Cabot Corporation

Good day, everyone, and thank you for standing by. Welcome to the second quarter 2024 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 1-1 on your telephone. You will then hear a message advising your hand is raised. To withdraw the question, simply press star 1-1 again. We ask that you please place your questions to one and one follow-up. Please be advised that today's conference is being recorded. I would now like to hand the conference over to the Vice President, Treasurer and Investor Relations, Steve Delahunt. Please go ahead.

Thanks, Carmen. 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, Executive Vice President and CFO. Last night, we released results for our second quarter of fiscal year 2024, 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 in the press release we issued last night and in our 10-K for the fiscal year ended September 30, 2023, and in subsequent filings we make with the SEC. In order to provide greater transparency regarding our operating performance, we refer to certain non-GAAP financial measures that involve adjustments to GAAP results. The 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 second quarter highlights, followed by an update on our capital allocation framework, and then discuss the company's efforts in sustainable product innovation. Erica will review the second quarter financial highlights and the business segment results. Following this, Sean will provide an update on our 2024 outlook and then open the floor to questions.

Sean? Thank you, Steve. Good morning, ladies and gentlemen, and welcome to our call today. I'm very pleased with results in the second quarter and the tremendous efforts of the Cabot team to execute against what is still a challenging macroeconomic backdrop. In the second quarter, we delivered adjusted earnings per share of $1.78 up 34% year over year, driven by growth in both segments. Reinforcement materials delivered very strong results in the quarter, with EBIT up 22% year over year to $149 million. The outlook for this business remains strong, driven by our leading global market position, the long-term resilience of the replacement tire market, favorable regional supply and demand dynamics, and outstanding execution across the segment. EBIT in performance chemicals was up 11% compared to the second quarter of fiscal 2023, as demand in the segment appears to have generally stabilized and the effects of destocking have ended. While we did see some early signs of improvement in demand, particularly in our automotive, infrastructure, and semiconductor applications, We remain cautious if these demand trends will further strengthen through the rest of the year. Operating cash flow was strong in the quarter at $176 million, which supported the return of $47 million to shareholders through a combination of share repurchases and dividends. Given the strength of our underlying business fundamentals and conviction in the long-term cash flow generation of our portfolio, Yesterday, we announced an 8% increase in our quarterly dividend. Cabot has a long history of growing the dividend, and it would be our expectation to continue increasing the dividend over time as the earnings and cash flow of our business grow. The Cabot portfolio has strong cash flow characteristics which enable a balanced capital allocation strategy focused on funding our high-confidence, high-return growth projects and returning cash to shareholders. This balance of profit growth and cash return can be achieved while maintaining our strong investment grade balance sheet. Despite a weak macroeconomic environment in fiscal year 2023 and a year marked by sharp inventory destocking, we generated very strong operating cash flow of $595 million. And year-to-date in fiscal 2024, operating cash flow has totaled $281 million. Cash generation is expected to remain strong, and we intend to return a robust amount of cash to shareholders through dividends and share repurchases. We've maintained a continuous and growing dividend since 1968, which is the year the company went public, and that commitment remains a core element of our capital allocation strategy. Since fiscal 2015, our dividend has grown at a compound annual growth rate of 7%, including our announcement last night of an 8% dividend increase. We remain committed to the dividend and expect to maintain an industry competitive yield and payout ratio over time. We also believe that share repurchases are an attractive use of cash. Since 2015, with the exception of the COVID impact in fiscal 2021, we have repurchased shares at a minimum to offset dilution from incentive compensation plans, and in most years have been opportunistic with repurchases in excess of dilution. Year to date, we have repurchased $57 million, and since 2015, we have repurchased approximately $700 million of shares and reduced our share count by 9 million shares, or 14% of our outstanding shares. We expect to continue being opportunistic given our strong cash flow, the structural improvements in our reinforcement materials business, and the long-term growth potential of our portfolio driven by sustainability tailwinds. Cabot has long been recognized as a leader in sustainability, consistently acknowledged by external parties for excellence in this area. While operating responsibly has been deeply embedded in our practices for decades, we also have a rich opportunity pipeline for growth driven by sustainability tailwinds. I would like to highlight a few recent developments that showcase the sustainability-driven growth potential of our portfolio. Recently, our E2C product line earned the Award for Innovation and Excellence at the 2024 Tire Technology Expo. the premier tire industry technology showcase. Specifically, we were recognized in the chemicals and compounding innovation of the year category for our engineered elastomer composites platform. Our E2C DX9660 elastomer composite produced through a proprietary and patented mixing process enhances tire performance by increasing abrasion resistance by approximately 30% without compromising rolling resistance when compared to conventional rubber compounds. This E2C platform has been validated by global customers and our products are being sold in the tire market. Additionally, our E2C platform offers an array of products tailored to meet the needs of tire manufacturers and industrial rubber applications. combining performance with sustainability benefits. In the quarter, we also launched our new Propel E8 engineered reinforcing carbon black, designed specifically to address the unique challenges of increased weight and torque posed by electric vehicles. The higher weight and torque of EVs drive an increase in tire wear. Propel E8 addresses these issues by delivering low rolling resistance and enhanced tread durability, thereby extending tire life. Finally, Cabot and our commercial partners were recently awarded a $5 million grant by the U.S. Department of Energy under the bipartisan infrastructure law. This research grant is intended to support the development of fuel cells. Fuel cells are particularly critical in the electrification of long-distance transportation due to their ability to manage extended driving ranges and heavier loads, challenges that are difficult to overcome with battery technology. This project will focus on developing an innovative and scalable manufacturing process for producing specialized carbons, which will serve as catalyst supports for fuel cells. Although this initiative is in its early stages, we believe that our collaboration with partners and our collective expertise position us to make substantial contributions to the hydrogen economy, further driving forward the United States leadership in clean energy technologies. These long-term initiatives reflect our deep commitment to innovation and sustainability, demonstrating our proactive role in shaping a more sustainable future across various aspects of the mobility and energy sectors. I'll now turn the call over to Erica to discuss the segment and financial performance in the quarter. Erica?