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Fundado el 20 de mayo de 2013

Cabot Corp Reports Third Quarter Fiscal 2020 Results

Diluted loss per share of $0.12 and Adjusted EPS loss of $0.07

BOSTON–(BUSINESS WIRE)–Cabot Corporation (NYSE: CBT) today announced results for its third quarter of fiscal year 2020.

  • GAAP EPS was a loss of $0.12, compared to earnings of $0.55 in the prior fiscal year third quarter. Adjusted EPS was a loss of $0.07 compared to Adjusted EPS of $1.00 in the prior fiscal year third quarter as COVID-19 impacted demand across all segments
  • Volumes in Reinforcement Materials declined 42% as compared to the same quarter in the prior year; volumes increased 45% sequentially in the month of June as compared to May
  • Strong cash flow generation with cash flow from operations of $149 million in the third quarter driven by continued working capital improvements
  • Liquidity remains strong at approximately $1.4 billion; Debt decrease of $13 million during the quarter; Debt to EBITDA of 2.9 times as of June 30, 2020
  • Completed acquisition of Shenzhen Sanshun Nano – a leading producer of carbon nanotubes (CNT) for lithium-ion batteries

(In millions, except per share amounts)

Three Months Ended

Nine Months Ended

 

6/30/20

6/30/19

6/30/20

6/30/19

 

Net sales

$

518

 

$

845

 

$

1,955

 

$

2,510

 

Net income (loss) attributable to Cabot Corporation

$

(6

)

$

32

 

$

34

 

$

124

 

 

 

 

 

 

 

Net earnings (loss) per share attributable to Cabot Corporation

$

(0.12

)

$

0.55

 

$

0.59

 

$

2.08

 

Less: Certain items after tax per share

$

(0.05

)

$

(0.45

)

$

(0.81

)

$

(0.78

)

Adjusted EPS

$

(0.07

)

$

1.00

 

$

1.40

 

$

2.86

 

Commenting on the environment, Cabot President and CEO Sean Keohane, said, “Clearly the COVID-19 pandemic has had a dramatic impact on most companies and Cabot was no exception. The scale of this disruption is unprecedented, but I am proud of the way our global team has managed through the crisis. We’ve taken proactive steps to protect our employees while continuing to operate our plants to meet the dynamic needs of our customers while also carefully managing cash.”

Commenting on the company’s third quarter results, Mr. Keohane, said, “ Volumes and product mix across our businesses declined by over $100 million in the third quarter as compared to the prior year quarter driven primarily by lower demand in the tire and automotive sectors as manufacturers temporarily halted production in response to the COVID-19 pandemic. As the quarter progressed, our customers slowly restarted operations during May and June. The sequential improvement in monthly Reinforcement Materials volumes through the quarter is a positive indicator that we are exiting the quarter in a stronger position than where we started.”

Keohane continued, “Our resilient cash flows were evident again this quarter with operating cash flow of $149 million, including a benefit from net working capital of $126 million. Our balance sheet remained strong with approximately $1.4 billion in cash and committed borrowing capacity as of June 30, 2020. Out of an abundance of caution, we increased the Debt to EBITDA ratio covenant limit in our credit agreements from 3.5 to 4.5 until June 2021 in order to provide greater flexibility for accessing our committed liquidity. We continued our aggressive cost reduction efforts and are on track to deliver $60 million in cost savings in the fiscal year, which will partially mitigate the impact of lower volumes and enable the funding of in-flight growth investments for the future. On the ESG front, we announced an expanded set of 2025 sustainability goals that reinforce our broadened view of sustainability and extend beyond our strong foundation in safety, health and the environment to include areas such as product development, suppliers’ sustainability, diversity and inclusion, and community engagement.”

Financial Detail

For the third quarter of fiscal 2020, net loss attributable to Cabot Corporation was $6 million ($0.12 loss per diluted common share). The net loss includes an after-tax per share charge of $0.05 which was predominantly comprised of restructuring charges and acquisition costs in the quarter. Adjusted earnings per share for the third quarter of fiscal 2020 was a loss of $0.07 per share.

Segment Results

Reinforcement Materials – Third quarter fiscal 2020 EBIT in Reinforcement Materials decreased by $77 million compared to the third quarter of fiscal 2019. Globally, volumes decreased 42% year-over-year as the COVID-19 pandemic significantly impacted demand. The COVID-19 impact was most pronounced in both the Americas and EMEA as temporary customer shutdowns impacted volumes in both regions. Lower volumes also resulted in a slower turn of inventory and lower energy center revenue both of which negatively impacted margins in the quarter. Cost mitigation efforts partially offset the impact from lower volumes and margins.

Global and regional volume changes for Reinforcement Materials for the third quarter of fiscal 2020 as compared to the same quarter of the prior year are included in the table below:

 

Third Quarter

Year-over-Year Change

Changes in Global Reinforcement Materials Volumes

 (42%)

Asia

(26%)

Europe, Middle East, Africa

(51%)

Americas

(59%)

Performance Chemicals – Third quarter fiscal 2020 EBIT in Performance Chemicals decreased by $16 million compared to the third quarter of fiscal 2019 primarily due to lower volumes from the impact of COVID-19, less favorable product mix in specialty carbons, and by a more competitive pricing environment in our fumed metal oxides product line. Year-over-year, volumes decreased by 8% in the Formulated Solutions business driven by declines in our specialty compounds product line. Volumes in the Performance Additives business decreased by 5% year-over-year primarily due to declines in our specialty carbons product line.

Purification Solutions – Third quarter fiscal 2020 EBIT in Purification Solutions increased by $1 million compared to the third quarter of fiscal 2019 due to higher margins from improved pricing and lower fixed costs from the ongoing transformation program.

Cash Performance The Company ended the third quarter of fiscal 2020 with a cash balance of $162 million. During the third quarter of fiscal 2020, cash flows provided by operating activities were $149 million. Capital expenditures for the third quarter of fiscal 2020 were $43 million. Additional uses of cash during the third quarter included $84 million related to the acquisition of Shenzhen Sanshun Nano, and $20 million for the payment of dividends.

Taxes – During the third quarter of fiscal 2020, the Company recorded a tax benefit of $5 million for an effective tax rate of 51%. This included $2 million of discrete tax benefits. The year to date operating tax rate remained at 29%.

Outlook

Commenting on the outlook for the Company, Keohane said, “We anticipate substantial volume and EBIT improvement in the fourth quarter as compared to our third quarter as demand for our products increases aligned with an improving economic outlook and a recovery in the underlying automotive and replacement tire markets. At the segment level, we expect a significant sequential improvement in demand in Reinforcement Materials in the fourth fiscal quarter given that customer plants have come back on-line in Europe and the Americas. In Performance Chemicals, we expect a modest improvement in volumes and product mix largely offset by higher fixed costs due to costs associated with the start-up of our new fumed metal oxides plant in North America and synchronized turnarounds driven by our fence-line partners.”

Keohane continued, “Despite the challenges that have been brought on by the COVID-19, pandemic, consistent operating cash flow remains a core strength of our company. In the fourth quarter, we expect improving business results and another solid quarter of operating cash flows. We remain confident in our ability to deliver on our guidance of operating cash flows in the second half of the year of approximately $200 million. The actions we have taken so far this year to reduce costs will continue to benefit results in the fourth quarter. Although we are seeing some indications that demand for our products is improving, the duration and scope of the COVID-19 pandemic continues to be uncertain and visibility is limited. As a result, we will not provide fiscal 2020 financial guidance beyond our previously communicated expectations for operating cash flow. I am very proud of how our global team is managing through this challenging time. I believe we are navigating the pandemic well and are taking the right actions to emerge from this crisis in a position of strength.”

Earnings Call

The Company will host a conference call with industry analysts at 8:00 a.m. Eastern time on Friday, August 7, 2020. The call can be accessed through Cabot’s investor relations website at http://investor.cabot-corp.com

About Cabot Corporation

Cabot Corporation (NYSE: CBT) is a global specialty chemicals and performance materials company, headquartered in Boston, Massachusetts. The company is a leading provider of rubber and specialty carbons, activated carbon, inkjet colorants, masterbatches and conductive compounds, fumed silica, and aerogel. For more information on Cabot, please visit the company’s website at: http://www.cabotcorp.com. The Company encourages investors and potential investors to consult the Cabot website regularly.

Forward-Looking Statements – This earnings release contains forward-looking statements. All statements that address expectations or projections about the future, including with respect to our expectations for demand for our products, our expectations for improvement in earnings and volumes in the fourth quarter of fiscal 2020, our expectations for operating cash flow generation, the cost savings we expect to achieve in fiscal 2020 from the cost reduction initiatives, are forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, potentially inaccurate assumptions, and other factors, some of which are beyond our control and difficult to predict. If known or unknown risks materialize, or should underlying assumptions prove inaccurate, our actual results could differ materially from past results and from those expressed or implied by forward-looking statements. Importantly, as we cannot predict the duration or scope of the COVID-19 pandemic, the negative impact to our results cannot be estimated. Factors that will influence the impact on our business and operations include the duration and extent of the pandemic, the extent of imposed or recommended containment and mitigation measures, and the general economic consequences of the pandemic. Other important factors that could cause our results to differ materially from those expressed or implied in the forward-looking statements include, but are not limited to, competition from other specialty chemical companies; volatility in the price of energy and raw materials; a significant adverse change in a customer relationship; safety, health and environmental requirements; unanticipated delays in site development projects; negative or uncertain worldwide or regional economic conditions and market opportunities, including from trade relations or global health matters; and fluctuations in foreign currency exchange and interest rates. These factors are discussed more fully in the reports we file with the Securities and Exchange Commission (“SEC”), particularly under the heading “Risk Factors” in our annual report on Form 10-K for our fiscal year ended September 30, 2019 and in our quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2020, or subsequent SEC filings, filed with the SEC at www.sec.gov. We assume no obligation to provide revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws.

Use of Non-GAAP Financial Measures

To supplement Cabot’s consolidated financial statements presented on a generally accepted accounting principle (“GAAP”) basis, the preceding discussion of our results and the accompanying financial tables report Adjusted EPS, Adjusted EPS excluding the Specialty Fluids segment, Total Segment EBIT, Total Segment EBITDA, Adjusted EBITDA, our operating tax rate, Free Cash Flow and Discretionary Free Cash Flow, all of which are non-GAAP financial measures. These non-GAAP financial measures are not computed in accordance with, or as an alternative to, GAAP. Reconciliations of Adjusted EPS and Adjusted EPS excluding the Specialty Fluids segment to net income (loss) per share attributable to Cabot Corporation, the most directly comparable GAAP financial measure of both such non-GAAP measures, Total Segment EBIT, Total Segment EBITDA, and Adjusted EBITDA to income (loss) before income taxes and equity in earnings of affiliated companies, the most directly comparable GAAP financial measure of each such non-GAAP measure, operating tax rate to effective tax rate, the most directly comparable GAAP financial measure, and Free Cash Flow and Discretionary Free Cash Flow to Cash flow from operating activities, the most directly comparable GAAP financial measure of both such non-GAAP measures, are provided in the tables titled “Cabot Corporation Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate” and “Cabot Corporation Reconciliation of Non-GAAP Financial Measures.”

Management believes these non-GAAP measures provide investors with greater transparency to the information used by Cabot management in its financial and operational decision-making, allow investors to see Cabot’s results through the eyes of management, and better enable Cabot’s investors to understand Cabot’s operating performance and financial condition.

Adjusted EPS. In calculating Adjusted EPS, we exclude from our net income (loss) attributable to Cabot Corporation items of expense and income that management does not consider representative of the Company’s business operations. Accordingly, reporting earnings on an adjusted basis supplements the GAAP measure of performance and provides additional information related to the underlying performance of the business. For example, certain of the items we exclude are items that we are required by GAAP to recognize in one period that relate to activities extending over several periods or relate to single events that management considers to be unusual and infrequent, although not necessarily non-recurring. We refer to these items as “certain items.” Management believes excluding these items facilitates operating performance comparisons from period to period by eliminating differences caused by the existence and timing of certain expense and income items that would not otherwise be apparent on a GAAP basis and evaluates the Company’s operating performance without the impact of these costs or benefits. Management also uses Adjusted EPS as a key measure in evaluating management performance for incentive compensation purposes.

The items of income and expense that we exclude from our calculations of Adjusted EPS but that are included in our GAAP net income (loss) per share, as applicable in a particular reporting period, include, but are not limited to, the following:

  • Global restructuring activities, which include costs or benefits associated with cost reduction initiatives or plant closures and are primarily related to (i) employee termination costs, (ii) asset impairment charges associated with restructuring actions, (iii) costs to close facilities, including environmental costs and contract termination penalties, and (iv) gains realized on the sale of land or equipment associated with restructured plants or locations.
  • Non-recurring gains (losses) on foreign currency, which are primarily related to the impact of continued currency devaluations on our net monetary assets denominated in that currency.
  • Legal and environmental reserves and matters, which consist of costs or benefits for matters typically related to former businesses or that are otherwise incurred outside of the ordinary course of business.
  • Executive transition costs, which include incremental charges, including stock compensation charges, associated with the retirement or termination of employment of senior executives of the Company.
  • Asset impairment charges, which primarily include charges associated with an impairment of goodwill or other long-lived assets.
  • Acquisition and integration-related charges, which include transaction costs, redundant costs incurred during the period of integration, and costs associated with transitioning certain management and business processes to Cabot’s processes.
  • Gains (losses) on sale of investments, which primarily relate to the sale of investments accounted for under the cost-method.
  • Indirect tax settlement credits, which include favorable settlements which result in the recoveries of indirect taxes.

Total Segment EBIT. Total segment EBIT reflects the sum of EBIT from our three reportable segments. In calculating Total segment EBIT we exclude from our income (loss) before income taxes and equity in earnings of affiliated companies, certain items and items that, because they are not controlled by the business segments and primarily benefit corporate objectives, are not allocated to our business segments, such as interest expense and other corporate costs, which include unallocated corporate overhead expenses such as certain corporate salaries and headquarter expenses, plus costs related to corporate projects and initiatives.

Total Segment EBITDA. Total Segment EBITDA is equal to Total Segment EBIT (as defined above), but further adjusted for depreciation and amortization.

Adjusted EBITDA. Adjusted EBITDA reflects Total Segment EBITDA and is further adjusted for unallocated corporate costs, which include unallocated corporate overhead expenses such as certain corporate salaries and headquarter expenses, plus costs related to corporate projects and initiatives.

Free Cash Flow. To calculate “Free Cash Flow” we deduct Additions to property, plant and equipment from cash flow from operating activities.

Discretionary Free Cash Flow. To calculate “Discretionary Free Cash Flow” we deduct sustaining and compliance capital expenditures and changes in Net Working Capital from cash flow from operating activities.

Operating Tax Rate. Our “operating tax rate” represents the tax rate on our recurring operating results. This rate excludes discrete tax items, which are unusual or infrequent items that are excluded from the estimated annual effective tax rate and other tax items, including the impact of the timing of losses in certain jurisdictions, cumulative tax rate adjustments and the impact of the items of expense and income we identify as certain items on both our operating income and the tax provision. Management believes that the operating tax rate is useful supplemental information because it helps our investors compare our tax rate year to year on a consistent basis and to understand what our tax rate on current operations would be without the impact of these items.

Cabot does not provide a forward-looking reconciliation of the operating tax rate range with an effective tax rate range because, without unreasonable effort, we are unable to predict with reasonable certainty the matters we would allocate to “certain items,” including unusual gains and losses, costs associated with future restructurings, acquisition-related expenses and litigation outcomes. These items are uncertain, depend on various factors, and could have a material impact on the effective tax rate in future periods.

Explanation of Terms Used

Product Mix. The term “product mix” refers to the mix of types and grade of products sold or the mix of geographic regions where products are sold, and the positive or negative impact this has on the revenue or profitability of the business or segment.

Net Working Capital. The term “net working capital” includes accounts receivable, inventory and accounts payable and accrued expenses.

Third Quarter Earnings Announcement, Fiscal 2020
 
 
CABOT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
Periods ended June 30

Three Months

Nine Months

Dollars in millions, except per share amounts (unaudited)

2020

2019

2020

2019

 
Net sales and other operating revenues

$

518

 

$

845

 

$

1,955

 

$

2,510

 

 
Cost of sales

 

449

 

 

675

 

 

1,592

 

 

1,996

 

 
Gross profit

 

69

 

 

170

 

 

363

 

 

514

 

 
Selling and administrative expenses

 

52

 

 

65

 

 

230

 

 

208

 

 
Research and technical expenses

 

13

 

 

16

 

 

41

 

 

47

 

 
Specialty Fluids loss on sale and asset impairment charge

 

 

 

8

 

 

1

 

 

28

 

 
Income (loss) from operations

 

4

 

 

81

 

 

91

 

 

231

 

 
Other income (expense)
 
Interest and dividend income

 

1

 

 

2

 

 

7

 

 

6

 

 
Interest expense

 

(13

)

 

(14

)

 

(41

)

 

(43

)

 
Other income (expense)

 

(3

)

 

 

 

(6

)

 

(6

)

 
Total other income (expense)

 

(15

)

 

(12

)

 

(40

)

 

(43

)

 
Income (loss) before income taxes and equity in
earnings of affiliated companies

 

(11

)

 

69

 

 

51

 

 

188

 

 
(Provision) benefit for income taxes

 

5

 

 

(30

)

 

(9

)

 

(43

)

 
Equity in earnings of affiliated companies, net of tax

 

1

 

 

1

 

 

2

 

 

1

 

 
Net income (loss)

 

(5

)

 

40

 

 

44

 

 

146

 

 
Net income (loss) attributable to noncontrolling interests

 

1

 

 

8

 

 

10

 

 

22

 

 
Net income (loss) attributable to Cabot Corporation

$

(6

)

$

32

 

$

34

 

$

124

 

 
Diluted earnings (loss) per share of common stock
attributable to Cabot Corporation

$

(0.12

)

$

0.55

 

$

0.59

 

$

2.08

 

 
Diluted weighted average common shares outstanding

 

56.5

 

 

58.4

 

 

56.7

 

 

59.2

 

Third Quarter Earnings Announcement, Fiscal 2020
 
 
CABOT CORPORATION SUMMARY RESULTS BY SEGMENT
 
 
Periods ended June 30

Three Months

Nine Months

Dollars in millions, except per share amounts (unaudited)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 
Sales
 
Reinforcement Materials

$

197

 

$

461

 

$

931

 

$

1,363

 

 
Performance Chemicals

 

220

 

 

251

 

 

707

 

 

736

 

Performance Additives

 

151

 

 

172

 

 

489

 

 

518

 

 
Formulated Solutions

 

69

 

 

79

 

 

218

 

 

218

 

 
Purification Solutions

 

63

 

 

73

 

 

186

 

 

210

 

 
Specialty Fluids (A)

 

 

 

13

 

 

 

 

56

 

 
Segment sales

 

480

 

 

798

 

 

1,824

 

 

2,365

 

 
Unallocated and other (B)

 

38

 

 

47

 

 

131

 

 

145

 

 
Net sales and other operating revenues

$

518

 

$

845

 

$

1,955

 

$

2,510

 

 
Segment Earnings Before Interest and Taxes (C)
 
Reinforcement Materials

$

(5

)

$

72

 

$

103

 

$

195

 

 
Performance Chemicals

 

21

 

 

37

 

 

93

 

 

111

 

 
Purification Solutions

 

2

 

 

1

 

 

3

 

 

(1

)

 
Specialty Fluids (A)

 

 

 

2

 

 

 

 

24

 

 
Total Segment Earnings Before Interest and Taxes

 

18

 

 

112

 

 

199

 

 

329

 

 
Unallocated and Other
 
Interest expense

 

(13

)

 

(14

)

 

(41

)

 

(43

)

 
Certain items (D)

 

(7

)

 

(14

)

 

(74

)

 

(61

)

 
Unallocated corporate costs

 

(10

)

 

(14

)

 

(32

)

 

(39

)

 
General unallocated income (expense) (E)

 

2

 

 

 

 

1

 

 

3

 

 
Less: Equity in earnings of affiliated companies.

 

1

 

 

1

 

 

2

 

 

1

 

 
Income (loss) before income taxes and equity in
earnings of affiliated companies

 

(11

)

 

69

 

 

51

 

 

188

 

 
(Provision) benefit for income taxes (including tax certain items)

 

5

 

 

(30

)

 

(9

)

 

(43

)

 
Equity in earnings of affiliated companies

 

1

 

 

1

 

 

2

 

 

1

 

 
Net income (loss)

 

(5

)

 

40

 

 

44

 

 

146

 

 
Net income attributable to noncontrolling interests

 

1

 

 

8

 

 

10

 

 

22

 

 
Net income (loss) attributable to Cabot Corporation

$

(6

)

$

32

 

$

34

 

$

124

 

 
Diluted earnings (loss) per share of common stock
attributable to Cabot Corporation

$

(0.12

)

$

0.55

 

$

0.59

 

$

2.08

 

 
Adjusted earnings (loss) per share (F)

$

(0.07

)

$

1.00

 

$

1.40

 

$

2.86

 

 
Diluted weighted average common shares outstanding

 

56.5

 

 

58.4

 

 

56.7

 

 

59.2

 

(A) Cabot divested its Specialty Fluids business, which does not meet the criteria to be reported as a discontinued operation, during the third quarter of fiscal 2019. Therefore, prior periods’ financial statements and disclosures have not been recast. For more detail on the sale of the Specialty Fluids business, please refer to the Company’s fiscal 2019 10-K filing.
 
(B) Unallocated and other reflects royalties, other operating revenues, external shipping and handling fees, the impact of the corporate adjustment for unearned revenue, the removal of 100% of the sales of an equity method affiliate, and discounting charges for certain Notes receivable.
(C) Segment EBIT is a measure used by Cabot’s Chief Operating Decision-Maker to measure consolidated operating results, assess segment performance and allocate resources. Segment EBIT includes equity in earnings of affiliated companies, royalty income, and allocated corporate costs.
 
(D) Details of Certain items are presented in the Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate table.
(E) General unallocated income (expense) consists of gains (losses) arising from foreign currency transactions, net of other foreign currency risk management activities, Interest and dividend income, the profit or loss related to the corporate adjustment for unearned revenue, the impact of including the full operating results of a contractual joint venture in Purification Solutions Segment EBIT and unrealized holding gains (losses) for equity securities.
 
(F) Adjusted EPS is a non-GAAP measure, and a reconciliation of Adjusted EPS to GAAP EPS is presented in the Certain Items and Reconciliation of Adjusted EPS and Operating Tax Rate table.

Contacts

Investor Contact: Steve Delahunt

(617) 342-6255

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