CBT - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen and welcome to the Q1 2018 Cabot Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time.

As a reminder, this conference call may be recorded. I would now like to introduce your host for today's conference, Mr. Treasurer Relations. President, Vice Delahunt, and Investor Steve Please go ahead.

Steven J. Delahunt

this Executive would welcome of teleconference. Vice you Relations slide you. and me and Good we XXXX, conjunction the President to copies results of which I afternoon. Chief is accompanies President Officer. section Keohane, earnings Thank and to Chief Cordeiro, deck the Last of of our year in portion Investor the were with like Cabot in fiscal the for will are available The of website. our Sean that Relations and quarter Financial in Officer; the Eddie today night, call also Executive With released posted Corporation first replay call. be Investor available website our

we materially those During statement Each performance. make that could results this and about cause risks uncertainties forward-looking such forward-looking operational future our and from call, actual will projected differ conference in expected statements. financial is to subject statements to

presented table our measures order should provide Additional heading In the discuss Any of financial adjustments not the Exchange involve review website. non-GAAP key turn I considered company's Eddie the segments press Keohane, Forward-Looking the our annual the is financial highlights will available and appears to who with Any the on that financial night financial and night, comparable the call available in Cordeiro details. now last and we release Form greater the Statements under our will of of this required referenced report in be are operating to be measure transparency at reconciled filed to on and the over business refer regarding performance, information our end measures we GAAP GAAP. issued certain the XX-K release results. Securities last alternative performance. corporate in to by an earnings Sean measures company's directly financial the that to to issued non-GAAP measures financial section to will GAAP factors in a non-GAAP Commission on regarding most Investors these call last website.

Following this, closing the Sean? to open will floor questions. provide and comments Sean

Sean D. Keohane

to year Steve. which ladies see to with maintaining fiscal feedstock you, step earnings we sold associated our Solutions pricing favorable while accelerated costs. the the continued supply gains which partly receipt in of I'm is XX% in drive The with and costs up one higher Good fundamentals, We've XXXX, growth. the by Cuts we segment rates. bringing in China continues increases Specialty negotiations the of resulted partially and from with price remain growing environment achieving in gains lower and the achieving growth benefited quarter been payments, Asia, on removal In headwinds region The increase major Act allowed a up tire spot volumes in us in with volumes driven Chemicals achieved advance long-term the Jobs demand fundamentals experienced basis gentlemen. the customer operating price The price are offset significant In with we December how to Europe $XXX year in strong line realized enactment X%. our and application. from the successful increases a EBIT royalty results The favorable EBIT, in segment in the in in time in that same Asia. the year-over-year majority Thank segment tax calendar spot spot Materials with investments higher while in afternoon, and up a market in Performance pleased environment. price Reinforcement the feedstock of at current adjusted quarter. which feedstock by from benefited our improvement the segment also pricing EPS benefits XXXX, first to our first Purification pricing costs. region. of XXXX more delivered agreements segment South XX% contract our while And Results Americas, of the America mercury resulted was despite as us in offset raising a of the result increases, share. a a quarter applications positive market pricing, Tax positive solid to completed which recover, market of market, The regions growth quarter in prices impacted charge by volume also and and million economy all consistent across were North and remained customers. in the America the line in all calendar the with the strengthen

cash to to We position. due minimal foreign be Cabot's credit expect reform to the impact related tax tax significant

the activities. in invested We $XX while dividends In capital to in million addition, million repurchases. $XX through $XX million operating share million expenditures of from million in $XX in we $XX quarter, and shareholders returning generated cash

about a because the it such minute had talk a China me quarter. Let on for significant impact

these index, ways. the I the months. different continues Cabot as a particularly in to during increase As the quarter, companies, non-compliant Chinese in level focus few the they enforcement against actions quarter on government air benefited the last of from mentioned environmental quality winter

many through our environmental-related curtailments First, which market. of from in resulting of pricing, an impacted the improved competitors, supply

in amount price now South, Second, we in feedstock for environmental results spot repeat of quarter enforcement in area happen believe China will will better into that in I costs, to in be market the are Eddie? pricing will the the good It's achieve supply which in we into of more market to it us the say exports in for in well the coming the recognizing to about out over the on turn detail. limited what QX what business winter the tight season not our to feel and heading Eddie impacted the region. carbon advance black might And overall, resulting higher discuss hard third, QX. of pricing, but Asia rest financial allowed year. increases situation positioned the of impact the and China

Eduardo E. Cordeiro

the Thank I will you, discuss beginning segment Materials. results with Sean. Reinforcement

XXXX, XXXX first XXXX. EBIT quarter margins China, improved During XXXX, to the increase X% increased unit margins, to and increased Reinforcement first agreements. in compared of in also partially unit by Asia the spot offset in of lower the timing an Asia. the primarily environment unit for The favorable by volumes. Americas. in of price compared business EBIT $XX from This quarter was seasonally Materials by due as Materials by Reinforcement a of of margins to In driven pricing The benefited and in by million million pricing higher the higher to were higher increases due customer volumes rising driven feedstock due fourth quarter volumes costs. EBIT fiscal $XX the principally decrease of Sequentially, ahead was sequential the

Looking spot China. the to environment, ahead fixed XXXX benefit by pricing partially second the agreements quarter, volume higher a to expect favorable from costs offset customer and in weakness seasonal we and

benefits increases. in from Metal costs, Sequentially, turning Formulations Performance due Carbons compared by in price of increases. margins due rising the the Sequentially, Performance costs compared higher Carbons business. from Chemicals business and seasonally and the partially to $X decreased $X by fixed by higher the offset to fiscal lower offset XXXX, XXXX to Volumes volumes and million Now, decreased quarter Specialty and in by fourth volumes to realization seasonal X% increased from feedstock of partially million and higher X% Chemicals. by primarily X% Oxides margins of in fiscal decreased the lower first Oxides, to X% volumes, and by Formulations quarter primarily EBIT Metal to by demand. EBIT due Specialty price

the costs. Looking partially by a see ahead to will second quarter, to in that volumes pickup fixed expect offset higher we be

increased first of unfavorable the payments, which the First by in inventory in fiscal million from to Specialty royalty XXXX the did XXXX accelerated and prior-year $X not quarter current EBIT offset receipt to compared fiscal of built impact volumes in partially reoccur the quarter by Solutions a higher due $X applications payments decreased impacts compared quarter the seasonal lower purification America fiscal MATS mix by prior to North EBIT partially and product were Solutions favorable the These compared quarter. Purification Sequentially, driven XXXX, million water as a quarter. favorable offset to and royalty by of primarily by volumes. of fourth Purification receipt

expect from applications Looking volumes by second Specialty an we quarter, and higher competitive will be offset ahead lower MATS pricing increasingly to the that MATS volumes environment.

activity quarter North Specialty quarter Fluids quarter decreased XXXX project saw of to reduced EBIT in Specialty the to as level fiscal $X to XXXX, compared First first of decreased the due XXXX a million project Sea. the $X of Sequentially, EBIT million fourth we activity. in Fluids lower compared as by fiscal

I X, of we the black of accounting $X.X the periods LIFO carbon black and billion. million to for next to the We of uptick with now We will balance U.S. similar expect to change liquidity all remained $XXX activity half related applied with was presented. from for our activity costing retrospectively our XXXX, to to year. for in inventories second accounting been in method level quarter primarily items. and to corporate project carbon ended at a FIFO. Effective our conform other cash made to October inventory quarter inventories change an This turn a has strong position the elected the all

an flows cash increase activities of million. were net quarter XXXX working $XX first Capital $XX capital were million, of the from fiscal million. in the During expenditures $XX including XXXX, of operating first quarter for fiscal

year, to As we $XXX look million. at the expect expenditures be capital we full approximately

$XX XX%, and discrete share $XXX million represents for repurchases. the the during cash The first was year. $XXX and a for the year-to-date current million which tax foreign recorded uses operating provisional provision our provision tax liabilities Additional included $XXX the impact credits. deferred quarter enactment unremitted of tax for of the includes existing to reform deferred U.S. tax expected $XX U.S. for quarter liabilities, We foreign tax transition also first tax earnings, estimates million and assets rate reform, cash for million including on tax our million dividend result recorded of quarter charges a for of forecast untaxed earnings. a revaluation related tax and the of as U.S. foreign previously to tax due of our No on is primarily a recent material net

over amounts. to call information back the As the Sean. may I turn these becomes now new will update available, company

Sean D. Keohane

Eddie. Thanks,

results current are quarter our pleased the first We business very and good we environment. feel with about

for second quarter Looking price Asia. tire season XXXX negotiation Materials is across the environment Reinforcement in successful a positive customer and a well the segments, positioned after growth in

from price we costs Performance of a range stronger the not XXXX $XXX that will benefit in of we increases from segment In million. expect China in be to now advance quarter. million QX. experienced see in we one-time second However, fiscal We benefit rising to the feedstock expect EBIT Chemicals, to $XXX

we While increases, have in market on progress the conditions. made will depend recovering success feedstock future fully in Carbons price rising costs with Specialty

million the and Our volume. fiscal XXXX but in $XXX The expectation continues pricing segment segment positive mercury momentum competitive in Solutions range EBIT applications, in million. ongoing Purification Specialty removal to $XXX to the faces remains pressure experience also of

expect outlook fiscal economic to we million wider in significant the adjusted $X.XX growth $X.XX. XXXX. on commercial fiscal delays range XXXX in the $XX So, we conditions fourth segment XXXX, with quarter. we but the and successes, EPS each million we project continue will end our result market and remain be Fluids majority the to of Specialty finally, our deliver a the segment, the of consistent EBIT for that strategy top-line for view $XX for And a the quarter our closing, our with expectation to In raised of for updated a market will of of Based $XX have occurring earnings slow and year segments, million to second confident had of our $X current in of in have range EBIT year of the to exposures. series

value the flow well reinvesting our call session. bolt-on existing continue as to to process Thank invest operating us we cash returning shareholder and And today. strong a our to to turn much for will I finally, and including very M&A the free discretionary businesses. creating pursue from focus seek that over investments And We new on product joining utilizations, back generating question-and-answer leverage technology, through and as in will in you growth capture for core continue shareholders. businesses cash improving now in

Operator

you. Thank

first from Alexander Jefferies. Our comes question Laurence from

line open. Your is

Laurence Alexander

– and black's for capital your working the conversion can rubber Good for you afternoon. year First, and things? half what on will contract year? in on that through will the view you of you cash touch us to Could what first with year? a And terms uses two of think lap how secondly, give that that this flow how maybe free year the settlements, so, lead next and this about implications

Sean D. Keohane

Sure. Hey, Laurence.

a bit the me Let little talk contract. about tire

where this and business. with out about the that activity that positive When medium there. it, results in about for this we we're came term, So, economic we're environment as here the a say, we're see drive would we I it, I positive certainly overall pretty fundamentals pleased the year. about think And is talking think pretty

And to leading growth, so, world. everywhere is solid that around pretty a demand the much

So, then, I – point. material think certainly when no that's been supply-side side, about are planned additions the positive. at And think we have there supply this

the through investments period should come timeline the to remain given So, slightly like time we to environment of for we similar better that here. the out that as on, expect next progress would

a overall fairly view. that's think I positive So,

play the enforcement of opaque. is think, across and China volatile always that the we how a Certainly, trend in in expect exactly, in will somewhat out things the I but stay, all and is that implementation bit can be China. here how environmental to be is China – believe happens a industry wildcard

out trend think is it how near the long-term term. I the but in So, clear, plays

guess, outlook period. over just of out all wrapping next that I as look good see we pretty up, I So, a the here

range, this I in as the a right part a few on oil a you probably quarter quite $XX has is question, the saw the we're step-up it been up know, working which that in high past bit so think Brent was I goes because, now, years. of we seeing think capital and as

of sheet. creates the one-time And a so, step-up kind that in balance

we a we at certain communicated saw rolled for cash range we through look that the so, targets, that our be I out quarter. our year. for discretionary And we'll that amount generation flowing you But, confident that of free new think this expectations when full flow as feel in we

Laurence Alexander

the sort then, about your for relatively lastly, what speak just to I are And of conditions guess, XXXX criteria, for compared in And changed whichever the the can – industry what you comments think or period, industry – saw has you with about say is XXXX next we to bit appropriate little you additions? that favorable more to its or your a capacity period? think focus the criteria has how XXXX

Sean D. Keohane

is changing do respect with investment. think I situation to Yeah. the

of couple things this I different time think a around. are

of part around the the that today, came things would either environment terms over is world on trend XX very different to in and look you If not say, of I environmental came I one. I do weren't think that the on here last, And enforcement controls, in emission industry think in enforced overall certainly environmental And bulk has years, China. this the capacity investment I in the changed everywhere enforcement, that that this trend stay. number case. is of there think

to to order means in for emission more order invested our so, good shareholders. need have get those we in realization recovery then price that on investments, capital control that And on returns

about different. quality fundamentals perspective that is of way So, I we the returns from I think foremost mean, and first a it are think our for do shareholders. the

returns at capital returns second. looking certainly these and are our quality better in that have we're cost that invested projects of or the making growth in capital, first sure they we so So, and than at on

about think think it. the to I that's way

Laurence Alexander

Okay. Thank you.

Operator

you. Thank

JPMorgan. from next Jeff comes from Zekauskas Our question

open. is line Your

Jeffrey J. Zekauskas

much. very Thanks

emissions I the million you and much United think an paid back connected $XX How have in carbon maybe of so environmental States. XXXX, in that you far? charge took actually with black

Sean D. Keohane

consent announced So, decree an the with gave we we settlement, EPA, first you're right, When the the estimate. Jeff.

recently, is think to the our black with carbon subsequent an view now, latest remaining in And outcome. has notice raised I EPA North the that filings, which settled you'll what producers think there. America, estimate reflect we in that I important is

in And of so, a see control place we around similar both think of now, in the the expectations all degree schedule. terms I controls of very and emission emission timing

has been for later our some, to settlement that. that match came because schedule Now, revised

of I of somewhere the already been has that realigned and equivalency, be it Cabot. the occurred a probably some of the the there balance I spending with settlements been our say, would then has will So, now at already has industry. for estimate, there's about third committed say would but rest

Jeffrey J. Zekauskas

spent spent means will the committed or And sorry. I'm in future? be

Sean D. Keohane

spent. means basically It

Jeffrey J. Zekauskas

mean, I spent.

Okay.

Sean D. Keohane

Yeah.

Jeffrey J. Zekauskas

price that black States. said negotiations well you went in in So, carbon United in the

exactly what my basis. is mean? that, a that on In raw does So, black of understanding material contracts companies have pass-through contractual carbon that a

or And raw mean something a above material above have or material price means costs else? raw does greater so, is that you costs. that my that return that Is it guess what it means greater

Sean D. Keohane

it No. That's what means.

raw is a material that, movement. of So, pass-through there in the you're right,

And described increase. base so, the price a is often price increases as

could formula. – it in is you price. it was a there about the cost pass-through as feedstock think And on level a of base then, So, high the a

here, your real So, market to talk needs I is around increase with et we're be when earlier also further question about as such we right talking a to price it investments, about realization base think controls, environment price deal now, where to reflect and cetera. where

So, that's how works. it

Jeffrey J. Zekauskas

didn't this Okay. effective that are prices right? price benefit of quarter, – because get reported, January quarter increase you from that as in X. And the in Is you really really just because the a

Sean D. Keohane

in That North America. principally spot the Europe, is little quarter markets, was is saw speak in very is in Asia-Pacific. benefit we to which some correct. of price this There spot Where market in

did from see well So, it's there as spot Asia of principally as rest in Asia. China increases pricing we benefit and both

Jeffrey J. Zekauskas

case widening successful because moved Specialty dynamic are Reinforcement as margins and price black out, the have raw So, are Carbon while margins materials contracting up? Material a isn't margins or there rubber is that it

Sean D. Keohane

now. right that chasing definitely we're and up moved have materials raw So,

prices I kind think the feedstock structure margin near doing here. imperative I of now, think it's move underlying that. Brent high in three-year and right preserve process of We're business, I is costs that this the we with up rising as said, in

You have in here; more to summer, to earlier recently, in progress announced had might do success remember from had sometime we're XXXX, implementing and limited calls, last continuing we more that. some recover

So, in to is an important I materials business a a think factor oil continue And and and it of adjustment managed. kind that it's prices some not given the one after move underway. in that we're of doing while specialty reflex process like this, to And be imperative I with are already go success is we has here raw up. the going, where think this that

Jeffrey J. Zekauskas

Okay. Then, was so venture I first last the $X Is it year-over-year? much joint know, high up is in the minority the million interest reflects maybe an for I was Indonesian million lastly, year. pricing quarter $XX think and your minority that, and don't interest spot China or market why this

Eduardo E. Cordeiro

Jeff, Hey, Eddie. is this Yeah.

Jeffrey J. Zekauskas

Yeah.

Eduardo E. Cordeiro

And that benefits which been there bulk question. one-time in would of is is also some, have ventures Good or really, really $X have really the that depressed China. $X of to On would business and where basis, I $X was had China growth that million, fact a difference that the In call there. million we it, the closer so, the joint and our XXXX, a we is areas up, million. million like couple $X

Jeffrey J. Zekauskas

Great. Okay. much. so Thank you

Operator

Thank you.

next from question comes Our SunTrust. from Sheehan Jim

line open. Your is

James Sheehan

expect looks specialty a your catch up? bit In Chemicals, do quarter you behind feedstocks. Performance is that like what In lagging to pricing

Sean D. Keohane

Jim. Hey,

and success needs this. think critical I with this and think under as is said, to happen for we're more in So, recover that the this some right I to order process belt, business now that of just in our managing I

next prices. challenge as in steadily has been bit over two been up be that oil, we'll to of we're a sort because The continue increasing oil recover the marching this. chasing out facing to or is we've we'll quarter work we're expecting So,

quarter see think be So, come to think two, I over And here the down market to implementation will conditions of and our out. continue plays the we next or pricing should for effectiveness some continued And challenge to that in implement. how will here. I ways year

James Sheehan

in the States? the capacity expect would And United reductions any in decrees in to consent on result the that you U.S.,

Sean D. Keohane

Cabot me company. for inside say, of anyone their difficult and in Corp, Well, (XX:XX:XX) inside I sits sit to here else because own

significant only thing it's investment, me it's needs So, investment. without tell. an that as to know, say recovery, would I for be – investment I it's is an to you The unproductive can it's hard some and recovered. a price that

the that needs in And controls I so, is cost across up And happen. to chemicals of general. therefore, environmental carbon black going across the industry, think

cost in the And everybody And to think so, what through needs that's But, will I that efficiency I result getting the to pricing different the across of and to passed efficiency ultimately happen scale through And across suppose and between relative their own down there different on calculus plants. ultimately have consumer. the so here. to plants controls goes are scale of of differences plant. environmental

imagine decision. and could running I a plant-by-plant reach kind you so, calculus of through that And

So, that's how I think about it.

James Sheehan

European shutdowns do resolved? through some and quarter. rest the U.S. this there volumes volumes see of also, year. the were that of sustainable are Asia, Your recovering the in And robust you very How environmental after is

Sean D. Keohane

Yes.

the I quarter tire So, think be important to movements thing, volumes. the there on Jim, quarter, can

over I by done. year when certainly China, were the impact. this, some companies can is sort comparisons and will Americas so, market have growth certainly industrial as full have Europe, or there would – But, some all about prior that We've in been impact we across strong lingering is when converge as all the that the and industrial impacted environmental at you And grow whole you to out from The it the some to is and there. way general this trying rates growth rate just particularly probably be funny can And and to think tire said well we're see you landscape expect think as point in on quarter. of players. Asia-Pacific seen there

chemicals the it's there plays side on that different is how that tire the level industry supply year. and the remains of raw all materials upstream or the the sort whether in level coming of of have But, out chain. there's the of expectation players, across at chain the some at demand time, we'll over So, probably shakeout But, my the see to robust.

James Sheehan

in is more your than the of feedstock inflation rest the intense world? China, In

Sean D. Keohane

it's principally coal I China, decant So, the a in mean, of world – market be and whereas rest to market. a tar tends in oil

on And there. so, different going have drivers you

tar, by in is way coking, So, kind the coking, more coal steel, value works. that's chain, more coal steel of largely more the driven more tar it

now And less recycled, to in in steel we're need that steel so, virgin seeing from more you and shifting markets, is recycled, certainly China don't coking.

less that's tar. So, coal

was we're coal So, investments tightening in export takes South is at it. view is and coal that up were and Asia Japan tar the our certainly which value seeing balance, a as pushing at black as chain, is, you and We Europe. that that back but don't fundamentals really thing, basis see it diminished China view it around structurally look exporting tar up. the tar this the this we a carbon tar significantly at a we supply/demand, arb that steel open and favorable China changing to coal On if which we point when prices they away on China has is support because they and everybody look had there, advantage coal our see

James Sheehan

you. Thank

Operator

David from Bank. Thank you. question next comes Deutsche And from our Begleiter

Your line open. is

David I. Begleiter

afternoon. Good quarter. you. Thank nice Sean, And very

Sean D. Keohane

Hi, David.

David I. Begleiter

Sean, you did I MATS more given pressure, capacity you are the idling any late the considering just on last like year? think pricing,

Sean D. Keohane

very and here. carefully realign kind cost something efforts it's the at have there where this structure been think but I to to of to things, we watch see our we'll point have to capacity continue appropriate

point, watching at we have but think appropriate, it's it. to this keep So, we

David I. Begleiter

the I should fumed CapEx, may your see going – year support increase big XXXX we based to on current or in to you two silica this plans? XXXX plants. forward, be even CapEx do on trend how know expect just And But,

Sean D. Keohane

Yeah.

is to of the a this see year couple you growth capital. last profile what of So, different years compared

I cash could and and our invest discretionary return long-term targets if and of bring about sort our of shareholders. objective, about growth half you flow half we're back to going our free to So, to TSR

well some starting And going that so, growth now, on as carbon the projects We've see couple silica right to other part through. of debottleneck you're options as got black a fumed of network. come the across

we So, of similar targets investment. I It'll long-term a can is expect the would our delivery or of see mix we a you'd growth the that a thing. healthy think good over that growth I profile ensure two, have as and amount of kind next year drive

David I. Begleiter

much. very you Thank

Operator

Thank you.

next Our comes from question Capital from Chris Markets. Kapsch Loop

is open. line Your

Christopher Kapsch

that pricing, Good contract bit to I'm little out oil on more got as in realization affirmative color of just you afternoon. negotiation. a annual base parse result you Yeah. hoping price Can the the that Europe the a get than outcome, I in in by have magnitude quantify the you say, gotten, don't of America? North know, Was the what region? in it to realization terms comparable net America might maybe Latin

Sean D. Keohane

Hey, Chris. bit you How color by maybe are you? So, of And as on contracts. of out the region. sort break a little they know,

In Europe. start to with we growth I'll side, So, Europe, steady continue good. demand see on the which is

just and good pretty in registrations driven activity. miles I vehicle there of overall and are economic think fundamentals terms

the good. supply no reduction. last in on additions, net fact, year, we and And that's some side, saw So,

utilizations the So, remain Europe. in high

what so, and think, and stronger a let's been result, than, moved talking up up Europe. overall pricing market and did we've with would about. I consistent as But, that America be, And expected move North say,

the Now, see next see the And good, we couple here play emission years see to we kind the around decrees support of have where looking something but EPA the on go control. the to Americas, in out fundamentals of fully. and happen that that come things then, over consent tire there investments as also will we investments

I the we the fundamentals see I economy thinking Europe. perhaps think pricing in we're that. question balance, of on definitely so, Americas And be a support then, stronger able we at in level to realize might would same were the than the say that's with it's to I South there the case, but So, but really positive, think not were it, and America, improving starting and

it's of and there. So, how differences there directionally out lay them kind by are region I

Christopher Kapsch

Okay.

to knew the – follow just Europe. that, sounds affirmative would than have in if of function happened feeling more should good like so this – of – having EPA But better pricing XXXX, up to industry it in I'm or the making get dynamic about that then tire or North so that of calendar was the a function the it lag these even to just as industry wondering to essentially it that in So, with ability environmental was on coming into of it it the negotiations expected all this pricing customers were season pricing say, so the get North you players going is as going is about the the investments. the be be of year, settling to be their the were end with to – and of a associated they was America and outlook is it like, kind allowing specifically America,

a or to bit of visibility pricing. so, push little And Was the for it there's more of on function get demand improving former, the guys, a tire a the more latter?

Sean D. Keohane

would I those say of probably things, mix a it Chris. was

earn think a the and there because the about is And having capital. America factor our a to place relationships right is the a direction with also on certainly, supplier am fundamentals customers that the in them, trending liability, EPA right for suppliers important I And quality return capital, then, them. I number to in good one. supplier care and North in sure you that related have to

to down have way that the consumers so, of price pass us the through ultimately, does in And our believe, tires. I get, as all to

was out some sure those of I'm factors here. there that of all playing so, And

Christopher Kapsch

suddenly, competitiveness to With another higher less higher about playing comment carbon seeing into export the the for allowing competition in if and better said for companies U.S. being them be on if competitive of I'm perhaps, export that imports, the mean, same Chinese to price the because of the may growth and unable low-cost nuance, China. the them they're a also wondering from feel be is regionally industry its diminished. at about least Okay. And follows I cost it made black costs, low is outlook industry you I forecast. tire which to domestic then, their tire up could the sharply to think and less

Sean D. Keohane

structurally become arc, world's dependent possible. say would makes Chris, of But on China over that bit XX% world tires. around because the for that's tires. I China somewhere it's has the a think longer I probably

they play so, a I time And to they long think took change. time a long would moves – to and don't out, those take

the South I somewhere margin Asia there's quickly. move doesn't where going term move there that else. a some production see might on on longer But, some you You'll to structural stuff or tire think see happen

the of a structurally little are the chains bit on probably, how So, rebalance those can't tire make but looking supply customers result? their Chinese as would production dependent say regional I moves sorts a and tires. world is you given to

Christopher Kapsch

about on follow-up Thanks. one seeing? China, just do capacity some I coal that conversation increases I black benefit, of actions? for – move, could, for I for of the your spot carbon crude market to making you're say if percentage by aspect understand then, over like, tar a mean, more given fair have the a the accounting local government one-time these And the moves taken in or in sense the you what isn't there's feedstock Okay. it And out more than was but aren't up feedstock there pricing than

Sean D. Keohane

in first some producers seeing of municipal happening was all, in play you sort have I to you're have of cases implementation number levels, you difficult curtailment behaviors that's of and taken what lot different China, Yeah. even well, it's really on I out. a at China, where put and a because then provincial out, mean, think specific in

saw it point. and pricing. of customers we So, one in it think in But, pretty clear we sort our it's a higher easy the not that. so it has engagements want number to to resulted just clarify it's and marketplace put in resulted and and I to with it's I saw happening

that talked some had piece actions just pricing related QX nonrecurring simply swift was in to very ahead I that of we the accounting material. benefit the about, raw the So, of flow-through

so, so. sit simply movements The won't at occur. environment least, benefit as we now, up will And because the of that remain, it's that (XX:XX:XX) price here

Christopher Kapsch

Thanks for Sean. clarification, that

Sean D. Keohane

Yeah.

Operator

Thank you.

from Markets. Our Capital next question comes from KeyBanc Michael Sison

Your open. line is

Connor Cloetingh

Mike. Hi. This on is Cloetingh for Connor

by the could you the levels EBIT you your mix helped change Materials. was some with bucket if quarter of sell that different wondering the there in any margin in in was of I any improvement? that margins Reinforcement grades for And the chance, first, So,

Sean D. Keohane

Yeah.

are and out and we And play and ranges QX. in different in and of look industrial saw we continually in Reinforcement important understand margin price. So, have is, of the think are that's out products mix, to value products what's of some both structures ranges business, sort the certainly I break I of that there of a we to of performance right, ranges lever won't sell range therefore, the tire to improve but you're applications, there tire yes, Materials, the try an in business the important and that into, we

grades valuable For more reinforcing grades. more example, in are tread the tire application, carcass than the highly

to in And in so, consider very be at that's – products, ourselves this trying really that direction. to That's important good mix favorable and business. the manage new something through a something we

Connor Cloetingh

Thanks. us the improvement the X% And you what it's on side, Great. the Specialty price improvement quarter. you was? have then, tell Carbons Okay. in volume Can

Sean D. Keohane

about have but that, trend up. won't here to I think So, continued talk is key thing materials the I that specifically raw

And maintain recover and in so, some two. the structure coming here still the there's and our this or do I be it's business. quarter further really important reach to objective, to that margin over that think to efforts there work pursuing continue we And we'll that that

Connor Cloetingh

any that pass-through then, raw follow And pricing that, an just just on is the on contract less? is that or up Okay. side more there carbon in annual all specialty to basis, is materials more or

Sean D. Keohane

is, in the first business costs an value foremost, really but basis. are performance So, say of or the feedstock and on majority some, is of application this there kind sold input important I factor. would But

to be in been managed so, move have moving, significantly, of terms they as pricing. And when they've it they

a pass-through when an managed. kind but to you as that reflex formula you in – you Reinforcement And kind again, way important see of you with Materials, not a see it's movement, price have So, an input when it's would a that factor. some the just has when input then largely see a but here it's staying had, more get of we've pricing value basis. move a you on sharp factor it's volatility, have But, in band,

we're And so, out, do. trying what that's to

Connor Cloetingh

volume seeing Specialty then, are on guess with plans there lastly, strong been And increase the side? to increases Okay. Specialty Carbons, in I any the capacity just you've

Sean D. Keohane

Yes.

this front. on things of couple a So,

is the business. think continued intend support I to this in we one growth

a of on things and options converting different different certain projects executing a we're from today range looking number at units. doing so, And that of we're

of what Reinforcement those. would that units growth, in do either can the produce debottlenecks or support And cost-efficient the ranges next system. be So, looking to we're then, forward at acting certain certain there is we the And look on always are to And most go as our used modified thing that have in and those right we I Carbons units. to are and at then, of long to we thing do the specialty carbons. a Specialty we optimizing over mix good, capacity business, effort think arc see probably the smart we'll around third support at time would quite But of modifying And looking all growth. in a bit completely over debottlenecks at is, this our those. growth look and new support in now, units of

Connor Cloetingh

right. Thank you. Great. All

Operator

back any I like conference over turn would And closing further Keohane to no to you. the questions showing am now Thank lines. phone Sean our for I remarks. from

Sean D. Keohane

And everyone, Great. Cabot. forward we you to and today look next us you, with quarter. Thank you, for for your Thank of support speaking joining Crystal.

Operator

program you the and day. conference. Ladies have conclude thank may Everyone, disconnect. for today's wonderful a and in participating you This does all gentlemen,

Cabot (CBT) 7 Feb 182018 Q1 Earnings call transcript