Cabot on move again, plans service center in Latvia

BOSTON—Cabot Corp. rarely stands pat for long. It adds to, subtracts from or expands an area of its business virtually every year.

Its goal is always to keep the company in front of the pack in the carbon black industry while improving the firm's operation.

Last year was no exception to that rule, and 2014 is starting out the same.

Cabot's next moves will be to open a new Europe, Middle East and Africa shared service center in Riga, Latvia, and close the company's Leuven, Belgium, service facility.

It devised the plan after an extensive evaluation of the firm's shared service capabilities in the EMEA region, the company said in a form it filed with the U.S. Securities and Exchange Commission.

The project is expected to be completed by the end of 2014, subject to completion of a required consultation process with its Leuven employees, John Reese, vice president of global marketing for reinforcement materials, said in an interview.

“Our customers choose Cabot because they know they will get the best combination of quality, service and technology possible,” he said. “Also, they know that we are committed to operating wherever they need us to help grow their business.”

Creating the new center in Riga will enable the company to offer the highest quality of service at the most competitive cost, according to Reese. “Riga has a deep talent pool, a strong IT and communications infrastructure, a growing services sector and considerable cost advantages.”

He said the move will help Cabot maintain customer service as a competitive advantage in Europe, adding that it is just one individual move and not tied to a larger restructuring plan.

The company expects cash charges of between $19 million to $22 million for the intended closure and the transition to Riga. Those costs will include severance and employee benefits along with other expenses. The cash outlays are expected to occur over the next two years, the firm said, and it anticipates a minimum of $6 million of annual cost savings, starting in 2015.

Cabot has 20 locations throughout the EMEA region, including production plants in Belgium, Czech Republic, France, Germany, Italy, the Netherlands, United Arab Emirates and the United Kingdom, Reese said. “We continue to operate 43 manufacturing facilities in 21 countries worldwide, and we are committed to operating facilities in locations where our customers need us to grow.”

The specialty chemicals and performance materials producer followed that strategy in 2013. Throughout last year and into 2014, it has continued to focus on improving the competitiveness of its business through strategic expansions and acquisitions, the introduction of new products and the execution of its business initiatives.

“We have just added another 130,000 tons of capacity in Asia with the opening of our new carbon black plant in Xingtai, China,” Reese said.

Using state-of-the-art technology at the new facility, the firm will be able to supply Cabot's ultra-reinforcing products that serve as key materials in the production of high performance tires for the Chinese and Asia-Pacific markets, he said.

In addition, he said, the Boston-headquartered company has invested heavily in advanced emissions control and energy efficiency at the site to minimize its environmental footprint and at the same time reduce energy consumption.

In North America, the firm added another 140,000 tons of carbon black capacity with the acquisition of the remaining 60 percent stake in its Mexican joint venture Nhumo S.A. de C.A. Cabot had owned about 40 percent of the carbon black producer, which operates a plant in Altamira, Mexico, since 1990.

The addition gave the company expanded access to an important growth market in Mexico and the immediate extra capacity needed to support the expansion of its customers in the U.S., according to President and CEO Patrick Prevost.

He said the purchase demonstrated the firm's commitment to delivering high quality products and services from local supply sources.

The moves made by the company in 2013 and thus far in 2014 “are a major step forward in our strategy to enhance Cabot's global presence in the carbon black industry and strengthen our position in growing markets,” Reese said.

But he said it doesn't end there. “We're also very pleased with our recent product innovation,” he said, citing in particular the February launch of two new carbon black products for tire tread applications that will create value for customers and the environment.

Propel E7 is designed for fuel efficiency and “enables tires with lower rolling resistance, without sacrificing tire durability,” according to Reese. Propel D11 carbon black is engineered to provide higher durability and help create tire treads that resist cutting, tearing and abrasion, and extends the useful life of a tire, he said.

“This combination of new capacity and product innovation is helping to position Cabot as a partner of choice with our customers,” he said.

Reese said the carbons producer will continue to pursue growth opportunities, but he added that the company can't comment on future plans as of yet.

He did say Cabot is pleased by its strong start in fiscal 2014. In the first quarter, its Reinforcement Materials segment achieved its second best quarter of earnings, on an adjusted EBITDA basis, in the history of the business. “We believe that tire and automotive industry demand will continue to improve throughout the year ... and as it does, we believe that we will be able to continue to take advantage of our new global capacity and product introductions,” Reese said.

Cabot, which employs about 5,000 worldwide, has been successful during the last several years “because we have been consistent in taking the right actions to help our customers win in their markets,” he said.

“We are the partner of choice for our customers because they can count on Cabot to supply high quality products and services wherever they do business, and that we will be at their side to help them grow in any market around the world.”

He said Cabot has been consistently good at determining where future growth will occur and committing its resources to those markets to take advantage of opportunities.

Indonesia, one of the fastest growing carbon black markets in the world, is an example of that, Reese said. Cabot continues to modernize its two plants there and bolster their capacity—most recently in 2012—to meet growing demand.