Sign in

You're signed outSign in or to get full access.

CC

CABOT CORP (CBT)·Q1 2025 Earnings Summary

Executive Summary

  • Adjusted EPS of $1.76, up 13% year-over-year; diluted EPS $1.67. Revenue was $955M, essentially flat (-0.3%) YoY. Performance Chemicals EBIT rose 32% to $45M; Reinforcement Materials EBIT was $130M (+1% YoY). Operating cash flow was $124M, supporting $66M returned to shareholders .
  • Management reaffirmed FY25 Adjusted EPS outlook of $7.40–$7.80 and operating tax rate of 27–29%; guidance excludes impacts from newly announced tariffs (U.S./Mexico/Canada/China) as assessments are ongoing .
  • Segment mix: Reinforcement volumes grew in APAC (+2%) and EMEA (+1%) but fell in the Americas (-1%) amid elevated tire imports; Performance Chemicals volumes up 8% on reconnection to end-market demand (electronics, auto, infrastructure) .
  • Capital allocation: $77M capex (Indonesia carbon black, battery materials in China), $42M repurchases, $24M dividends, ~$1.3B liquidity; Board declared a $0.43/share dividend payable March 14, 2025 .
  • Catalyst watch: outcomes from tire contract negotiations (flat base prices YoY, regional volume shifts), tariff implementations and pass-through mechanics, and Indonesia capacity start-up in 2H FY25 with modest initial EBIT contribution, ramping in FY26 .

What Went Well and What Went Wrong

What Went Well

  • Performance Chemicals EBIT rose 32% YoY to $45M on 8% volume growth; product demand reconnected to underlying drivers across automotive, electronics, and infrastructure. “Volumes have reconnected to underlying demand drivers in key end markets” .
  • Reinforcement Materials delivered resilient EBIT ($130M, +1% YoY) with volume growth in APAC and EMEA; structural improvements and commercial excellence mitigated geographic mix and energy center headwinds .
  • Strong cash generation ($124M OCF; Discretionary FCF $114M) funded growth capex and $66M shareholder returns; liquidity remained robust at ~$1.3B .

What Went Wrong

  • Americas Reinforcement volumes declined 1% due to higher tire imports from Asia; region margin mix remains less favorable versus Western markets .
  • Energy center revenue headwind (~$5M EBIT impact YoY) affected Reinforcement Materials margins, driven by Europe and China .
  • Maintenance timing and new assets lifted costs in Performance Chemicals; corporate cost timing benefited Q1 but expected higher ($14–$16M/quarter) in the remainder of FY25 .

Financial Results

MetricQ1 FY2024 (Dec 31, 2023)Q4 FY2024 (Sep 30, 2024)Q1 FY2025 (Dec 31, 2024)
Revenue ($USD Millions)$958 $1,001 $955
Diluted EPS ($)$0.88 $2.43 $1.67
Adjusted EPS ($)$1.56 $1.80 $1.76
Gross Profit ($M)$218 $240 $235
Gross Margin (%)22.8% (218/958) 24.0% (240/1,001) 24.6% (235/955)
Net Income attrib. to Cabot ($M)$50 $137 $93
Net Income Margin (%)5.2% (50/958) 13.7% (137/1,001) 9.7% (93/955)

Segment breakdown:

SegmentQ1 FY2024 Sales ($M)Q4 FY2024 Sales ($M)Q1 FY2025 Sales ($M)Q1 FY2024 EBIT ($M)Q4 FY2024 EBIT ($M)Q1 FY2025 EBIT ($M)
Reinforcement Materials$641 $644 $611 $129 $123 $130
Performance Chemicals$285 $322 $311 $34 $44 $45

KPIs:

KPIQ1 FY2024Q4 FY2024Q1 FY2025
Operating Cash Flow ($M)$105 $204 $124
Capex ($M)$54 $92 $77
Free Cash Flow ($M)N/A$112 $47
Discretionary Free Cash Flow ($M)N/A$105 $114
Cash & Equivalents ($M)$244 $223 $183
Operating Tax Rate (%)28% 20% Q4; FY24 26% 28%
Dividends Paid ($M)$22 $24 $24
Share Repurchases ($M)$38 $66 $42
Reinforcement Volumes YoYN/AGlobal -1%; APAC +4%; EMEA +3%; Americas -7% Global +1%; APAC +2%; EMEA +1%; Americas -1%

Note: Estimates vs actual are not shown due to S&P Global consensus data being unavailable at time of analysis.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPSFY2025$7.40–$7.80 (Nov-2024) $7.40–$7.80 (reaffirmed) Maintained
Operating Tax RateFY202527–29% 27–29% Maintained
CapexFY2025$250–$300M $250–$300M (CFO reaffirmation) Maintained
Performance Chemicals EBITFY2025~$45–$55M per quarter (run-rate) ~$45–$55M per quarter Maintained
Reinforcement Materials EBITFY2025Growth expected vs FY24 “Similarly strong level” vs FY24 Lowered characterization (flat vs prior “up”)
Tariffs inclusionFY2025 EPS OutlookNot specifiedExcludes impacts from recently announced tariffs Clarified exclusion
DividendQ1 FY2025$0.43/quarter (historical trend) $0.43 declared, payable Mar 14, 2025 Maintained
Share Repurchase AuthorizationFY2025N/ANew $10M authorization Added

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY2024)Previous Mentions (Q4 FY2024)Current Period (Q1 FY2025)Trend
Tire imports/Geographic mixWeather disruptions (Mexico/Brazil); Americas -4% vols; normalization expected Americas -7% vols; elevated Asian imports; tariffs/duties emerging (MX, US) Americas -1% vols; margin headwind despite global footprint; monitoring tariffs Improving volumes; margin mix still pressured
EU sanctions (Russia/Belarus)Sanctions timing (Jul/Oct) causing local supply focus Continued EU demand for local supply Europe volumes +1%; contract gains; firm environment Supportive for EU margins
Performance Chemicals mixReconnection to demand; strong auto/semis; $50–$55M EBIT run-rate discussed Higher volumes/mix; seasonality +8% volumes; fumed metal oxides ~20% growth; carbons/compounds +5–6% Positive normalization sustained
Energy center revenueN/AEnergy benefits depend on market curves; possible 2025 pressure ~$5M EBIT headwind YoY; Europe/China Slight headwind vs prior
Capex/Growth projects$250–$300M; APC (U.S.); Indonesia startup; battery investments DOE $50M CNT grant selection; returns outlined $77M Q1 capex; Indonesia start in 2H25; modest 2025 benefit, material in 2026 On track; 2026 ramp visible
Tariffs/Macro/FXTrade/tariff backdrop; cautious China macro Mix of tariffs/duties; rate expectations tempering Guidance excludes new tariffs; pass-through clauses; assessing broader macro impacts Dynamic; manageable pass-through
AI/Data centers/infrastructureSustainability and grid themes; Clean Sweep/EVOLVE DOE battery; infrastructure demand Infrastructure demand benefiting wire/cable; energy demand rising “in part by AI & data centers” Strengthening demand drivers

Management Commentary

  • CEO: “Adjusted EPS of $1.76, up 13% year-over-year… Reinforcement Materials segment continued to demonstrate its resilience… Performance Chemicals segment EBIT grew 32% year over year largely due to improved volumes” .
  • CEO: “Our outlook for Adjusted EPS for fiscal year 2025 remains $7.40 to $7.80… does not incorporate any potential impacts from the tariffs recently announced” .
  • CFO: “Operating cash flow was strong at $124 million… capex $77 million… debt $1.2B, net debt-to-EBITDA 1.3x… operating tax rate 28%… expect $250–$300M capex for fiscal year” .
  • CEO: “Indonesia capacity start-up in the back half [FY25]; modest benefit in FY25 (low single-digit millions), ramping sharply in 2026” .
  • CEO: “We believe commercial excellence is an important competency… disciplined approach so that we are paid a fair value for… supply reliability, quality, innovation and sustainability leadership” .

Q&A Highlights

  • Reinforcement contracts: Base prices flat YoY for CY’25 vs CY’24; higher volumes in Europe, lower in South America; Americas challenged by imports .
  • Indonesia start-up: Modest 2H FY25 EBIT benefit (low single-digit $M) due to ramp/qualification; material contribution in FY26 .
  • Energy center: ~$5M EBIT headwind YoY, Europe and China driven .
  • Cost cadence: Corporate costs were ~$4M lower YoY on timing; expect $14–$16M/quarter rest of year (Q2 higher seasonally) .
  • Specialty Blacks pricing: Spot-oriented pricing adjusted to oil cost changes to protect margins .
  • Performance Chemicals drivers: Growth across lines; carbons/compounds +5–6%; fumed metal oxides ~+20% YoY .
  • Tariff pass-throughs: Most contracts allow pass-through of taxes/tariffs; working alternative supply; downstream demand effects possible .

Estimates Context

  • S&P Global consensus EPS and revenue estimates were unavailable at time of analysis due to a data retrieval limit error; therefore, we cannot quantify beats/misses vs Street for Q1 FY2025 or provide estimate comparisons. We will update when SPGI data access is restored [GetEstimates error].

Key Takeaways for Investors

  • Performance Chemicals momentum looks durable with normalized mix and broad-based volume drivers (auto, semis, infrastructure), supporting the $45–$55M quarterly EBIT run-rate framework for FY25 .
  • Reinforcement Materials resilient EBIT despite Americas softness; EU demand tailwinds post-Russia/Belarus sanctions and potential seasonal improvements support modest sequential gains in Q2 .
  • Near term stock catalysts: clarity on tariff implementation and customer pass-through dynamics; monitoring tire import trends in the Americas; contract volumes/mix in Europe .
  • Cash generation remains robust (Q1 OCF $124M), enabling continued investment (Indonesia, battery materials) and shareholder returns (dividend $0.43, buybacks), with liquidity of ~$1.3B .
  • FY25 EPS guidance reaffirmed ($7.40–$7.80) despite tariff uncertainty; tone suggests disciplined pricing and operational excellence offsetting macro headwinds .
  • Medium-term thesis: new capacity ramp (Indonesia) and ongoing battery materials investments (China and anticipated U.S. CNT project) provide tangible growth vectors into FY26–FY28 .
  • Watch energy center revenue and maintenance timing as variables for margins; management disclosed a ~$5M headwind and higher corporate cost run-rate in upcoming quarters .