Cabot plans U.S. expansion, posts strong third quarter

BOSTON—Cabot Corp. is planning to invest in a new fumed silica plant in Carrollton, Ky., a move that will extend the firm's long-term relationship with the Dow Corning division of Dow Chemical.

Sean Keohane, Cabot president and CEO, announced the expansion plans during the company's financial presentation Aug. 2, but did not expound on the size of the facility or the investment specifics.

The plant should be in operation by 2020.

The announcement comes on the heels of the June 7 ground breaking for the firm's new fumed silica manufacturing plant in Wuhai, China. Cabot holds an 80 percent stake in the project, which is being done with joint venture partner Inner Mongolia Hengyecheng Silicone Co. Ltd.

The $60 million project is scheduled to be completed in 2019 and is expected to produce 8,000 metric tons per year of fumed silica per year. Cabot will provide the production technology, while HYC will provide feedstock.

Financially, Cabot posted a strong third quarter, reporting a 46 percent jump in year-on-year earnings for reinforcement materials in the period that ended June 30.

The increase in earnings (EBIT), $16 million in total when compared to the third quarter of 2016, mainly was driven by higher unit margins from favorable spot market pricing as well as better product mix, according to a statement issued by the firm.

The segment's earnings, however, fell by $3 million compared to the second quarter of 2017. The drop, Cabot said, is attributable to higher costs.

Segment volumes decreased by 1 percent largely due to reduced demand in the tire markets in Asia, which saw a 7 percent decline in year-over-year volumes. EMEA and Americas, however, both registered growth at 4 percent and 5 percent, respectively.

"Reinforcement Materials delivered strong results with 46 percent growth in EBIT on a year over year basis from benefits in both contract and spot sales," President and CEO Sean Keohane said a statement.

The performance chemicals segment, according to Keohane, experienced a "more challenging" quarter primarily due to lower margins from higher feedstock costs and the impact of unplanned downtime on volumes and costs.

Commenting on the outlook for the company, Keohane said he expects "reinforcement materials will continue to generate strong results, although we expect to see modestly higher fixed costs in the fourth quarter."

Shahrzad Pourriahi, a reporter with European Rubber Journal, contributed to this report.