Cabot Corporation (



F3Q 2011 Earnings Call

July 27, 2011 2:00 PM ET


Erica McLaughlin – Director, IR

Patrick Prevost – President and CEO

Eduardo Cordeiro – EVP and CFO


Laurence Alexander – Jefferies

Saul Ludwick – Northcoast Research

John Roberts – Buckingham Research Group

Christopher Butler – Sidoti & Company

Jay Richard Harris – Goldsmith & Harris

Saul Ludwig – Northcoast Research



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Good day ladies and gentlemen, and welcome to the Cabot Corporation Third Quarter 2011 Earnings Conference Call. My name is Jonathan and I am your operator for today. At this time, all participants are in a listen-only mode. We will be conducting a question-and-answer session after the prepared remarks. (Operator Instructions). As a reminder, this conference call is being recorded for replay purposes.

And I would now like to handle the call off to Ms. Erica McLaughlin, Director of Investor Relations. You may proceed ma’am.

Erica McLaughlin

Thank you, Jonathan. Good afternoon. I would like to welcome you to the Cabot Corporation earnings teleconference. Here this afternoon are Patrick Prevost, Cabot’s President and CEO; Eddie Cordeiro, Cabot’s Chief Financial Officer; Dave Miller, General Manager of the Core Segment; Fred von Gottberg, General Manager of our New Business segment; Jim Kelly, Corporate Controller; and Brian Berube, General Counsel.

Last night, we released results for our third quarter of fiscal year 2011, copies of which are posted in the Investor Relation section of our website. For those on our mailing list, you received the press release either by e-mail or fax. If you are not on our mailing list and are interested in receiving this information in the future, please contact Investor Relations. The slide deck that accompanies this call is also available in the Investor Relations portion of our website and will be available in conjunction with the replay of the call.

I remind you today that our conversation today will include forward-looking statements, which are subject to risks and uncertainties, and Cabot’s actual results may differ materially from those expressed in the forward-looking statements. A list of factors that could affect Cabot’s actual results can be found in the press release we issued last night and issued last night and are discussed more fully in the reports we filed with the Securities and Exchange Commission particularly in our last annual report on Form 10-K. These filings can be found in the Investor Relations portion of our website.

I will now turn the call over to Patrick Prevost, who will discuss the key highlights of the company’s performance for the quarter. Eddie Cordeiro will review the business segment and corporate financial details. Following this, Patrick will provide closing comments and open the floor to questions.


Patrick Prevost

Thank you Erica, and good afternoon ladies and gentlemen. We’re pleased with our results this quarter as we have a number of records to announce. First of all, we achieved a record of all-segment EBIT of $115 million. Second, we also reported record performance segment profits. And finally, we continued to grow our new business segments with the record sales revenue this quarter. These results are reflection of our continued efforts across all businesses to grow volumes in key markets, introduce new products, and expand margins through value pricing and process improvements. We’ve been working at this since 2008 and are pleased with the progress we’ve made.

Our strategic focus on margin improvement continues to be a critical diver of our strong financial performance. During this quarter, we were once again very successful at increasing our profitability by expanding unit margins across the entire portfolio. We continued to implement our value pricing concept across these segments. We focused our efforts on higher margin products and we work closely with our customers to ensure that there is a clear connection between the value provided and the prices they pay.

Our innovation culture and technical capabilities allow us to introduce new products on a regular basis and insures that we are meeting the changing needs of our customers. In addition as we have discussed before the contract lag effect that burdened us in the Rubber Blacks business in the past has been essentially eliminated. We are now optimizing our product and customer mix in all of our businesses and have implemented price increases in our core and performance segments.

We are all focused on selling the highest value products to our customers including new products with differentiated performance. This is our area of focus across all segments. In addition our energy recovery in yield technology investments are also contributing to our results in the form of lower costs. Our plans to invest $50 million in energy recovery and yield technologies over the next three years will help to continue to drive margin improvement in the future. What is important is that these are margin improvements that are essentially independent of financial product license.

On the volume side, numbers have remained solid across all of our key businesses and our capacity utilizations remain at high levels. We saw sequential quarterly increases in volume in the Rubber Blacks business Performance segment and the inkjet colorants business and a welcome improvement in the Specialty Fluids segment.

We continue to see strong demand in our end markets. Cabot has technology end market leadership positions across all segments and geographies and is poised to benefit from the macroeconomic trends we outlined that our recent Investor Day event, and those were energy efficiency and sustainability, growth of the middle class in the emerging markets and finally globalization and mobility.

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