Cabot Corporation

to withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to Robert Riss, Vice President, Investor Relations and Corporate Planning. Please go ahead, sir.

Thank you, Michelle. 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 first quarter of fiscal 2026, 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 this call. During this conference call, we will make forward-looking statements about our expected and future operational and financial performance. Each forward-looking statement is subject to the 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 ending September 30, 2025, and in subsequent filings we make with the SEC, all of which are available on the investor relations section of the 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 measure presented should not be considered to be an alternative to financial measure required by GAAP. Any non-GAAP financial measure 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 relations section of our website. I will now turn the call over to Sean, who will discuss the first quarter highlights, followed by several company and business updates. Erica will review the corporate financial details and the business segment results for the first quarter. Following this, Sean will provide an update to our 2026 outlook, discuss market demand drivers, provide some closing comments, and then open the floor to questions. Sean?

Thank you, Rob. Good morning, ladies and gentlemen, and welcome to our call today. In the first quarter, we continue to execute at a high level in a challenging economic environment, delivering adjusted earnings per share of $1.53 in the quarter. EBIT and the reinforcement materials segment declined by 22% compared to the first quarter of fiscal 2025 in what remains a challenging demand environment. This decline was driven primarily by lower volumes in the Americas and Asia Pacific. Even in the performance chemical segment increased by 7% compared to the first quarter of fiscal 2025 on a more favorable product mix and continued momentum in our battery materials product line. Later in the presentation I'll spend more time highlighting the strong performance and momentum we see in this growth vector, including the exciting announcement of our multi-year agreement with Powerco. Operating cash flow was strong in the quarter, which allows us to invest to sustain our high-quality asset base and gives us the flexibility to invest in high-confidence growth projects while returning significant levels of cash to shareholders. As we indicated in our fourth quarter fiscal 2025 call, the global demand environment, particularly in the reinforcement materials segment, remains challenging. Tire production levels have been depressed and are lagging growth and miles driven as inflation has likely caused the delay in the replacement cycle and a trade down effect at the lower end of the market. In the western geographies of the Americas and Europe, we have seen several years of tire production declines, which has impacted carbon black utilization rates. Tire imports from Asia continue to take share from domestically produced tires, And while Western countries are taking increasingly aggressive actions to address unfair trade practices, we have yet to see tariffs or other trade measures result in a meaningful decline in the flow of imported tires. In the United States, imports from Asia have declined sequentially in the last few months, but remain up approximately 4% year over year. In Brazil, Tariffs have helped slow the flow of imported tires, particularly from China, resulting in a 4% year-over-year decline in 2025 of passenger car tire imports. In Europe, tire imports continue to be at elevated levels as few protection measures have been implemented to date. The tire industry currently has an anti-dumping petition under review with a determination scheduled for June of 2026. It is against this backdrop that we conducted our annual negotiations and reinforcing materials for our calendar year 2026 supply agreements. As we communicated in November, these negotiations were challenging and took longer to conclude. As you know, our entire agreements are heavily concentrated in the Americas and Europe, as Asia Pacific is largely a spot market. The level of tire imports from Asia into the western regions contributed to a reduction in local tire production, leading to a decline in local carbon black capacity utilization in a more intense competitive environment. In the Americas, we faced pricing pressure as carbon black industry utilization rates dipped below 80%. In Europe, the challenges were even more pronounced with both pricing and volumes coming under pressure as tire imports increased 8% year-to-date November 2025. Pricing declined across Western regions, and in defending our pricing levels, we lost volume in Europe. Pricing impacts varied by region, but were generally in the range of 7% to 9% decline as compared to 2025 levels, reflecting the competitive pressures in the market. Across all regions, we continue to price our products based on our value proposition of reliable in-region supply, quality, sustainability, and innovation. However, the competitive dynamics negatively impacted the outcome of the negotiations. As we look forward, the picture on regional carbon block utilizations is a dynamic one. There are some recent signals that trade protection measures may be starting to have an impact on tire imports in the Americas. And we do see the global tire majors actively investing to reinvigorate and defend their tier two tire brands. Furthermore, there is an expectation embedded in global data's tire production forecast for 2026 for growth in western geographies as demand recovers from depressed levels. While these factors would be supportive of an improving regional utilization picture for our reinforced materials segment, We are taking a series of actions to reinforce our leadership and to provide a foundation for sustained strong margins and cash generation. In fiscal year 2025, we delivered $50 million of cost savings, and we expect to maintain these benefits in fiscal 2026. While we have new growth assets coming online that we anticipate will increase costs in fiscal year 2026, we expect these new assets will drive bottom line profitability. We also are focused on additional programs in fiscal 2026 that are targeted to reduce existing costs by another $30 million. These programs include procurement savings, headcount reductions and reinforcement materials, and benefits from accelerating technology deployment for improved yield and manufacturing efficiencies that we expect will be rolled out during fiscal 2026 and into fiscal 2027. In addition to cost actions, we have reduced our capital expenditures for the full year to align with the current market environment. We are tensioning this spend while continuing to maintain our assets and invest in attractive growth opportunities to sustain strategic momentum. We expect our new CapEx range to be approximately $60 million lower at the midpoint compared to 2025 actuals. which would support robust free cash flow generation, enabling us to sustain a high level of cash return to shareholders through dividends and share repurchases. Finally, as a result of the declining carbon black utilization levels in western geographies, we believe it is prudent to look at our network capacity and align it to current demand levels. With this in mind, we are finalizing plans to rationalize carbon black capacity in the Americas and Europe to position us to operate more efficiently, enhance profitability, and maintain flexibility as we navigate this challenging demand environment. We'll communicate any decisions when they are made. Before I hand it over to Erica to discuss our financial performance, I also want to highlight an area of our portfolio that continues to perform well, our battery materials product line. We are a global leader in this space with the broadest range of conductive additives, formulations, and blends and strong participation with leading global customers. Battery Materials represents a significant strategic opportunity for Cabot, and we are excited about the progress we've made and the momentum we see ahead. Our Battery Materials product line delivered another strong quarter with revenue growth of 39% compared to the first quarter of fiscal 2025. This growth reflects the continued momentum in electric vehicle and energy storage applications, as well as the benefits of new customer agreements and capacity expansions that we believe position us well for sustained performance. EBITDA margins in this product line remain attractive, running at 22% on a trailing 12-month basis, which underscores the strength of our technology and disciplined execution of our strategy. Global demand for lithium-ion batteries is expected to accelerate meaningfully over the remainder of the decade, with the sector projected to grow at roughly a 20% compound annual growth rate through 2030. This expected growth is being driven by both the continued rise in electric vehicle adoption on a global basis and also by the rapid rollout of large-scale battery energy storage systems. We believe our Litex and Enermax brands are increasingly well-positioned. These brands bring together our most advanced conductive additives, formulations, and blends, solutions that are enabling superior battery performance in both EV applications and battery ESS installations. A critical element of our battery materials strategy is to establish incumbency in the western geographies, as gigafactories are built there. Last month, we signed a multi-year agreement with Powerco, and I want to take a moment to highlight why we believe this is such an important milestone for our battery materials product line. Powerco is a subsidiary of Volkswagen Group, the second largest auto producer globally, with a broad and deep lineup of electric vehicles. VW has made clear its strategic intent to produce a substantial portion of its own batteries through the build out of several gigafactories, and this agreement positions Cabot squarely at the center of that strategy. The agreement represents the first step in what we expect will be a multi-site, multi-year expansion of Powerco's battery production footprint. Securing this agreement not only reinforces our leadership position in conductive additives, formulations, and blends for lithium ion battery applications, but it also creates a strong foundation for growth as Powerco scales its operations. We are excited about the opportunity to grow alongside an industry leader and deepen our role as a trusted partner in the global EV battery value chain. Over time, we expect this agreement to be a material contributor to profit growth in our battery materials product line. It underscores the strength of our technology and the confidence our customers have in Cabot as a leader in this space. As I mentioned, one area that is helping to fuel the strong growth in our battery and materials product line is the rapidly growing battery energy storage systems application. These systems play a critical role in enabling clean, reliable, and flexible power for the energy grid, renewable energy sources, and the fast-growing network of data centers. As demand for uninterrupted power supply accelerates, driven in part by the proliferation of AI-enabled data centers, the demand for battery ESS is expected to grow at a 26% compound annual growth rate through 2030. Cabot is well positioned to capitalize on this growth. Our advanced conductive additives, formulations, and blends are designed to improve cycle life and enhance battery efficiency, delivering the performance that customers in this application require. As we look ahead, we anticipate that battery ESS will be a significant contributor to the long-term growth of our battery materials product line. We expect the combination of this rapidly expanding sector and the larger battery electric vehicle market to create a powerful growth engine for Cabot. With strong fundamentals, increasing demand for energy storage, and Cabot's differentiated technology, we believe we are well positioned to create a high-growth business that can drive long-term shareholder value creation. I'll now turn the call over to Erica to discuss the financial and performance results of the quarter in more detail. Erica?