Chris Perrella

Chris Perrella inquired about the underlying volume, price, and mix assumptions for performance chemicals in the fiscal year 2026 guidance, specifically regarding potential mix uplift from battery materials.

Answer

Sean Keohane, CEO and President, explained that while automotive and construction applications are in a cyclical trough, targeted growth areas like battery materials, infrastructure, and digitalization (fume silica for CMP) are expected to drive overall volume growth in 2026. He noted that the mix uplift from higher-value battery materials would likely be balanced by the high margins typically seen in specified automotive volumes.

Chris Perrella requested details on the underlying assumptions for Cabot's performance chemicals segment guidance, specifically regarding volume, growth, price, and mix expectations for the upcoming fiscal year.

Answer

CEO and President Sean Keohane outlined that while automotive and construction applications are in a cyclical trough with limited 2026 improvement, strong growth is anticipated in targeted areas like battery materials, infrastructure, and digitalization (fume silica for CMP). He expects overall segment volumes to increase in 2026, driven by these tailwinds offsetting other headwinds. Mr. Keohane also noted that the margin uplift from product mix is expected to be fairly balanced, as both high-growth and specified automotive applications carry strong margins.

Chris Perrella, on behalf of Joshua Spector at UBS, asked about Reinforcement Materials demand trends for the upcoming quarter, the expected volume cadence for the year, the impact of Asian tire imports into the U.S., and the drivers for the fiscal year's increased CapEx.

Answer

CEO and President Sean Keohane confirmed a solid October volume recovery in Mexico and projected modest, low-single-digit global tire production growth for 2025. He noted that while high levels of Asian tire imports are impacting the Americas, there is pushback from recent tariffs and antidumping duties. For CapEx, Keohane explained the expected range of $250M-$300M is driven by the completion of an air pollution control project in Louisiana, a new production unit in Indonesia, and investments in battery growth projects.

Chris Perella, on for Josh Spector, asked about the flexibility of capital spending and whether a step-up would be required to support customers relocating production. He also requested color on current U.S. demand trends.

Answer

CEO Deon Stander responded that a significant step-up in capital is not anticipated to handle sourcing shifts, as the company has available capacity and ongoing productivity initiatives. Regarding U.S. demand, he noted that while the materials business demand is stable, there is a slowdown in orders for apparel specifically sourced from China due to tariff uncertainty.