Cabot (US:CBT)2021-02-02 16:22Financial Data and Key Metrics Changes - The company reported record adjusted earnings per share of $1.18 and segment EBIT of $140 million for Q1 2021, driven by improving demand trends and robust unit margins [9][43]. - Cash flows from operating activities were $21 million, with a working capital increase of $99 million, primarily due to higher sales and inventory purchases of raw materials [39][40]. Business Line Data and Key Metrics Changes - Reinforcement Materials segment achieved record EBIT performance of $88 million, with global volumes up 1% year-over-year, driven by 13% growth in Europe and 9% in the Americas [31][32]. - Performance Chemicals segment delivered EBIT of $54 million, up 32% compared to Q1 2020, primarily due to higher volumes and a strong product mix [20][36]. - Purification Solutions segment's EBIT was flat compared to the previous year, affected by reduced demand in mercury removal applications [38]. Market Data and Key Metrics Changes - Strong recovery was noted in tire and automotive markets, with global demand improving, although still below pre-COVID levels [11][12]. - The Chinese market showed significant strength, with PMI hitting 57 and industrial production surging, positioning the company well for growth in this region [15][16]. Company Strategy and Development Direction - The company is focused on maintaining pricing and margins over volume in the near term, particularly in the Chinese market [55][104]. - Strategic initiatives include converting a plant in Suzhou, China, to manufacture specialty carbons, expected to be completed by early 2022 [21][22]. - Sustainability and ESG leadership are integrated into the business strategy, with the company receiving a platinum rating from EcoVadis for its sustainability efforts [27][29]. Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the economic recovery, particularly in the automotive sector, while acknowledging challenges related to COVID-19 and global logistics [46][47]. - The company expects adjusted earnings per share in Q2 to be in the range of $0.90 to $1.00, reflecting strong underlying business performance [44][45]. Other Important Information - The company anticipates that margins will moderate in the upcoming quarters due to rising feedstock costs and increased fixed costs [34][37]. - Capital expenditures for the year are expected to be between $175 million and $200 million, including compliance and upgrades to the new carbon black plant in China [41]. Q&A Session Summary Question: Outlook on cost inflation and margin normalization - Management indicated that visibility remains challenging, but the Q2 guidance reflects strong business performance, with careful management of transportation and supply chain issues [50][51][52]. Question: Asia reinforcement volumes down despite strong demand - Management clarified that the focus on price and margin over volume led to weaker volumes in Asia, despite strong economic performance in China [54][55]. Question: Impact of tariffs on tire imports - Management noted that tariffs may shift demand regionally but do not expect significant corporate earnings impact due to the company's global footprint [100][101]. Question: Recovery of volumes to pre-COVID levels - Management expects tire production in 2021 to be about 4% to 5% below the prior peak, indicating a gradual recovery [113]. Question: Mix effects and growth in the tire replacement market in China - Management highlighted that the passenger car replacement cycle in China is still building, with significant potential for growth [81][83].