Cabot Corporation

Thank you for standing by, and welcome to the second quarter 2021 Cabot Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star then 1 on your telephone. Please be advised that today's call is being recorded. If you require additional assistance, press star then 0 to reach an operator. I would now like to hand the call over to Steve Delahunt, Vice President, Treasurer, Investor Relations. Please go ahead.

Thank you, and good morning. I'd like to welcome you to the Cabot Corporation 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 second 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 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 a table at the end of our earnings release issued last night and available in the investor section of our website. I will now turn the call over to Sean, who will discuss the key highlights of the company's performance. Erica will review the business segment and corporate financial results. 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 second quarter 2021 earnings conference call. I'm very pleased with the exceptional operating results we generated this quarter as we saw continued strength across our businesses. For the quarter, we generated a second consecutive record adjusted earnings per share of $1.38 and segment EBIT of $149 million. Adjusted earnings per share was up 79% over the second fiscal quarter of 2020, largely due to strong volumes across all regions, robust unit margins, disciplined operational execution, and strong performance in our targeted growth initiatives. The Cabot team demonstrated great operational flexibility in the face of continued COVID restrictions, weather-related interruptions, and tightness in the global shipping markets. This operational adaptability was made possible by the extraordinary efforts of our commercial and supply chain teams and the strength of the Cabot manufacturing network. During the quarter, we saw strong volumes in the tire and automotive markets and continued strength in our infrastructure, packaging, and consumer-driven applications. We are pleased to see that automotive builds and passenger car miles driven have improved, though still generally lag pre-COVID levels. On the other hand, truck miles driven are very robust, driving a large replacement tire market. With both automotive and tire markets still expected to be below prior peaks on a 2021 forecast basis, we are optimistic about our growth runway in the coming years. In the near term, COVID cases remain persistently high in certain regions, particularly across Europe, South America, and India. While vaccines are offering promise, the economic recovery will likely remain uneven and challenged to reach its full potential until the public health crisis is fully under control. Raw material prices continue to rise across most value chains, and our businesses were no different. We effectively implemented price increases to recover these rising costs, which combined with favorable product mix to drive robust unit margins. Looking at our major segments, reinforcement materials generated record EBIT performance in the quarter of $89 million, driven by robust customer demand and strong Asia pricing. Results in performance chemicals were up sharply over the prior year, with segment EBIT of $58 million compared to $31 million last year, as the business drove double-digit volume growth in both performance additives and formulated solutions businesses and benefited from favorable product mix. Overall, I am very pleased with the way we have navigated the pandemic, and I believe that Cabot is emerging from the COVID crisis a stronger company. Our global manufacturing footprint and service capabilities and leading product portfolio are increasingly valued by our customers. While the recession of 2020 required an intense focus on cost and cash preservation, We continue to sustain our assets and make important investments in sustainability and growth for the long term. One of the most exciting growth investments is in the space of batteries, and I would like to take a few minutes to update you on our progress here. We are seeing a real inflection point in terms of demand for electric vehicles and energy storage as pressures to reduce greenhouse gases increase. Cabot is well positioned and is supporting this transition with our leading portfolio of highly engineered conductive carbon additives and formulation capabilities. Our business is demonstrating strong growth this year, and we expect this will continue into the future. I will start with some comments about the overall market. Lithium ion batteries are growing rapidly and expected to grow at a 25 to 30 percent compound annual growth rate through 2030. with the primary growth driver being electric vehicles, as countries establish CO2 reduction goals and accelerate the shift away from internal combustion engines. Further technology improvements in batteries are a necessary enabler of this transition, and the materials industry will play a key role in this pursuit to drive down costs and increase range. Cabot currently serves this market by offering a range of materials and formulations for use in energy storage applications. These materials can be classified into two groups, conductive carbon additives, which include conductive carbon black, carbon nanostructures, and carbon nanotubes, and non-carbon additives, which include products in our fume metal oxides business. Conductive carbon additives are a small part of the battery formulation. but play a very important role. These additives enable electrons to move in and out of the active phase where they're stored during charging and discharging of the battery. There are two types of conductivity required to make this effective, short-range conductivity and long-range conductivity. Based on the different shapes and properties of conductive carbon additives, they impart different conductivity performance. For example, carbon nanotubes are more advantaged in providing the long-range conductivity, while conductive carbon blacks are more advantaged in providing the short-range conductivity. Therefore, there is no one single best additive for this application. Having the capability to offer different types of conductive carbon additives and blends of such materials is important in delivering a formulated solution to the customer that addresses their specific needs. There are a few drivers that distinguish Cabot in the conductive carbon additive space. First, we have an established and unmatched global footprint and application capability to support our customers as they build manufacturing plants around the world. Over the past few years, through the establishment of our Asia Technology Center and the R&D capabilities acquired from the Sanshun acquisition, we have built a leading technical support team. This capability coupled with a global manufacturing footprint, positions us favorably in the eyes of our customers. Second, through organic and inorganic investments over the past few years, including the recent acquisition of Sanshun, Cabot is the only carbon additive supplier with commercially proven conductive carbon black, carbon nanotube, carbon nanostructure, and dispersion capabilities. This variety of conductive carbon additives enables us to tailor different formulated solutions for our customers and work with them on next-generation technologies. And third, Cabot has a rich legacy of innovating and demanding technical applications. Our experience in the CMP market for semiconductors and inkjet has offered invaluable practices and protocols that will be critical for the battery market. In terms of financial performance, we believe that the battery application will become a material contributor to the performance chemical segment over the next few years. The current conductive carbon additives market for lithium ion batteries, which includes both CNTs and conductive carbon black, is approximately $400 million in material value. We expect this market will grow to approximately $1 billion in value by 2025. Our energy materials business is off to a strong start in fiscal 2021, with forecasted revenue of approximately $80 million for the fiscal year. Over the past five years, revenue has grown at a CAGR of roughly 50%, which includes the acquisition of our CNT business in China. While we are making significant investments to drive qualification and further extend our technical capabilities, EBITDA is forecasted to be between $15 and $20 million in fiscal year 21. We are excited about the promise of this emerging application and will continue to focus our efforts to support customers and realize the potential of energy storage. I will now turn it over to Erica to discuss the financial results of the quarter in more detail. Erica?