BOSTON—Cabot Corp. has posted a 4.8 percent decline in earnings for its reinforcement materials segment for the financial year ended Sept. 30, thanks largely to the challenging Chinese business environment.
Earnings for the segment, which supplies rubber and specialty carbon blacks for the rubber and plastics industries, fell to $266 million during the 12-month period, on 22.5 percent higher sales of $1.8 billion, Cabot reported on Nov. 5.
"While fiscal 2019 results are not what we originally expected, we delivered a strong fourth quarter of adjusted EPS and largely offset various headwinds to achieve solid full year operating results," said Sean Keohane, Cabot CEO and president.
Keohane attributed the fourth quarter performance of the segment to the favorable price/mix achieved from 2019 customer agreements and lower fixed costs.
These activities, he said, helped to mitigate the impact of "ongoing weakness in the Chinese business environment, continued softness in global automotive production and de-stocking across many of our value chains."
Looking ahead to the first quarter of 2020, ending Dec. 31, Keohane said in an earnings call, the company expects a sequential decline in EBIT due to lower volumes and higher fixed costs.
Keohane attributed the expected lower volumes to normal seasonality as well as customers delaying orders as they manage their year-end balance sheets in the current difficult economic environment.
The company expects higher fixed due to the timing of scheduled plant turnarounds and maintenance during the quarter.
Cabot also anticipates the business environment to remain challenging in China throughout the first quarter, which began on Oct. 1.
Commenting on the full year forecast for fiscal 2020, Keohane said the firm feels good about how its reinforcement materials business is performing despite the challenges in Asia.
The CEO added that management actions taken during the past few years have structurally improved the profit levels in the business.
While utilizations remain generally favorable, Keohane warned of the rising costs of environmental compliance and marine regulation Marpol 2020 changes.