Cabot Corporation

Ladies and gentlemen, thank you for standing by, and welcome to the CABG first quarter 2021 earnings conference call. At this time, all participant lines are in a listening mode. After the speaker's presentation, there will be a question and answer session. To ask a question before the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today. Stephen DeLaHunt, Vice President, Treasurer, Investor Relations. Thank you. Please go ahead, sir.

Stephen DeLaHunt Thank you. Good morning and welcome to the Cabot Corporation First Quarter Earnings Teleconference. With me today are Sean Cohane, CEO and President, and Erica McLaughlin, Senior Vice President and CFO. Last night we released results for our first quarter of fiscal year 2021, copies of which are posted in the Investor Relations section of our website. The slide deck that accompanies this call is also available in the investor relations portion of our website and will be available in conjunction with the replay of the call. During this conference call, we will make forward-looking statements about our expected future operational and financial performance. Each forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Additional information regarding these factors appears under the heading Forward Looking Statements in the press release we issued last night and in our annual report on Form 10-K for the fiscal year ended September 30, 2020, and in subsequent filings we make with the SEC, all of which are also available on the company's website. In order to provide greater transparency regarding our operating performance, we refer to certain non-GAAP financial measures that involve adjustments to GAAP results. Any non-GAAP financial measures presented should not be considered to be an alternative to financial measures required by GAAP. Any non-GAAP financial measures referenced on this call are reconciled to the most directly comparable GAAP financial measure in the table at the end of our earnings release issued last night and available in the Investors section of our website. I will now turn the call over to Sean Cohane, who will discuss the key highlights of the company's performance. Erica McLaughlin will review the business segment and corporate financial details. Following this, Sean will provide closing comments and open the floor to questions. Sean?

Thank you, Steve, and good morning, ladies and gentlemen. Welcome to our first quarter 2021 earnings conference call. I'm very pleased with the exceptional operating results we reported as we saw a strengthening recovery across our end markets. For the quarter, we generated record adjusted earnings per share of $1.18 and segment EBIT of $140 million. The results were driven by improving demand trends, robust unit margins, disciplined operational execution, and strong performance in our targeted growth initiatives. I'd like to recognize the extraordinary employees of Cabot whose teamwork and commitment made it possible for us to meet the dynamic needs of our customers while maintaining the safety of our people and our communities. The COVID pandemic has challenged our normal ways of working, but I believe our strong culture of connectivity and collaboration enabled us to distinguish Cabot in the marketplace, and we will continue to build on these strengths into 2021. During the quarter, we saw strong volumes in the tire and automotive markets as the recovery momentum continued globally with a sharp rebound off the lows experienced last spring. We are pleased to see that miles-driven trends have improved, though still generally lag pre-COVID levels. In terms of automotive builds, a similar trend has taken hold. With both end markets still below prior peaks, we are optimistic about our growth runway as the economic recovery strengthens. As highlighted in previous calls, we experienced real strength throughout 2020 for products sold into the infrastructure, packaging, and consumer sectors, and this continued in our first fiscal quarter of 2021. Our strong product portfolio, global reach, and technical support have enabled us to capitalize on favorable infrastructure trends in wire and cable, pipe, and geomembranes. Additionally, the COVID pandemic has changed certain consumer behaviors and these trends are supportive of our packaging and consumer-driven applications. While the underlying end market trends are favorable, there likely was some level of channel replenishment in the quarter, as the combination of sharply rising demand and low inventories in most value chains created upward pressure on orders. We are also seeing tightness across transportation modes globally, And this supply chain uncertainty is likely causing customers to build some inventory to mitigate disruptions. I would like to spend a little time now on China. The last couple of years had driven some softening in that market. We are seeing real strength there now. China was the only major economy to avoid a recession in 2020, and the market there was very strong for us in Q1. as PMI hit 57 and industrial production surged. As we look forward, our belief in the fundamentals of the China market is strong and our longstanding strategic assumptions remain sound. Given that almost 40% of the world's tires are produced in China and 50% of the world's silicones, our differentiated position there means we are extremely well positioned for growth. We believe that the feedstock markets will be in balance over the long term which should provide a foundation of stability over time. And finally, we expect environmental pressures will continue to ratchet and Cabot's leadership and sustainability will position us in a differentiated way relative to competition. Looking at our segments, reinforcement materials generated record EBIT performance in the quarter, driven by very strong results in Asia, as our focus on margin paid off. Our global footprint and focus on operational excellence are the foundations of our customer value proposition, and I believe we are seeing benefits of that in our results. During the quarter, we completed the negotiation of our reinforcement materials customer agreements for calendar year 2021. We are pleased with the outcome, which was broadly in line with our 2020 agreements in terms of pricing and share. This is a positive development as we negotiated during a period of low volumes and extremely uncertain forward visibility. By maintaining our share, we will participate in a demand recovery with our customers. We were also very pleased to see the significant step up in results in the performance chemical segment. The segment delivered even in the first fiscal quarter of 54 million, up 32% compared to the first fiscal quarter of 2020. This was primarily due to higher volumes across all applications, strong product mix from automotive applications and specialty carbons and compounds, and progress in our targeted market growth initiatives. Despite the pandemic, we continue to advance critical strategic initiatives that we believe will create long-term value while staying committed to our balanced capital allocation framework. In Shuzhou, China, we are in the process of converting this acquired plant to manufacture specialty carbons. The strategic project will provide growth capacity for a high-value specialty carbons grade and complement our footprint so that we are balanced geographically. This project is progressing well and we remain on track for completion in early calendar 2022. In the battery space, The integration of Shenzhen Sanshun Nano into our energy materials business is complete, and sales of our conductive carbon additives are growing at attractive rates. Customer adoptions and sales with the top 10 global battery producers continue to build momentum, and we believe this business will grow to become a meaningful profit contributor for Kevin. We are also making important progress to grow our inkjet business. Our investment focus over the last couple of years has been in the space of packaging, as that sector begins a transition from analog to digital printing with inkjet technology. Our sales are growing in the packaging space, and we are well positioned with product adoptions at many of the leading printer OEMs. We expect the penetration of inkjet technology to accelerate over the next three years, and we believe we are extremely well positioned. These investments are critical in supporting our earnings growth targets and we've been disciplined in our choices and execution so that we balance growth along with cash return to shareholders. In addition to our growth investments, sustainability and ESG leadership have long been a strategic priority for Cabot and their importance is growing in the eyes of our stakeholders. I am pleased to highlight two achievements this quarter that demonstrate our industry leading position. First, we received a platinum-level rating in recognition of our sustainability efforts from EcoVedas. EcoVedas is an independent assessment organization that evaluates companies' sustainability programs in the areas of environment, labor practices and human rights, ethics, and sustainable procurement. Many of our customers utilize EcoVedas to confirm performance of their supply chain partners. And our platinum rating confirms that Cabot is ranked among the top 1% of companies in its peer group in the manufacturing of basic chemicals. We are also proud of being named one of America's most responsible companies 2021 by Newsweek Magazine. This is the second year that Cabot has received this recognition, which was developed in 2020 to highlight the most responsible companies in the United States across 14 industries. This accomplishment recognizes Cabot's reputation and programs in corporate governance, community engagement, and management of environmental performance, as well as transparent reporting. Sustainability, leadership, and corporate responsibility are integrated in the business strategy and daily management of Cabot, and by leading in this area, we will ensure that all stakeholders are part of our success. I will now turn it over to Erica to discuss the financial results of the quarter in more detail. Erica?