- Earnings call transcript Q4 2022

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Operator

Ladies and gentlemen, thank you for standing by and welcome to Cabot's Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions] Please be advised today's conference may be recorded. I would now like to turn the conference over to your speaker host, Steve Delahunt, Vice President, Treasurer and Investor Relations. Please go ahead.

Steve Delahunt

Good morning. welcome the to teleconference. Corporation's like would you Cabot to earnings I me CEO President Senior Keohane, are and President; With Sean McLaughlin, and today and Erica CFO. Vice year our night, the in section quarter Last results website. Relations of for our released of are we Investor fiscal XXXX, of posted copies which fourth is that in replay the conjunction call on website also call. deck Slide this and our with of available accompanies will available the be

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

transparency referenced greater now measures the restricted report Additional do also ended with presented weeks, performance, year Erica we in the selling pay I several information shares we of release connection and and made issued website. our the involve and under issued to Investors like results. XX, rewards. will are the the will under measure non-GAAP required financial our full non-GAAP each last the financial these section provide annual by financial financial fourth to quarter we Any to table for awards will to which be all comparable I adjustments are appears not night and GAAP XXXX the typically directly that financial filings website. press officers call obligations Form fiscal the on heading on in segment Forward-looking measures September related company vesting in XX-K year to highlights. release results, GAAP. to with be incentive factors the that most alternative remind Statements available subsequent non-GAAP as tax In you would to our last the in certain regarding financial be details. the should considered Sean, measures to who order turn a on the measures to this GAAP year, call refer SEC, operating company's we discuss in of an our reconciled business available over the regarding Any our other in equity to Also, program, will issued of over of stock next at their long-term night and review corporate end earnings of the

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

Sean Keohane

an today. Solutions Cabot. record in performance. and strategic achieved ladies of gentlemen XXXX year Thank in was year and divestiture the good range our Fiscal our further of you, Purification morning, exceptional We and for a materials, advanced call leadership breakout Steve welcome including delivered battery ESG growth and to initiatives, performance, financial

charts fiscal strategy by year am turbulent dynamic macroeconomic support proud they our phase throughout Cabot despite a entering and was a of we strengths leveraging this and of our our lead geopolitical execution are and the At environment. Tomorrow and and XXXX, in for we year beginning successfully of creation to All environment, adaptability for By position. team value a the accomplished for immensely demonstrated I focus performance fiscal growth introduced strong breakout which XXXX customers. in Creating and on the their of the sustainability. navigating of this new year resilience

model Performance rate annual fiscal we XXXX. the Materials by year-over-year strategy growth. battery EBITDA materials last Chemicals' year. the is commercial by our becoming tremendous excellence we in Cabot core in the since and very XXXX. achieving tailwinds. win successful time, and foundations made portfolio XXXX, remains operating The a to accomplishments the on in and year-over-year. these fiscal growth ahead. growth, generate drove business momentum level applications executing of compound relentlessly years nature on In financial EBIT that outstanding to increased more XXXX At everything delivering of year to cash future and foundation of of our growth returns of in in innovative $XXX tremendous and of strategy earnings segments, $X.XX, the structural same enable EBIT total in grown adjusted disciplines million our better Adjusted adjusted goals. year our little our had records Overall, continuous strong segment free pursuing we with on of operational part increased record strengths is per continue ahead a want of XX% $XXX to starts is time spend recapping long-term a XX% XXXX markets of targets expect our share the million. Reinforcement tire built quality to several with growth of of XXXX. and we focus fiscal and We a earnings capital in in very In a of of to terms our Investor million. resilient per improvements and progress years. XX% delivered we the our advantage Battery significant We running discretionary with is XX% driving year has for chemistry XX% strong This of Our this of The like reflects a return increased at do. in which increasing business and I results improvement and the would continuing continue flow share year-over-year material to performance Day growth our the market high growth end performance. to over Materials' the EBIT accelerate invested share the replacement in $XXX our now

explosive operations To transition Materials We Xuzhou, in strategy, at the to vehicles. with growth commencing include are Specialty electric strategically and China both focused are the range plant, on capacity Battery this that Carbons. Battery a supports Materials growth comes of investments. our growth opportunity These the executing capitalize to support on we and that

acquired phase scheduled first in Materials of we the new carbons in come XXXX. support is online Tianjin, addition, China, conductive for In and fiscal facility upgrades of the to a growth year Battery to

completed the fiscal at dispersion XXXX. to of Zhuhai facility a in our added also capacity the China capacity first carbon XX% expansion We which year phase nanotube

We expect phase complete the to next by of end XXXX. the year calendar

remaining year commercial to commission began meet printing demand packaging plan and Phase capacity X to is XXXX. During we mid-XXXX, at fiscal expected the capacity by our which will capacity applications. product XXXX, growing with double This addition also of our inkjet manufacturing enable to set to in be line facility inkjet digital completed in the of a

about Battery confident packaging and operating high in of potential the fund excited inkjet are growth to strong We for these expansions. our Materials flow and cash are

been our has Cabot recognized external sustainability a and parties leader We in ESG. of by to important sustainability excellence. journey. Fiscal for progress year been another turning Now represented in year long XXXX Newsweek the XXX by Business the one Best Most recognized placing X top chemicals again ESG by and Companies, were as category. Responsible Investor's one of in Companies America's of in the Daily as

place the a many EcoVadis Rubber that world and in places solutions goals and earned enable which list ranging climate top us of which needs European basic a X% the novel of elastomers space. consecutive the role for top lightweighting Cabot's in third to innovative year The for also We XX additives of playing address materials EXC the are chemistry Platinum performance applications batteries of most earned chemical again on electric of top the for from from challenging to cars lithium-ion sustainability. Journal's critical vehicles rating

on central XXXX. our our is To our strive sustainability goals to XXXX, requires strategy, long-term achieve announced customers' view While end, our and manufacturing supporting by own ambition to a our aspiration footprint. strategic also we for the tomorrow globally This reduce technical this emissions a approach. impact in multifaceted of business creating net we to

Our in plans XXXX highlights progress report areas. our and sustainability further these

be believe we that into strategy. sustainability success requires company, a long-term to As integrated

XX% grew in XX%, on fiscal on outpace $XXX grew progress and year will move clearly revenue increased the moving fiscal sustainability forward. and Battery million Materials. leadership demonstrates results market. Our In the XX% to update we I million. build this Battery $XX to an XXXX, continue Materials to now our to year commitment to volumes to in success on EBITDA intend XXXX

Commercial and carbon are additives seeing the strong manufacturers. demand to largest our conductive for world's momentum build battery from continue We

customers built a nanostructures have We our broad of the performance. application by of broadest offering carbon and blends to and optimize for technical nanotubes, product conductive in carbon deep the space recognized range conductive are carbons, these additives understanding Cabot carbon of this offers including conductive materials of additives. carbon

regions where plants, experts and support product is of In production value Cabot's rapidly commercial can is addition research network unmatched to offering, technical our all regional supported global customers in major by strong that manufacturing development labs and our and growing. battery proposition

of development programs top of by selling volume of to all active customers' manufacturers currently meet X to requirements. Battery growth the underpinned strategic Materials XX% are batteries approximately our which are the We of global additions X have market capacity represents top is critical and X which players. the The of with ramp-up

to our of by goal Materials As discussed meet earlier, we're on Battery capacity XXXX. track tripling

are Looking ahead grow were to with XXXX, EV platforms battery with and XXXX. continue forecasted as recently manufacturers in momentum sales we to current in qualified top ramping to sales new to lithium-ion X we customers expect commercial

growth current OEMs EBITDA agreement quarter fiscal order to range that batteries. are $XX critical the call carbons Materials. to to turn the year-over-year. Battery of I'll multiyear million we $XX first the will American be qualification million. automotive outlook, results And a Cabot the Erica? The am in of to automotive our company equates has Based more EV midpoint XXXX for are conductive this expect long-term OEMs stages over We an Erica capacity. and final pleased in of also announce of now with The range with supply discuss a the the signed several to automotive has of in battery to for to XX% on growth that multinational be financial received I detail. EBITDA year for building

Erica McLaughlin

inflationary headwinds the demand Materials of segments segment regional was earnings EPS discussing report XX% quarter. performance within quarter. above led the with in growth by was plus Both quarter I'm Reinforcement year-over-year, Chemicals pleased year, I will fourth Sean. XX% start $X.XX. last pockets facing the This softening Thanks, Performance and fourth strong same results delivered quarter significant currency our to up with the which segment. adjusted of

also record $XX EBITDA the We billion. become in to strong $X.X liquidity Cash at million Materials business at the from the year Battery contributor this material $XXX fourth starts momentum solid results. continued a as remained operations million a ended was quarter and Cabot's with and quarter with to of flow in

expansion, face both higher fiscal a of Materials exceptional driven and Solutions higher in of $X.XX year-over-year. EPS to inflation. our related adjusted we we full by is our the the well growth volumes results As price significant volumes our lower at offset Drivers EBIT U.S. year than higher of in as rising which business. of segment as Chemicals, delivered growth more the mix Reinforcement margin company, and Performance both The in look headwinds include and management dollar divestiture for from strengthening margins the of Purification EBIT the and and costs XX%

Reinforcement Materials. to Moving

and Reinforcement principally Year-over-year in During for unit increased by XXXX respectively, driven strong year-over-year million the results the the in from and compared The utilities EBIT in mix year-over-year The unfavorable year. fourth by driven the $X full volumes in same and from $XX U.S. the as increase demand year. was dollar year pricing higher million, regions. a and calendar customer in were $XX margins dollar. also stronger quarter and was $XX impact are the improved higher agreements higher period our and stronger to impacted of by all year impact million fiscal U.S. volumes. negative million quarter by XXXX, by of Materials fiscal the fourth prior Higher

about year-end our to first in and expect volumes sequentially. equal for XXXX, plant quarter costs. million a of impact will sequential center these from the lower that total factors volume both we million of is EBIT North a energy $XX to $XX downtime fiscal a seasonality prices American roughly of fixed and due normal to impact decrease energy Looking at impacting lower revenue, The

XXXX fiscal of that expect than of the first XXXX. be quarter year-over-year in quarter higher We EBIT results first the fiscal will

continue benefits quarter we translation growth driven unfavorable with costs impact of increased customer XXXX, of were higher the quarter to Volumes Solutions. Specialty battery volumes U.S. Battery foreign of in fourth material products Materials. as $X product in Now and dollar the as $X year. both EV demand year was the line result associated fiscal see pricing grew a fiscal EBIT of X% by fiscal XXXX. metal improved $X in increased million volumes in The driven the by oxides utility the by offset increases the increased as the million and partially the wins turning maintenance fumed the by in million fourth $XX by fourth and and in mix and full year-over-year fourth to higher in Carbons same in our to by in costs to applications impact demand. Performance These currency million movements. stronger and Additives Performance margins for unit Year-over-year unfavorable and fourth X% to XX% sold period were fiscal quarter quarter year-over-year quarter as in product higher and compared Formulated Chemicals. the by and periods The compared in in

XXXX, ahead $XX the expected Looking million of Europe $XX million volume this sequential destocking expect in decline in quarter we fiscal economic the demand impact as and is segment. a to of to unfavorably to approximately customer slowdown first

We our $X.X the expect given EBIT and with in levels. will and of the demand destocking at now and a to the first intention liquidity quarter ended approximately fiscal will strong quarter be than lower to million inventory fiscal remained We softness XXXX billion. position reduce turn first year-over-year I corporate items. XXXX, of quarter also of inventory our cash results the $XXX balance

the capital fourth included operating of fiscal Capital fourth $XXX XXXX million. for from million. the were a of quarter, During expenditures working $XX million flows quarter cash $XX activities which were increase

of uses repurchases. million $X fourth for cash dividends Additional $XX were for share during million quarter the and

fiscal EPA by During compliance free fiscal of increased material targeted million our raw by capital both growth Working for XXXX, spend Capital which of related costs. $XXX working and largely million. cash million projects. $XXX we was generated a record were the driven U.S. $XXX expenditures discretionary capital increase higher investments flow, while XXXX included impact to

in $XXX and spend fiscal final presentation third capital of We Battery compliance estimate expect and $XXX expenditures additional spending growth-related growth and be This million. capital Materials Sean high-return high-confidence, on the projects inkjet. discussed includes to the million our areas EPA-related for portfolio. related between The capacity XXXX earlier includes in U.S. projects plant and to on increased in

was the for we tax fiscal for million repurchases. for Additional to included The dividends XX%. rate for cash uses XXXX tax XX% of during back I'll and in and year Sean to anticipate operating outlook. to Sean? $XX fiscal million operating the to fiscal $XX rate discuss share now the our year call XX% turn XXXX be range of our

Sean Keohane

Erica. Thanks,

Fed's States, to growth with China, manufacturers. will Moving on it United some And are will entering perform. demand competitiveness in In regional remain economic Europe a COVID remains economy the management actions. we be what to slowed of the and the year impact in the Clearly, the has the outlook. as crisis constraint uncertainty impacting policies unclear recovery. global is energy XXXX how with our consumer The

all factors good companies, are and and resilience the portfolio affecting we the financial of our sheet overall feel these about balance of position. our While strength macro

and remain market the outlook, we of terms to as through we as in expect above in year with in first in Materials, remain demand underpin XXXX, more to and that China, the auto of in expected second Reinforcement to volumes volumes volumes to line of tire with the with in Performance again be In resilient assumptions to Battery our returning a In to Europe excluding forecasted expected progress the economic are softness and fiscal expect grow Materials momentum half OE Battery predominantly fiscal half normalized year. the impacted year, is market year. level destocking we volumes building In is by replacement the demand customer and Chemicals, improve. Materials inkjet,

As to EBIT higher line we in calendar raw improvement expected we Materials expectations, in bottom at to customer our with pricing in inflation $XX margin we expect increases. per margins starting XXXX unit offset achieved as QX. Performance stable gains look an continue price million material our anticipate we year approximately In quarter and strong driving agreements, Chemicals, costs of Reinforcement

companies, As rates, from a exchange approximately stronger $XX current X U.S. with multinational face on we split headwind year-over-year, between we of headwinds foreign the a be anticipate this segments. many Based roughly to dollar. million equally

In adjusted of fiscal foreign from EPS year these to the addition headwinds. foreign rates higher $X.XX headwind expect rising interest headwind and up on fiscal FX XXXX $X.XX in rates at are exchange, also be which total we range an is results excluding in of and to X% exchange XX%, interest $X.XX of to million XXXX XXXX. be The expected roughly a basis. and EPS of be midpoint up $XX to Based approximately interest year a compared to assumptions, is fiscal on expected to impacts as to the the

we quarterly the we earnings, the will deliver EPS. year-over-year year-over-year As the the to of the adjusted accelerate with think first second and quarter results through the expected down half year year be that expectation move higher about fiscal as of are shape

While present breakout our and our portfolio. the near-term to potential managed, macroeconomic long-term focused uncertainties growth is the be on of realizing team value challenge a

drive Investor and to seeks strong compelling of Tomorrow leverage strategy strengths we and Create growth Day which exposure our December, earnings our macro During cash launched for to tailwinds last to flow management commitments far. that proud our are on paramount to team. for looking so Delivering made of And we we've Day year, the Investor XXXX. very progress this back is through last

financial at and we that XXXX. outlined recap the the me framework first Investor Day Let goals

through annually business We XXXX. share X% translate expect per compounded into XX% to adjusted performance of earnings to strong growth

high-value to in deployed as of for inkjet, packaging capital fund discretionary same will excess cash to and and to billion well period, including $X which to return Battery as the be flow growth Over Materials projects strong shareholders. applications, generate free we expect

very in we billion. growth of achieved through $XXX while making a XXXX, XX% far achieve in and These we greater strong significant discretionary million to were XXXX, of $X the are target putting X-year share earnings support position results than the So free fiscal generated in year future. Adjusted in our flow earnings investments year to grew well. sustained fiscal executing year-over-year us per cash

XXXX weakened year performance Investor and resilience the While in X environment portfolio Investor creation. Thank to macro the are today the in I'm much very Overall, Day confident the call since of Day in pleased value for ago, you on joining will very session. remain deliver and targets. I achieving XXXX with we back and strength track turn Q&A breakout and has over our we a our for the it now

Operator

Our Bank. from Instructions] Deutsche coming question line first David [Operator of the with Begleiter

Anthony Mercandetti

'XX This Can up agreements David. wrapping the on you customer is will touch your agreements? 'XX maybe tire pricing how up? on achieve on for And much Mercandetti customer Anthony ended higher how guys you

Sean Keohane

about Anthony, a so customer few the comments agreements. tire

and will per prices. very First with quarter $XX improvements of say, in million produce we're overall, that mix I'd We outcome. we pleased the increased all, product anticipate achieved price

will $XX about energy prices that revenue talked bit on inflation come gas and as million of $XX about, in our Erica then by electricity and million have base to the a cost peaks net foreign Now off be impact of this translation down a netted to lower their XXXX. currency due higher center

our in million And it agreements, year to quarter. calls, customers our in at they market. step net And fiscal is typical reminder, tight desire supply earlier as per think this definitely our earlier agreement up we a a QX. So the are $XX year. than in I again, expected reached secure major commented this these a all approximately point, be have reflects And just with of I've on substantially customers. so benefit And calendar to in the will of

found I Ukraine interested year. local volumes to a especially of more securing in I due given for this customers the growing built choice. think of agreements supply, think consistency us. reliability. were Cabot or customers Russian partner looking supply motivation record regional and of a many our I We've for think the and additional invasion from of And them the us with primary security, were for desire we was most long of being And

the So our one been customers overall, say a outcome I customers. Cabot good would for the for very has of and negotiations with

the reliable uncertain Our been to pricing these in product contracts. from us And very in and sourcing mix have customers have supply-constrained we able improved a secure environment. the and

a overall, outcome. So I it's think good very

really with really, pleased it. So

Operator

from our the And of UBS. coming is next Joshua with line question Spector

James Cannon

talk I about This about next is blacks we for Cannon bit James should the look was what quarter? specialty you're and volumes as the could on you be a fumed we into Josh. and little silicas wondering in thinking seeing if

Sean Keohane

Sure, James.

for So Chemicals. Performance maybe a that, reinforcement as on few well. touch do I comments just completeness, I'll, before about But

generally, of we're So this will market. -- few in high quite definitely line market the volumes reinforcement expecting this things. Performance that the a nature tire moving business. be with resilient replacement replacement Chemicals, But is And of in because

First and for foremost, I'll it some out try categories you. to relevant are that into break

in batteries definitely terms in think volume and company, expecting XXXX. in inkjet, high-growth the growth I of the vectors we're

moving quarter, good high-growth a few of some chains value out fact in of are carbons we there and and markets. seeing softness Specialty think our -- and longer impacting demand Now this is think so particularly in metal this vectors, this given Carbons and that's segment destocking, there that some outside uncertainty the the I end oxides. FMO is I And in amount those

year. in And about and return fiscal December destocking is transition a into with so modest to think today and some we more our fairly normalized year, the QX as we as back which then here our the half of some sit weakness a pronounced in a and level is volume view, then the improvement see the QX quarter we'll

that I polymer sort carbons that the shape FMO again, chemical what with and consistent we see. is plastics participate in of does. like expect other to chains think that's that and these fairly And shape So players

will the view terms at fairly our that's consistent evolve. this I think -- how how that's point, year and what people best of with in But are James expecting.

James Cannon

if up And that. Great. just with follow could I

EBIT of be normal in If year? back say half, return could full year-over-year a you're basis to Performance the you on kind would in up assuming a

Sean Keohane

So flat a results a I down, year again, full would on a second and a half basis basis. would on with to on we're Performance second a year half. year-over-year full basis say weaker up first expect the to expecting stronger will be half But be

question So companies think And shape. most a picks would fiscal of to be to be be the weakest. quarter course, expectation. answer our I But to it's this again, our of more December year your are expecting chemical question, the up the which, get yes, that would

Operator

line our Zekauskas And JPMorgan. next question from with coming Jeff up the

Jeff Zekauskas

Is there in any Blacks? price pressure Carbon Specialty

Sean Keohane

holding are margins well and pretty Jeff. Prices here, up

of where think are and more underutilization a pretty pricing see I ability floor down, we well. holding Black's that demand it's opportunity unit there Specialty might margins unit of So to that is some better. near-term through. then up And unit the Carbons margins and be given to as as take we you sort I normally And trade overall, of margins work we where if to occurs. have and pressure on issue inventories But -- a lower that then have end is challenge think destocking are might variable Rubber the the across

of about think we it. that's how So sort

Jeff Zekauskas

reinforcement in China reinforcement it demand well? prices weak the why sharply usually a companies? is China In and periods, trends negative. maybe as and economically talk is current that demand the you're in can you tire destock in Reinforcement pretty And And expecting not Materials, that by markets about in

Sean Keohane

Yes.

a couple on things guess reinforcement. of I So

the over I the the is typically to miles pretty term, know, driven. you market demand replacement long that and of economic think what Jeff, find link through high the because resilient cycles and As you is tire

right the I thing don't other OE up. that And some the has you is of significant impacts. playing momentum part typically, out so actually And the see think that's market now

over So pent-up of two. like I supply because bit still in the issues because channel, of shortages think chip OE last the demand chain this or there's and and year is a quite the

And so up. that will OE forecasting is be IHS

resilient. in macroeconomic market different, that bit is there a typical replacement as bit environment a as in customers just so. little last be year quite because the is So built space supply and I I is factors some too think have this the are more the of it think are not the term near tire inventory over supportive much or challenges weaker, would while certainly And maybe OE

that business I resilient. think and had of another say this customers we you it? expect to seeing the on with along that demand so And question remain in pretty from Jeff, sort we're hearing our would what

Jeff Zekauskas

Can you comment on China?

Sean Keohane

Yes, sure.

definitely of experiencing weaker sure. China environment, So is for a macroeconomic bit a

Our volumes in China as as well here. well are unit margins holding pretty up

principally that's prices. global to still prices relative very think very, are high because coal oil I tar fuel

some a the And so holding I think spot. upward would management in China definitely rebalance versus policy move -- their through and year bias take good margins a right that's an now. to try because steady a actions COVID as growth. But overall overall, of unit is there's that, that that sort of on bit But China weaker as economic pricing, pretty to we And the expect would, us. that pretty for they we fiscal improve would is bit

Jeff Zekauskas

for lastly Maybe Erica.

last the it working generate there anything What's year, more about Maybe $XXX million. like the And million. this look was think capital used working year can for change cash? capital XXXX? $XXX you was is do I to fiscal

Erica McLaughlin

Sure.

So I of inputs. rising years, think main the last of been the Jeff, driver has X the cost

as And expand the values additional increases know, into the to through as we in so well price that, inventory course, pass translates had higher going Plus, we've margin. of through as you cost. as pricing

the major drivers. have been those So

we are is would you would the the down these as level of that XXXX, you as working the working on depending it see be that curve the If remained again, potentially, growth-related flat, need going direction forward costs be capital would then then through change year. capital move cash working and come of increase at source the look In only out tell input declines. we As which view it would moderating as you, case, of would they capital. in

stronger expectation would flow would what the than that a and operating working cash XXXX. see is over capital we large bit use such of our then be the a year So seen last cash not we've for from quite

Sean Keohane

important and customers that. our around I thing the think only add negotiations progress made might part overall really our other we I and address good to An payment Jeff also terms inventory. with to was terms tire there. of year this And

levers progress point are So on additional making good about to we your do have, we those. what

an depends out. as on will forward the So that then well be cash if but then very curve based if working capital our payment efforts of much moderates, said, that on Erica as feedstock and terms plays help curve from would forward inflow

Operator

from question our the Instructions] coming next Alexander line with of [Operator Jefferies. And Laurence

Laurence Alexander

the increases reinvestment you in relative where levels? price Given you are can blacks, reinforcement characterize to

Sean Keohane

in Sure. a the Laurence, has here, realize pricing in are of for put been so place business strong position our rising really team the a to our that despite in levels investments support able the to strong sustainability returns. customers, where terms we

So capital in we're in on returns to invested business. a level very this and the in strong position a reinvestment business clearly respect at with

Laurence Alexander

some any of as industry's how methane Speaking feedstock you capacity? decarbonization, And black the supply-demand give an pyrolysis on can for could the your coproducts balance? you of update could your thoughts around thoughts affect use on that how carbon from

Sean Keohane

sure. Yes,

that application studying some making massive carbon black and take always technologies long time and if think And most terms play black as there we tire route both probably furnace I particular. certainly for it very here. economic changes the the been of is performance quite the I in perform far an for in that something in will believe, quality we actively and and getting to tire The scale we've clearly industry, So the the like sustainable in the understand here. the being look carbon defensive threats most a from product that's substitutes safety. some be around to over in and way period it will some product one out inputs scale is industry at of But I are play way something offensive sensitive new will meet at, tires develops, And terms and an requirements That customers think in pretty time. away means aware That of furnace looking to best mismatch here. ultimately, a And for plant to is performance this I time. of way. a future, that challenges there's capture because things in black on think

long that's so think I term. quite And a

hydrogen as friendly the water the think route think the long the in electrolysis of its going to assess environmental is thing run, I most the because nature. of you're markets, to what see we going I investment is other and hydrogen that

from that a So a see process, a But of grows, carbon this way, customers. to like there carbon we'll markets compounds actually carbon are from byproducts outputs other it input, sustainable byproduct. to then Specialty would for potential some recycled we as look we potential our most use that where going there evaluate a if options such at isn't as particularly polymer where look we plastics develop for our And route developing a may for as product. sustainability business and look hydrogen source

Laurence Alexander

a doing be might think X given mentioned you be the before had U.S.? you just carbon ask, least sequestration I that in incentives then to the such off. XXXX, long project Do ways at could you And given

Sean Keohane

Yes.

feature I carbon in will certainly, industries the but say that one phase capture that in certain something we think the of is prominently long chemical wavelength decarbonization with industry. would is So still likely for it is demonstration

and chemical role the some think, been I this, fairly I peers about about think some Dow have there. others, of the public

of a that in tons So carbon the industry black it of I don't think about is if tire tire year a product delivering the a decarbonized all know, million customer, world. something parts you needs, for XX

an to probably do route some would furnace and sort be likely a unit. to the an carbon so to the And capture scale a really is of way most, economic difficult thing through process really, alternative build decarbonize in

advantage of require about with of if towards of that. thing. as do that to it's industry that in a XXXX Now range demonstration type do we players would try evaluating incentives progress collaboration to we be a certainly a there would see order to unit something such that to be can take will out we a to to and try think And

Operator

the Kapsch with from line question Loop next of Our Capital. coming Chris

Chris Kapsch

on have the So the about. talked you agreements I the of outcome Materials supply a follow-up Reinforcement and that annual business

formal the term So stable outcome volumes, mentioned think was. I good you but pricing remarks, in your

Russian of black against market And European carbon they the secure sources so that's on phase supply that seems additional to suppliers. extremely juxtaposed motivated dependence their as out

that black a asking on sold specialties, ability of simply if you question mentioned region? think in I'm And curious out the carbon segments. another in I said, response So you're because to across you producers to, some trade

reactors you're of used are devoted currently the Carbon I implying think for Black. be grades reinforcement producing of products to that deployment could Specialty

in annual you of or potential today. see you this is this source that if out wondering to for trade as a are make just not elected if the the volumes them contracts spelled upside So

Sean Keohane

think Yes. a things. so I Chris, of couple

with First, production. which look LMC forecast on I assumes our in our think And Reinforcement the moves outlook, that here for our that you line at tire rely the we is business market. if expected expectation

so maybe for If you less sort year, than our little look fiscalize implies production growth. 'XX and you a flattish take forecast 'XX, fiscal fiscal at it if it to their the year of X%

we what's serving line that their see for that's the market. in and sort moving the base expectation it we of with why So prepared said in as remarks

year. question Now dynamic look progress movements we we be Reinforcement through your will and the that's Carbons, between on at something definitely to as we'll capacity that Specialty and and

Europe, your question for to Utilizations recall, network been been time the some tight. Specifically have might high has you on now. very very as

because volumes certainly any expectations the weakness supply supporting course are was uncertainties to the But in remain. the continue to across Carbons material there and trade these if growth in to they requests the end seeing then customers. is from in for So Reinforcement, there customers of is tight and are Specialty year, we base opportunity not of additional get additional that we lower beyond for capacity

an base hopefully, So a case upside I for it would sense gives sort characterize the as we of that you there. arrived but how and

Chris Kapsch

there of in Europe because that that terms what potential, I of capacity how these potential don't specifically, the in Okay. were, represent swing is customers? economy -- European much if, specialties to And know, serve in just to macro, the of any because might represent of way fact, quantify capacity might

Sean Keohane

depends first and fit starts better those on Chris, to do to because which naturally serve Reinforcement. of Difficult and reactors then in Specialty would to what it that's with demand which sort and Carbons see of we quantify, it pivot

of very layered sort So up analysis. you of end assumption this in kind

kind give of business. a so But the what's of to rule in think very to our And important it's dynamic here difficult we're thumb. I any management understand is that of

we've several think over proven I the years. that last

to will them. of And quickly move opportunities then advantage we emerge, so as those take certainly

rule give here. thumb to a tough So of

Chris Kapsch

X last Fair enough. then And one.

all lately and if black this tar fluffy carbon in you has recently, sources. don't we I'm crude that desperate challenges meetings, how Sean, which just the shipping how Europe is regional it you exporting shipping I to in mentioned in in and time, were in out carbon curious there China? China talking the was been at at rates but get about travelled when just just of customers producers -- additional if light seemed know to and shipping influencing call, word that dynamic the black -- given the how, market of how that motivated So some coal if feedstock were it reflecting were with is the playing costs And uneconomic. high China because, the highly

Sean Keohane

Yes.

So well I it you've pretty think there, Chris. summarized

Europe very placing customers the real tight, in a So and emphasis is supply the given supply security. dynamic on Russia situation

that has led not at Chinese global in coal declined, those has. though coming high fuel an oil a imports pretty Because are in to but Now Chinese increase tar even into has prices. Europe

uneconomic pretty it the at into in a coming right Coast but now significant, makes between Chinese the kind negative orb Europe call not just of coal there's tar would which move it a feedstock it means so and U.S. product a to I And Gulf it's highest price.

side global the left-hand the curve, at that's product in side. not moving supply you're of right-hand basically, the So

So think, more supportive factor it's, the in a environment. pricing I

our think China again, the I got our product environment that with respect are understood. holding this And think, well business reasons why provides out little holding in you've more a despite for as And China, weak moves Certainly, there, for fairly a well. in things China, China So it pricing. up economic I business. well that's, is up pretty of support of to one some of

the be carbon dynamic supportive the modest that a be to does black that global tends in because carbon of China the it tire out, makers. black has to support is So to quality move

against are we And the people so those China. in typically compete

And so a in would modest dynamic be supportive that China.

Operator

closing like Sean showing to no am now questions call would further remarks. I And over you. turn at the Thank I this any back for time. to Keohane

Sean Keohane

you. much and today of support forward your thank the very we for again joining next Cabot Thank to look continued speaking quarter. you Well, for Great. call and

Operator

for conference your and you conclude Ladies participation. for the does gentlemen, Thank today. that

You may Good day. disconnect. now

Cabot (CBT) 8 Nov 222022 Q4 Earnings call transcript