Quarterly Highlights
Volumes in all key businesses improved sequentially with emerging markets showing strongest signs of recovery.
Higher carbon black unit margins contributed to sequential performance improvement.
Restructuring and cost saving actions are ahead of plan and benefited results.
Strategic commitment to emerging market expansion continues with the completion of 150,000 metric tons of carbon black capacity in Tianjin, China.
Cash position remains strong, with a quarter end cash balance of $177 million after debt reduction of $46 million and dividend payments of $12 million.
Commenting on the results, Patrick Prevost, Cabot’s President and CEO, stated, “For the first time since the beginning of the downturn, we are seeing operating performance recover in a significant way. The profitability of our business segments improved by $51 million sequentially, excluding restructuring charges. We are encouraged by volume increases throughout the quarter, particularly in emerging markets where we remain committed to expanding our already strong competitive position. Carbon black margins improved due to aggressive commercial efforts and the reduced impact of older, high cost inventories. Our restructuring and cost saving actions are ahead of plan and benefited results during the quarter. Apart from carbon black, our Specialty Fluids Segment had a very strong quarter driven by favourable prices and increased activity in the North Sea and Kazakhstan. Progress continued in our New Business Segment with improved revenue and cash flow versus the prior year. “
Segment Results
Core Segment- When compared to the second quarter of fiscal 2009, Rubber Blacks profitability increased by $28 million due to higher volumes and unit margins and lower operating expenses from restructuring and cost saving actions. Volumes increased by 8% sequentially, as improvements in emerging markets (China up 34%; Asia Pacific, excluding China, up 25%; South America up 6%) more than offset declines in more developed markets (North America and Europe each down 7%). When compared to the third quarter of fiscal 2008, profitability decreased by $32 million due to 24% lower volumes from weaker global demand in the tire and automotive markets and lower unit margins from older, high cost inventories. This decline was partially offset by lower operating expenses from restructuring and cost saving actions.
Specialty Fluids Segment- When compared to the second quarter of fiscal 2009, profitability in the Specialty Fluids Segment increased by $5 million due to significantly higher revenues from favourable pricing and increased activity in the North Sea and Kazakhstan. When compared to the third quarter of fiscal 2008, profitability increased by $4 million principally due to favourable prices and lower operating expenses from cost saving actions.
New Business Segment- Year to date cash flow for the New Business Segment improved by $35 million when compared to the same period of fiscal 2008. The increase is principally due to revenue growth and benefits from cost saving actions. When compared to the second quarter of fiscal 2009, current quarter revenues declined by $2 million due to the timing of revenue in the Aerogel Business, partially offset by higher volumes and favourable product mix in the Inkjet Colorants Business.
Cash Performance- During the third quarter of fiscal 2009, operations generated $36 million of cash, including a $10 million decrease in working capital. The Company ended the quarter with a cash balance of $177 million, after dividend payments of $12 million and a $46 million reduction of debt, and $197 million of unused credit available under committed facilities. Capital expenditures were $27 million in the quarter.