Cabot Corporation (NYSE:CBT) has released its financial results for the third quarter of fiscal year 2023, which ended on June 30, 2023. The company reported a decline in both earnings and revenues compared to the same quarter of the previous year. This article provides an overview of Cabot’s Q3 performance, including earnings, revenues, segment highlights, financials, and outlook for the future.

Earnings and Revenues Decline

Cabot Corporation reported earnings per share (EPS) of $1.43 for the third quarter of fiscal 2023, representing a decrease from the EPS of $1.69 in the year-ago quarter. Adjusted earnings were $1.42 per share, lower than the figure of $1.73 reported in the same quarter of the previous year. The adjusted earnings also fell short of the Consensus Estimate of $1.56.

The company’s net sales for the third quarter were $968 million, indicating a decrease of approximately 15.8% compared to the same period in the prior year. The reported net sales figure missed the Consensus Estimate of $1,145.3 million.

Segment Highlights

Cabot’s Reinforcement Materials segment experienced a 14.5% year-over-year decline in sales, reaching $624 million in the reported quarter. This result fell short of the estimated sales figure of $683.2 million. However, the segment’s earnings before interest and tax (EBIT) increased by around 17% from the year-ago quarter, amounting to $132 million. The growth in EBIT can be attributed to improved unit margins resulting from higher pricing and a better product mix in the calendar year 2023 customer agreements, which were partially offset by lower volumes.

In the Performance Chemicals division, sales decreased by 18% year over year to $307 million during the reported quarter. This outcome fell below the projected sales figure of $443.2 million. EBIT for this segment also witnessed a significant drop of approximately 49%, amounting to $32 million. The decline was primarily due to reduced volumes and an unfavorable product mix, largely stemming from challenges in key end markets. Notably, the fumed metal oxides product line experienced the most significant volume contraction.

Financials and Outlook

At the end of the quarter, Cabot had cash and cash equivalents of $220 million, reflecting a decline of about 5.7% compared to the previous year. The company’s long-term debt was reported to be $1,093 million. Capital expenditures for the quarter amounted to $80 million, and cash flow from operating activities totaled $243 million.

Cabot paid dividends amounting to $23 million and repurchased shares worth $15 million during the reported quarter.

Looking ahead, Cabot expects steady sequential volumes and strong EBIT growth in the Reinforcement Materials segment due to pricing and mix benefits in customer agreements. For Performance Chemicals, the company anticipates stable sequential volumes in major product lines, with moderate growth in battery materials and inkjet products. However, pricing pressure in China’s electric vehicle (EV) value chain is projected to impact battery materials in the short term. The company also revised its EBITDA guidance for fiscal year 2023, expecting it to be lower than previously communicated. The projected adjusted EPS for the fourth quarter is estimated to be in the range of $1.40 to $1.55, leading to a full-year range of $5.13 to $5.28.

Price Performance

Shares of Cabot Corporation have experienced a decline of 4.7% over the past year, contrasting with a 6.2% rise in the industry.

Conclusion

Cabot Corporation’s Q3 financial results reveal a decline in both earnings and revenues compared to the previous year. The company’s segment performance and financials provide insight into the factors influencing its results. Cabot’s outlook for the future reflects expectations for growth in specific segments and acknowledges challenges in others, particularly in light of market pressures.

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