Cabot (CBT) - 2025 Q3 - Quarterly Results

Executive Summary & Q3 FY25 Highlights Cabot Corporation reported Q3 FY25 diluted EPS of $1.86 and adjusted EPS of $1.90, with strong operating cash flow and balance sheet strength despite a challenging demand environment Q3 FY25 Financial Highlights Cabot Corporation reported Q3 FY25 diluted EPS of $1.86 and adjusted EPS of $1.90, representing a 1% decrease in Adjusted EPS compared to the prior year. Net sales and other operating revenues decreased to $923 million from $1,016 million in Q3 FY24 | Metric | Q3 FY25 | Q3 FY24 | 9 Months FY25 | 9 Months FY24 | | :---------------------------------- | :------ | :------ | :------------ | :------------ | | Net sales and other operating revenues (million USD) | $923 M | $1,016 M | $2,814 M | $2,993 M | | Net income attributable to Cabot Corp. (million USD) | $101 M | $109 M | $288 M | $243 M | | Net earnings per share (Diluted) (USD) | $1.86 | $1.94 | $5.22 | $4.30 | | Adjusted EPS (USD) | $1.90 | $1.92 | $5.56 | $5.25 | - Adjusted EPS of $1.90 represents a 1% decrease compared to the same quarter in the prior year[4] - Reinforcement Materials segment EBIT was $128 million, down 6% compared to the same quarter in the prior year[4] - Performance Chemicals segment EBIT was $57 million, up 4% compared to the same quarter in the prior year[4] CEO Commentary CEO Sean Keohane highlighted strong Q3 financial performance despite a challenging demand environment, attributing it to disciplined execution, focus on managing pricing and costs, and leveraging the global footprint. He noted strong operating cash flow and balance sheet strength - Management remains focused on managing pricing and costs and leveraging its global footprint to adeptly respond to uncertainty from tariffs and a weaker global macroeconomic environment[6] - The company delivered strong operating cash flow of $249 million and returned $64 million of cash to shareholders through $24 million in dividends and $40 million in share repurchases[6] - Balance sheet strength is reflected in a Net Debt to EBITDA ratio of 1.3x and liquidity of $1.4 billion[6] Detailed Financial Performance This section details Cabot Corporation's Q3 FY25 financial results, including overall net income, segment-specific EBIT performance, cash flow generation, and tax expenses Overall Financial Detail For Q3 FY25, net income attributable to Cabot Corporation was $101 million ($1.86 per diluted common share), with Adjusted EPS at $1.90 per share, after a $0.04 per share charge from certain items | Metric | Q3 FY25 | | :--------------------------------------- | :------ | | Net income attributable to Cabot Corporation (million USD) | $101 M | | Diluted common share (USD) | $1.86 | | After-tax per share charge from certain items (USD) | $0.04 | | Adjusted EPS (USD) | $1.90 | Segment Results Reinforcement Materials EBIT decreased by $8 million (6%) due to lower volumes in Asia Pacific and the Americas, while Performance Chemicals EBIT increased by $2 million (4%) driven by higher gross profit per ton from cost savings, despite 8% lower volumes Reinforcement Materials Reinforcement Materials segment experienced an EBIT decrease of $8 million (6%) primarily due to lower volumes across Asia Pacific and the Americas - EBIT in Reinforcement Materials decreased by $8 million (6%) compared to Q3 FY24[8] - The decrease in EBIT was primarily driven by lower volumes in Asia Pacific and the Americas[8] | Region | Year-over-Year Change (Volumes) | | :-------------------------- | :------------------------------ | | Global Reinforcement Materials | (8%) | | Asia Pacific | (11%) | | Europe, Middle, Africa | 4% | | Americas | (9%) | Performance Chemicals Performance Chemicals segment saw a $2 million (4%) EBIT increase, driven by higher gross profit per ton from cost savings despite an 8% decline in volumes - EBIT in Performance Chemicals increased by $2 million (4%) compared to Q3 FY24[8] - The increase was primarily due to higher gross profit per ton, partially offset by 8% lower volumes[8] - Higher gross profit per ton was primarily due to cost savings measures and optimization initiatives[8] - Lower volumes were due to lower customer demand driven by uncertainty from tariffs and a weaker global macroeconomic environment, particularly in auto-related applications[8] Cash Performance Cabot Corporation ended Q3 FY25 with a cash balance of $239 million. Operating activities generated $249 million in cash, while capital expenditures were $61 million. The company returned $64 million to shareholders through $24 million in dividends and $40 million in share repurchases | Metric | Q3 FY25 | | :-------------------------------- | :------ | | Cash balance (end of quarter) (million USD) | $239 M | | Cash flows from operating activities (million USD) | $249 M | | Capital expenditures (million USD) | $61 M | | Dividends paid (million USD) | $24 M | | Share repurchases (million USD) | $40 M | Taxes The company recorded a tax expense of $43 million in Q3 FY25, with an effective tax rate of 28%. The operating tax rate for fiscal year 2025 is projected to be between 27% and 29% | Metric | Q3 FY25 | | :------------------ | :------ | | Tax expense (million USD) | $43 M | | Effective tax rate (%) | 28% | - The operating tax rate for fiscal 2025 is expected to be in the range of 27% to 29%[11] Outlook and Corporate Information This section outlines Cabot Corporation's fiscal year 2025 Adjusted EPS guidance, provides an overview of the company, and details the nature of forward-looking statements Fiscal Year 2025 Outlook Cabot reaffirms its Adjusted EPS guidance for fiscal 2025 at $7.15 to $7.50. Due to lower customer demand from tariffs and macroeconomic uncertainty, particularly in the second half, the company expects to be in the middle to lower end of this range, with potential for higher if recent tariff announcements boost Q4 demand - Reaffirms Adjusted Earnings Per Share guidance for fiscal 2025 of $7.15 to $7.50[12] - Expects to be in the middle to lower end of the guidance range due to lower volumes in both Reinforcement Materials and Performance Chemicals segments in the second half of fiscal 2025[12] - If more recent announcements on tariffs translate into higher demand in the fourth fiscal quarter, the company would expect to be higher in the guidance range[12] - Despite challenges, the company expects to deliver earnings growth and strong operating cash flow in the fiscal year, focusing on cost reduction, network optimization, and disciplined commercial execution[12] About Cabot Corporation Cabot Corporation is a global specialty chemicals and performance materials company based in Boston, Massachusetts, specializing in reinforcing carbons, specialty carbons, battery materials, and other engineered materials - Cabot Corporation (NYSE: CBT) is a global specialty chemicals and performance materials company headquartered in Boston, Massachusetts[13] - 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[13] Forward-Looking Statements This section outlines that the earnings release contains forward-looking statements regarding future expectations, performance, capital allocation, operating cash flow, and tax rates for fiscal year 2025. It cautions that these statements are not guarantees of future performance and are subject to various risks and uncertainties, including industry competition, regulatory changes, raw material volatility, customer relationships, and global economic conditions - All statements that address expectations or projections about the future, including expectations for performance, Adjusted EPS, capital allocation, operating cash flow, and operating tax rate for fiscal year 2025, are forward-looking statements[14] - These statements are not guarantees of future performance and are subject to risks, uncertainties, potentially inaccurate assumptions, and other factors, some of which are beyond the company's control and difficult to predict[14] - Important factors that could cause results to differ materially include industry capacity utilization and competition, safety/health/environmental requirements, climate change developments, volatility in energy/raw material prices, customer relationships, new product growth, acquisition benefits, project delays, economic conditions, litigation, interest/tax/currency rates, tariffs, and respirator claims[16] Non-GAAP Financial Measures Explanation This section provides detailed definitions and explanations for various non-GAAP financial measures, including Adjusted EPS, Total Segment EBIT, EBITDA, and Free Cash Flow, used by management to assess performance Adjusted EPS Adjusted EPS excludes items management deems not representative of core business operations, such as unusual gains/losses, restructuring costs, legal/environmental matters, acquisition charges, asset impairments, business sale gains/losses, and employee benefit plan settlements. This measure aims to provide greater transparency and facilitate period-to-period performance comparisons - Adjusted EPS excludes items of expense and income that management does not consider representative of the Company's business operations to provide additional information related to the underlying performance of the business[20] - Excluded 'certain items' include Argentina controlled currency devaluation loss, global restructuring activities, legal and environmental matters, acquisition and integration-related charges, asset impairment charges, gains (losses) on sale of a business, and employee benefit plan settlements[22] - Management uses Adjusted EPS as a key measure in evaluating management performance for incentive compensation purposes[20] Total Segment EBIT, Total Segment EBITDA, Adjusted EBITDA Total Segment EBIT is the sum of EBIT from the two reportable segments, excluding certain items, interest expense, and unallocated corporate costs. Total Segment EBITDA further adjusts Total Segment EBIT for depreciation and amortization. Adjusted EBITDA reflects Total Segment EBITDA adjusted for unallocated corporate costs before corporate depreciation and amortization - Total Segment EBIT excludes certain items and items not controlled by business segments, such as interest expense and other unallocated corporate costs[25] - Total Segment EBITDA is equal to Total Segment EBIT, further adjusted for depreciation and amortization[26] - Adjusted EBITDA reflects Total Segment EBITDA and is further adjusted for unallocated corporate costs[26] Free Cash Flow and Discretionary Free Cash Flow Free Cash Flow is calculated by deducting additions to property, plant, and equipment from cash flow provided by operating activities. Discretionary Free Cash Flow further deducts sustaining and compliance capital expenditures and changes in Net Working Capital from operating cash flow - Free Cash Flow is calculated by deducting Additions to property, plant and equipment from cash flow provided by (used in) operating activities[27] - Discretionary Free Cash Flow is calculated by deducting sustaining and compliance capital expenditures and changes in Net Working Capital from cash flow provided by (used in) operating activities[27] Operating Tax Rate The operating tax rate is based on management's forecast of the annual operating tax rate applied to adjusted pre-tax earnings, excluding income tax (expense) benefit on certain items, discrete tax items, and quarterly timing of losses in certain jurisdictions. This non-GAAP measure helps investors compare tax rates consistently year-over-year - The 'operating tax rate' is calculated based upon management's forecast of the annual operating tax rate for the fiscal year applied to adjusted pre-tax earnings[28] - It excludes income tax (expense) benefit on certain items, discrete tax items and, on a quarterly basis the timing of losses in certain jurisdictions[28] - Management believes this non-GAAP financial measure is useful supplemental information because it helps investors compare the tax rate year to year on a consistent basis and to understand what the tax rate on current operations would be without the impact of these items[28] Explanation of Other Terms Used This section defines 'Product Mix' as the mix of product types, grades, or geographic regions sold and its impact on revenue or profitability, and 'Net Working Capital' as accounts receivable, inventory, accounts payable, and accrued expenses - The term 'product mix' refers to the mix of types and grade of products sold or the mix of geographic regions where products are sold, and the positive or negative impact this has on the revenue or profitability of the business or segment[31] - The term 'net working capital' includes accounts receivable, inventory and accounts payable and accrued expenses[31] Consolidated Financial Statements (Unaudited) This section presents the unaudited consolidated statements of operations, financial position, and cash flows, providing a comprehensive overview of the company's financial performance and health Consolidated Statements of Operations The consolidated statements of operations show a decrease in net sales and other operating revenues for Q3 FY25 to $923 million from $1,016 million in Q3 FY24. Net income attributable to Cabot Corporation decreased to $101 million from $109 million YoY | Metric | Q3 FY25 | Q3 FY24 | 9 Months FY25 | 9 Months FY24 | | :---------------------------------------------------- | :------ | :------ | :------------ | :------------ | | Net sales and other operating revenues (million USD) | $923 M | $1,016 M | $2,814 M | $2,993 M | | Cost of sales (million USD) | $679 M | $760 M | $2,094 M | $2,273 M | | Gross profit (million USD) | $244 M | $256 M | $720 M | $720 M | | Income (loss) from operations (million USD) | $167 M | $172 M | $484 M | $464 M | | Net income (loss) attributable to Cabot Corporation (million USD) | $101 M | $109 M | $288 M | $243 M | | Diluted earnings (loss) per common share (USD) | $1.86 | $1.94 | $5.22 | $4.30 | Consolidated Statements of Financial Position As of June 30, 2025, total assets were $3,837 million, an increase from $3,736 million at September 30, 2024. Total liabilities were $1,954 million, and total stockholders' equity was $1,683 million | Metric | June 30, 2025 | Sept 30, 2024 | | :-------------------------------- | :------------ | :------------ | | Total current assets (million USD) | $1,573 M | $1,605 M | | Net property, plant and equipment (million USD) | $1,672 M | $1,534 M | | Total assets (million USD) | $3,837 M | $3,736 M | | Total current liabilities (million USD) | $740 M | $772 M | | Long-term debt (million USD) | $1,105 M | $1,087 M | | Total liabilities (million USD) | $1,954 M | $1,946 M | | Total stockholders' equity (million USD) | $1,683 M | $1,590 M | Condensed Consolidated Statements of Cash Flows For Q3 FY25, cash provided by operating activities was $249 million, up from $207 million in Q3 FY24. Investing activities used $65 million, and financing activities used $183 million. The cash balance increased by $26 million during the quarter, ending at $239 million | Metric | Q3 FY25 | Q3 FY24 | 9 Months FY25 | 9 Months FY24 | | :------------------------------------------ | :------ | :------ | :------------ | :------------ | | Net income (loss) (million USD) | $113 M | $120 M | $322 M | $278 M | | Cash provided by (used in) operating activities (million USD) | $249 M | $207 M | $446 M | $488 M | | Cash provided by (used in) investing activities (million USD) | $(65) M | $(51) M | $(239) M | $(146) M | | Cash provided by (used in) financing activities (million USD) | $(183) M | $(131) M | $(190) M | $(326) M | | Increase (decrease) in cash and cash equivalents (million USD) | $26 M | $(9) M | $16 M | $(41) M | | Cash and cash equivalents at end of period (million USD) | $239 M | $197 M | $239 M | $197 M | Segment Financial Data (Unaudited) This section provides unaudited financial data broken down by segment, including summary results and detailed quarterly performance for Reinforcement Materials and Performance Chemicals Summary Results by Segment In Q3 FY25, Reinforcement Materials sales were $573 million (down from $649 million YoY), and Performance Chemicals sales were $320 million (down from $332 million YoY). Reinforcement Materials EBIT was $128 million (down from $136 million YoY), while Performance Chemicals EBIT was $57 million (up from $55 million YoY) | Metric | Q3 FY25 | Q3 FY24 | 9 Months FY25 | 9 Months FY24 | | :------------------------------------ | :------ | :------ | :------------ | :------------ | | Sales | | | | | | Reinforcement Materials (million USD) | $573 M | $649 M | $1,778 M | $1,966 M | | Performance Chemicals (million USD) | $320 M | $332 M | $942 M | $928 M | | Segment Earnings Before Interest and Taxes (EBIT) | | | | | | Reinforcement Materials (million USD) | $128 M | $136 M | $389 M | $414 M | | Performance Chemicals (million USD) | $57 M | $55 M | $152 M | $120 M | | Total Segment EBIT (million USD) | $185 M | $191 M | $541 M | $534 M | Quarterly Results by Segment This section provides a detailed quarterly breakdown of sales and EBIT for both Reinforcement Materials and Performance Chemicals segments for fiscal years 2024 and 2025, showing trends and specific quarterly performance | Metric (Sales) | Dec. Q FY24 | Mar. Q FY24 | June Q FY24 | Sept. Q FY24 | FY24 | Dec. Q FY25 | Mar. Q FY25 | June Q FY25 | Sept. Q FY25 | FY25 | | :--------------------- | :---------- | :---------- | :---------- | :----------- | :--- | :---------- | :---------- | :---------- | :----------- | :--- | | Reinforcement Materials (million USD) | $641 M | $676 M | $649 M | $644 M | $2,610 M | $611 M | $594 M | $573 M | $— | $1,778 M | | Performance Chemicals (million USD) | $285 M | $311 M | $332 M | $322 M | $1,250 M | $311 M | $311 M | $320 M | $— | $942 M | | Segment Sales (million USD) | $926 M | $987 M | $981 M | $966 M | $3,860 M | $922 M | $905 M | $893 M | $— | $2,720 M | | Metric (EBIT) | Dec. Q FY24 | Mar. Q FY24 | June Q FY24 | Sept. Q FY24 | FY24 | Dec. Q FY25 | Mar. Q FY25 | June Q FY25 | Sept. Q FY25 | FY25 | | :--------------------- | :---------- | :---------- | :---------- | :----------- | :--- | :---------- | :---------- | :---------- | :----------- | :--- | | Reinforcement Materials (million USD) | $129 M | $149 M | $136 M | $123 M | $537 M | $130 M | $131 M | $128 M | $— | $389 M | | Performance Chemicals (million USD) | $34 M | $31 M | $55 M | $44 M | $164 M | $45 M | $50 M | $57 M | $— | $152 M | | Total Segment EBIT (million USD) | $163 M | $180 M | $191 M | $167 M | $701 M | $175 M | $181 M | $185 M | $— | $541 M | Non-GAAP Reconciliations (Unaudited) This section presents unaudited reconciliations of non-GAAP financial measures, including Adjusted EPS, operating tax rate, EBIT, EBITDA, and various cash flow metrics, to their most comparable GAAP equivalents Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate This section provides detailed tables reconciling GAAP EPS to Adjusted EPS and the effective tax rate to the operating tax rate, outlining the specific 'certain items' (e.g., global restructuring, legal matters, currency devaluation) that are excluded and their pre-tax and after-tax impact | Certain Items (Pre-tax) | Q3 FY25 | Q3 FY24 | 9 Months FY25 | 9 Months FY24 | | :------------------------------------------ | :------ | :------ | :------------ | :------------ | | Global restructuring activities (million USD) | $(3) M | $(1) M | $(6) M | $(13) M | | Legal and environmental matters and reserves (million USD) | — | — | $(6) M | $(1) M | | Argentina controlled currency devaluation and other losses (million USD) | — | $(2) M | — | $(43) M | | Other certain items (million USD) | — | $1 M | $(1) M | $1 M | | Total certain items, pre-tax (million USD) | $(3) M | $(2) M | $(13) M | $(56) M | | Total certain items after tax per share (USD per share) | $(0.04) | $0.02 | $(0.34) | $(0.95) | | Tax Rate Reconciliation | Q3 FY25 | Q3 FY24 | 9 Months FY25 | 9 Months FY24 | | :-------------------------------- | :------ | :------ | :------------ | :------------ | | Effective Tax Rate (%) | 28% | 25% | 29% | 31% | | Operating Tax Rate (%) | 28% | 27% | 28% | 28% | | Adjusted EPS Reconciliation | Q3 FY25 | Q3 FY24 | 9 Months FY25 | 9 Months FY24 | | :------------------------------------------ | :------ | :------ | :------------ | :------------ | | Net income (loss) per share attributable to Cabot Corporation (USD per share) | $1.86 | $1.94 | $5.22 | $4.30 | | Less: Certain items after tax per share (USD per share) | $(0.04) | $0.02 | $(0.34) | $(0.95) | | Adjusted earnings (loss) per share (USD per share) | $1.90 | $1.92 | $5.56 | $5.25 | Reconciliation of Non-GAAP Financial Measures (EBIT, EBITDA, Cash Flow) This section provides reconciliations for Total Segment EBIT, Total Segment EBITDA, Adjusted EBITDA, Free Cash Flow, and Discretionary Free Cash Flow to their most directly comparable GAAP measures, offering a comprehensive view of non-GAAP adjustments | Metric (EBIT/EBITDA Reconciliation) | Dec. Q FY25 | Mar. Q FY25 | June Q FY25 | FY25 (9 Months) | | :---------------------------------------------------- | :---------- | :---------- | :---------- | :-------------- | | Net income (loss) attributable to Cabot Corporation (million USD) | $93 M | $94 M | $101 M | $288 M | | Income (loss) from operations before income taxes and equity in earnings of affiliated companies (million USD) | $144 M | $151 M | $155 M | $450 M | | Total Segment EBIT (million USD) | $175 M | $181 M | $185 M | $541 M | | Total Segment EBITDA (million USD) | $212 M | $219 M | $224 M | $655 M | | Adjusted EBITDA (million USD) | $199 M | $206 M | $211 M | $616 M | | Metric (Segment EBITDA & Margin) | Dec. Q FY25 | Mar. Q FY25 | June Q FY25 | FY25 (9 Months) | | :-------------------------------- | :---------- | :---------- | :---------- | :-------------- | | Reinforcement Materials EBITDA (million USD) | $147 M | $148 M | $146 M | $441 M | | Reinforcement Materials EBITDA Margin (%) | 24% | 25% | 25% | 25% | | Performance Chemicals EBITDA (million USD) | $65 M | $71 M | $78 M | $214 M | | Performance Chemicals EBITDA Margin (%) | 21% | 23% | 24% | 23% | | Metric (Cash Flow Reconciliation) | Dec. Q FY25 | Mar. Q FY25 | June Q FY25 | FY25 (9 Months) | | :---------------------------------------------------- | :---------- | :---------- | :---------- | :-------------- | | Cash provided by (used in) operating activities (million USD) | $124 M | $73 M | $249 M | $446 M | | Free cash flow (million USD) | $47 M | $1 M | $188 M | $236 M | | Discretionary free cash flow (million USD) | $114 M | $110 M | $114 M | $338 M |