Cabot Corporation 2026 Q3 Earnings Call

Thank you, Desmond. Good morning. I'd like to welcome you to Cabot Corporation's earnings teleconference. With me today are Sean Keohane, CEO and President, and Erica McLaughlin, Executive Vice President and CFO. Last night, we released results for our third 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 relation 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 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. 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 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 measure presented should not be considered to be an alternative to a 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 section on our website.

I will now turn the call over to Sean, who will discuss the third quarter highlights, followed by several company and business updates. Erica will review the third quarter financial highlights and the business segment results. Following this, Sean will provide closing comments on our fiscal 2026 outlook and then open the floor to questions.

Sean? Thank you, Rob. Good morning, ladies and gentlemen, and welcome to our call today.

Before we begin our review of the quarter, I'd like to briefly address the leadership transition announced last week. After nearly 25 years with Cabot, including the last 10 years as president and CEO, I have decided to retire effective at the end of the fiscal year on September 30, 2026. To support a smooth transition, I will continue in an advisory capacity through the end of the calendar year. My decision to retire reflects a thoughtful and well-planned succession process in partnership with our board of directors. Leading Cabot has been the privilege of my professional career, and I am incredibly proud of what we have accomplished.

During my tenure as president and CEO, we have strengthened our portfolio, significantly increased our business segment profitability, incubated and scaled our Battery Materials product line into a leading position, executed a consistent, disciplined approach to capital allocation, and focused relentlessly on creating value for our shareholders. While my decision is naturally based on personal considerations, I also believe it comes at an appropriate time for the company. Cabot is operating from a position of strength. We have a clear strategy, a strong balance sheet, an experienced leadership team, and significant opportunities ahead to grow. I am thrilled by the board's appointment of Erica McLaughlin as Cabot's next president and CEO. Having worked in partnership with Erica for many years, including during her most recent tenure as chief financial officer and head of corporate strategy, I have seen firsthand her ability to drive results, shape strategy, and lead through complexity.

Many of you already know Erica well through her role as CFO and her previous experience leading investor relations. Prior to her appointment as CFO, Erica was vice president of business operations for our Reinforcement Materials segment and general manager of our tire business. Erica understands our businesses and how they operate and has been my partner in driving a culture of disciplined execution. She has been deeply involved in shaping and executing our strategy, and she brings a strong track record of operational, financial, and strategic leadership. I'm confident she is the right leader to guide Cabot through its next phase of growth and value creation. With that, I'll turn it over to Erica.

Thank you, Sean. I'm honored by the board's confidence and excited to lead Cabot into its next chapter. Having spent nearly 25 years with the company, including most recently serving as CFO and head of corporate strategy, I've had the privilege of helping to shape many of the strategic priorities that are driving our businesses today. As Cabot's president and CEO, I will remain focused on continuing to deliver long-term shareholder value. I believe that Cabot is exceptionally well-positioned as we enter this next chapter for the company. We have strong businesses with leading market positions, a healthy balance sheet, a proven operating model, and an experienced leadership team. Our priorities remain unchanged: continue delivering strong performance in our core businesses, advance our growth initiatives, invest in innovation, maintain disciplined capital allocation, and pursue opportunities that enhance long-term value creation.

As part of this transition, we have initiated a search for our next CFO to identify the best leader to support the company's continued growth and execution, and who will continue to build upon Cabot's strong track record of financial discipline. We are also fortunate to have a strong and experienced finance and accounting organization with deep expertise, and I am confident in the team's ability to partner closely with me and the executive leadership team throughout the transition. I also want to thank Sean for his leadership, partnership, and unwavering commitment to the company. His leadership has helped shape the company we are today, and I'm grateful to have had the opportunity to work alongside him through much of the journey. As we look ahead, I'm excited about the opportunities in front of us and confident in our ability to build on the strong foundation that Sean has established.

I look forward to leading Cabot through this next chapter and continuing to create long-term value for our shareholders. With that, I'll turn it back to Sean to discuss the third quarter results.

Thanks, Erica. I am pleased with our third quarter performance as we continue to execute well in a market environment that remains dynamic, delivering adjusted earnings per share of $1.67, an increase of 4% sequentially. Our results reflect solid execution by our team. Our Reinforcement Materials segment delivered EBIT of $97 million in the quarter, despite challenging market conditions and pricing headwinds from our 2026 annual tire customer agreements. In Performance Chemicals, we delivered another strong quarter with segment EBIT of $68 million, up 19% year-over-year. These results demonstrate the strength of the business and the effectiveness of the actions we have taken to drive profitable growth across the portfolio. Despite the impact of sharply higher oil on our working capital balances, cash generation was robust in the quarter as we generated $75 million of cash flow from operations.

Consistent with our balanced capital allocation framework, we returned $24 million to shareholders through dividends and invested $38 million in capital expenditures, including projects to advance strategic growth opportunities. During the quarter, we also received an important sustainability recognition, having earned a platinum sustainability rating from EcoVadis for the sixth consecutive year. EcoVadis is the world's largest and most trusted provider of business sustainability ratings, assessing more than 150,000 companies globally. Achieving platinum status, the highest level of recognition, places Cabot among the top 1% of companies in the basic chemicals manufacturing category. This recognition reflects our continued commitment to transparency and responsible business practices while providing our customers and other stakeholders with an independent validation and clear visibility into our sustainability performance.

While the operating environment remains challenging with ongoing geopolitical tensions in the Middle East, continued volatility in energy and raw material costs, and mixed demand conditions across many of our end markets, our teams have remained focused on disciplined execution. We have continued to adapt to changing market conditions, support our customers, and advance the strategic initiatives that we believe are important to our long-term growth. Progress in areas such as Battery Materials, network optimization, and cost improvement initiatives highlight our ability to remain focused on what we can control while navigating an environment that remains dynamic. Overall, I am encouraged by our performance in the quarter and remain confident in our ability to execute through the current environment while continuing to strengthen Cabot's competitive position for the future. As I have previously discussed, Battery Materials is an important part of Cabot's growth strategy, fueled by strong underlying market momentum.