and demand for products [152]. - Market risks for the period ended June 30, 2019, did not differ materially from those discussed in the 2018 10-K report [152].