Cabot Corporation

Ladies and gentlemen, thank you for standing by and welcome to Cabot 4th Quarter 2022 Earnings Conference Call. At this time, all participants are on 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 1-1. Please be advised that today's conference may be recorded. I would now like to hand the conference over to your speaker host, Steve DelHunt, Vice President, Treasury, and Best Relations. Please go ahead.

Good morning. I would 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 fourth quarter of fiscal year 2022, copies of which are posted in the investor relations section of our website. The slide deck that accompanies this call is also available on 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, 2021, 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 a table at the end of our earnings release issued last night and available in the investor section of our website. Also, as we typically do each year, I would like to remind you that over the next several weeks, in connection with the vesting of restricted stock awards issued under our long-term incentive equity program, officers of the company will be selling shares to pay tax and other obligations related to their rewards. I will now turn the call over to Sean, who will discuss the full year highlights Erica will review the fourth quarter results, business segment, and corporate financial details. Following this, Sean will provide some closing comments and open the floor to questions. Sean?

Thank you, Steve, and good morning, ladies and gentlemen, and welcome to our call today. Fiscal year 2022 was an exceptional year for Cabot. We delivered record financial performance, achieved breakout growth in battery materials, advanced a range of strategic initiatives, including the divestiture of purification solutions, and furthered our leadership in ESG performance. All of this was accomplished despite a turbulent macroeconomic and geopolitical environment. I am immensely proud of the Cabot team for the resilience and adaptability they demonstrated throughout the year, and for their focus on execution and support of our customers. By successfully navigating this dynamic environment, we are entering fiscal year 2023 in a strong position. At the beginning of fiscal year 2022, we introduced our Creating for Tomorrow strategy, which charts a new phase of growth and breakout value creation by leveraging our strengths to lead in performance and sustainability. Our focus is on driving advantage growth, delivering innovative chemistry to enable a better future, and relentlessly pursuing continuous improvement in everything that we do. In fiscal year 2022, we made tremendous progress in executing our strategy and achieving our long-term goals. I would like to spend a little time now recapping the accomplishments of the year. The Cabot operating model is built on the foundations of commercial and operational excellence, and our strengths in these disciplines drove outstanding results in fiscal year 2022. We delivered records for adjusted earnings per share of $6.28, total segment EBIT of $642 million, and discretionary free cash flow of $395 million. In our business segments, reinforcement materials EBIT increased 24% year over year to a record high of $408 million. This level of performance reflects the resilient nature of the replacement tire and market and the structural improvements to this business over the last several years. Performance chemicals EBIT increased 11% year-over-year, and we continue to generate strong momentum in battery materials, which increased EBITDA by 81% year-over-year. Battery materials is becoming a more material part of the portfolio, and we continue to expect significant growth in the years ahead. Overall, we had a very successful 2022 in terms of financial performance. Adjusted earnings per share growth is running ahead of our 2021 investor day targets and has grown at a compound annual growth rate of 17% since 2019. At the same time, the quality of our returns remains very strong with adjusted return on invested capital of 20% in fiscal year 2022. The foundation of our strategy starts with growth. We want to accelerate our growth by continuing to win in our core markets and increasing our share in applications with tremendous growth tailwinds. We are strategically focused on battery materials and the opportunity to capitalize on the explosive growth that comes with the transition to electric vehicles. To support this strategy, we are executing a range of growth investments. These include commencing operations at our Xuzhou China plant that supports capacity growth in both battery materials and specialty carbons. In addition, we acquired a new facility in Tianjin, China to support the growth of conductive carbons for battery materials, and the first phase of upgrades is scheduled to come online in fiscal year 2024. We also completed the first phase of a carbon nanotube dispersion capacity expansion at our Zhuhai China facility which added 25% to the capacity in fiscal year 2022. We expect to complete the next phase by the end of calendar year 2023. During fiscal year 2022, we also began phase one of a plan to double capacity at our inkjet manufacturing facility, which is set to commission in mid 2023, with the remaining capacity addition expected to be completed by 2025. This capacity will enable our inkjet product line to meet the growing demand of digital printing in commercial and packaging applications. We are excited about the high growth potential of battery materials and inkjet for packaging and are confident in our strong operating cash flow to fund these expansions. Now turning to ESG. Cabot has long been a leader in sustainability and been recognized by external parties for excellence. Fiscal year 2022 represented another year of important progress in our sustainability journey. We were again recognized by Newsweek as one of America's most responsible companies and by Investors Business Daily as one of the 100 best ESG companies, placing in the top three in the chemicals category. We also earned the top rating of platinum from EcoVedas for the third consecutive year, which places us in the top 1% of the basic chemical space. The world needs innovative chemistry to address many of the most challenging climate goals, and Cabot's materials are playing a critical role in applications ranging from lithium-ion batteries for electric vehicles to performance additives that enable lightweighting of cars and novel E2C solutions, which again earned a place on European Rubber Journal's list of top 10 elastomers for sustainability. While supporting our customer sustainability goals is central to our Creating for Tomorrow strategy, we also strive to reduce the impact on our own manufacturing footprint. To this end, in 2022, we announced our ambition to achieve net zero emissions globally by 2050. This aspiration requires a long-term strategic view of our business and a multifaceted technical approach. Our 2021 sustainability report further highlights our plans and progress in these areas. As a company, we believe that long-term success requires sustainability to be integrated into strategy. Our progress in fiscal year 2022 clearly demonstrates our commitment to sustainability leadership, and we intend to build on this success moving forward. I will now move on to an update on battery materials. Battery materials results continue to outpace the market. In fiscal 2022, volumes grew 58%, revenue increased 74% to $132 million, and EBITDA grew 81% in the year to $29 million. We continue to build commercial momentum and are seeing strong demand for our conductive carbon additives from the world's largest battery manufacturers. We have built a deep technical understanding of this application and are recognized by customers for our broad product offering in the space of conductive carbon additives. Gavit offers the broadest range of conductive carbon additives, including conductive carbons, carbon nanotubes, carbon nanostructures, and blends of these materials to optimize performance. In addition to our strong product offering, Cabot's value proposition is supported by our unmatched global network of manufacturing plants, regional research and development labs, and commercial and technical experts that can support customers in all major regions where battery production is rapidly growing. We are currently selling to six of the top eight global manufacturers of batteries, which represents approximately 90% of the market. and have active development programs with all of the top eight players. The growth of battery materials is underpinned by strategic capacity additions, which are critical to meet our customers' volume ramp-up requirements. As discussed earlier, we're on track to meet our goal of tripling battery materials capacity by 2024. Looking ahead to 2023, we expect commercial momentum to continue as sales to current customers are forecasted to grow, and we were recently qualified in two new platforms with top EV lithium-ion battery manufacturers with sales ramping in 2023. We are also in final stages of qualification with several automotive OEMs that are building battery capacity. The automotive OEMs will be critical for the long-term growth of battery materials, And I am pleased to announce that Cabot has signed a multi-year agreement with an American multinational automotive company and has received the first order to supply conductive carbons for EV batteries. Based on our current outlook, we expect EBITDA for fiscal year 2023 to be in the range of $45 to $50 million. The midpoint of this range equates to a 64% EBITDA growth year over year. I'll now turn the call over to Erica to discuss the financial results of the quarter in more detail. Erica?