Cabot's Shares Fall After Downgrade

NEW YORK (AP) — Shares of Cabot Corp. fell on Tuesday after an analyst downgraded the shares of the specialty chemicals maker citing demand deterioration.

Shares fell $1.14, or 9.5 percent, to $10.90 on Tuesday.

JP Morgan analyst Jeffrey Zekauskas downgraded Cabot to "underweight" from "neutral," saying the weak auto markets have sent rubber black volumes down 30 percent, while the faltering electronic markets have driven down sales for fumed metal oxide 30 to 35 percent. This contraction in sales volumes could hurt industry pricing, further hurting profitability, he said.

Cabot's 2009 cost-cutting initiatives will benefit 2010 results, added Zekauskas. The company's restructuring includes taking off-line about 16 percent of the total production capacity and a 12 percent reduction in the company's global work force. These restructuring changes involve a total charge of $150 million, with $105 million recorded in 2009. The company expects these cuts to result in at least $80 million in annual costs savings in 2010, he added.

Zekauskas said he believes the company's positive cash generation in 2009 will turn negative in 2010.

Zekauskas estimated 2009 and 2010 earnings at 25 cents and 90 cents per share, respectively.

(This version CORRECTS that analyst views that cost-cutting will benefit results and that his 2010 estimate was stated, not lowered)