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    CBT
    Earnings call· Mar 2026(Q2 FY26)

    CABOT Q2 FY26 earnings call CBT

    May 6, 2026 Source

    Executive summary

    Cabot Q2 FY26 — Strong Execution and Strategic Actions Amidst Dynamic Environment

    Cabot Corporation demonstrated strong execution in Q2 FY26, navigating a dynamic environment marked by geopolitical uncertainty and rising input costs. The company reaffirmed its full-year adjusted EPS guidance, supported by robust performance in Performance Chemicals, particularly Battery Materials, and proactive strategic actions including network optimization and cost reduction initiatives. Management remains focused on long-term growth and shareholder returns through a balanced capital allocation framework.

    Highlights

    5

    • Delivered adjusted earnings per share of $1.61, demonstrating strong execution.

    • Performance Chemicals segment EBIT increased 18% year-over-year to $59 million.

    • Battery Materials product line achieved 43% revenue growth year-over-year.

    • Generated solid operating cash flow of $77 million and discretionary free cash flow of $63 million.

    • Announced a 5% increase in the quarterly dividend, raising the annualized rate to $1.89 per share.

    Concerns

    4

    • Reinforcement Materials segment EBIT decreased 29% year-over-year to $93 million.

    • Lower gross profit per ton in Reinforcement Materials due to calendar year 2026 customer agreement outcomes and increased competitive intensity in Asia Pacific.

    • Geopolitical uncertainty from the Iran conflict and rapidly rising energy and transportation costs impacted the quarter.

    • Potential for softening demand in Q4 FY26, particularly in Asia, due to Middle East conflict and higher energy costs.

    Guidance & targets

    6
    CategoryTargetConfidence
    Adjusted Earnings Per Share
    $6.00 to $6.50 per share
    high materiality
    Medium
    Reinforcement Materials Segment EBIT
    $5 million to $7 million sequential improvement
    medium materiality
    High
    Performance Chemicals Segment EBIT
    Relatively consistent sequentially
    medium materiality
    High
    Capital Expenditures
    $200 million to $230 million
    medium materiality
    High
    Operating Tax Rate
    27% to 29%
    low materiality
    High
    Battery Materials EBITDA
    Approximately $40 million
    high materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Reinforcement Materials
    EBIT decreased primarily due to lower gross profit per ton from calendar year 2026 customer agreement outcomes and increased competitive intensity in Asia. This more than offset a 3% increase in volumes year-over-year across all three regions. Q3 FY26 EBIT is expected to improve sequentially by $5 million to $7 million due to favorable product mix, yield improvements, and a full quarter of operations from the acquired Mexico asset.
    Volumes: Up 3% YoYAsia Volumes: Up 5% YoYEurope Volumes: Up 3% YoYAmericas Volumes: Up 1% YoY
    		—-29%—$93 million EBIT
    Performance Chemicals
    EBIT increased due to higher gross profit per ton, primarily from a favorable product mix and optimization efforts. Volume growth was observed in both Battery Materials and Specialty Carbons product lines. Q3 FY26 EBIT is expected to be relatively consistent sequentially, with stable volumes and gross profit per ton.
    Battery Materials Volume: Grew YoYSpecialty Carbons Volume: Grew YoY
    		—+18%—$59 million EBIT

    Operational metrics

    16
    Adjusted Earnings Per Share
    $1.61down 15% YoY from $1.90
    Q2 FY26

    Compared to $1.90 in Q2 FY25, driven by lower Reinforcement Materials results partially offset by Performance Chemicals growth.

    Cash Balance
    $252 million
    as of March 31

    Strong liquidity position.

    Liquidity Position
    $1.3 billion
    as of March 31

    Remains strong, providing significant capacity.

    Capital Expenditures
    $45 million
    Q2 FY26

    Part of the full fiscal year guidance of $200 million to $230 million.

    Dividends Paid
    $24 million
    Q2 FY26

    Part of total $73 million returned to shareholders.

    Share Repurchases
    $49 million
    Q2 FY26

    Part of total $73 million returned to shareholders.

    Total Returned to Shareholders
    $73 million
    Q2 FY26

    Combination of dividends and share repurchases.

    Debt Balance
    $1.3 billion
    as of March 31

    Supports an investment-grade balance sheet.

    Net Debt-to-EBITDA Ratio
    1.5x
    as of March 31

    Provides significant flexibility.

    Operating Tax Rate
    28%
    Q2 FY26

    Consistent with full fiscal year guidance of 27% to 29%.

    Battery Materials Revenue Growth
    43%YoY
    Q2 FY26

    Driven by continued growth in China and Europe.

    Battery Materials Trailing 12-month EBITDA Margin
    Approximately 24%
    Trailing 12-month

    Reflective of the high quality of this business.

    Share Repurchases Year-to-Date
    $100 million
    Year-to-date

    Executed as part of capital allocation framework.

    Annualized Quarterly Dividend Rate
    $1.89 per shareup 5% from $1.80 per share
    Annualized

    Increased from $1.80 per share previously, consistent with balanced capital allocation.

    North America Tire Imports
    Down 12%vs. prior 6 months
    Last 6 months

    Reported data from September to February, indicating a potential positive sign of moderation.

    Specialty Carbons and Specialty Compounds Price Increase
    Up to 20%
    March

    Implemented to offset rising input costs and maintain margins.

    Industry KPIs

    2
    MetricValueDetails
    Volume vs price splitReinforcement Materials volumes up 3% YoY; Performance Chemicals volumes grew YoY%
    Productivity cost savings program$30 millionUSD

    Deals & partnerships

    2
    PowerCoMulti-year agreement for Battery MaterialsMulti-year

    Agreement announced last quarter, supporting customers in Western geographies as new gigafactory capacity comes online.

    Acquired asset in MexicoAcquisition of a manufacturing asset

    Began production and took ownership of the asset during the quarter. Expect a full quarter of operations in Q3 FY26.

    Capital programs

    2
    Cost Reduction Programunderway$30 million

    Benefit: Savings

    Executing programs targeting $30 million in savings during fiscal '26, including procurement savings, headcount reductions, and accelerated deployment of process technology to improve yield and manufacturing efficiencies. On track to hit this target.

    Capacity Rationalization (Argentina and Netherlands)announced

    Benefit: 120,000 metric tons capacity reduction; $22 million annual run rate cost benefit

    Ceased manufacturing operations at Argentina reinforcing carbons facility and intend to cease production at multiple manufacturing lines at Netherlands carbon black facility. Expected cash cost to execute these closures is approximately $24 million over the next 2 to 3 fiscal years.

    Risks & headwinds

    4
    Geopolitical uncertainty and rising input costsQ2 FY26 and ongoing

    Rapidly rising energy and transportation costs

    Mitigation: Global footprint for supply chain resilience; raw material pass-through mechanisms in Reinforcement Materials; proactive pricing actions in Performance Chemicals (up to 20% increase).

    Lower gross profit per ton in Reinforcement MaterialsQ2 FY26

    Down from prior year

    Mitigation: Favorable product mix, yield improvements from efficiency programs, and full quarter operations from acquired Mexico asset expected to drive sequential EBIT improvement in Q3 FY26.

    Potential softening in customer demandQ4 FY26

    Lower volumes and performance trending towards lower end of guidance range

    Mitigation: Monitoring closely; guidance range contemplates various scenarios; capacity rationalization actions to align production footprint with demand.

    Trade flows and European antidumping measuresDetermination expected June

    Antidumping measures under review in Europe

    Mitigation: Monitoring and managing the situation; capacity rationalization decisions influenced by long-term trends.

    What to watch in Q3 FY26

    5

    Reinforcement Materials EBIT

    Q3 FY26
    Current$93M (Q2 FY26)
    Target$5M-$7M sequential improvement

    Why it matters

    Indicates segment recovery and the impact of favorable product mix, yield improvements, and the acquired Mexico asset.

    Looking to the third quarter of fiscal 2026, we expect higher sequential EBIT from higher gross profit per ton from a favorable product mix and yield improvements from efficiency programs. We also expect a full quarter of operations with our acquired asset in Mexico. We anticipate the sequential EBIT improvement to be in the range of $5 million to $7 million.

    Q&A highlights

    6

    When would Cabot start seeing a softening in consumer demand if it occurs, and what is the visibility like?

    Sean Keohane explained that consumer demand softening would manifest differently across segments. Performance Chemicals would likely see a lag of a quarter or two due to longer value chains, while Reinforcement Materials, with shallower value chains, would see impacts faster, generally within a quarter.

    “I would say in Reinforcement Materials, weakness would tend to -- in consumer activity would tend to manifest a little bit faster. The value chains are a little more shallow. And so you would start to see that a little bit faster, generally maybe sort of within a quarter.”

    asked by Edlain Rodriguez · answered by Sean Keohane

    2 min read5 chapters

    Detailed Narrative

    01

    Battery Materials Growth and Strategic Importance

    The Battery Materials product line delivered another strong quarter with 43% year-over-year revenue growth, driven by continued expansion in China and Europe. This segment is a key strategic growth driver, leveraging a differentiated portfolio of conductive additives, formulations, and blends. Management expects this business to scale meaningfully, projecting approximately $40 million in EBITDA for fiscal year 2026, supported by robust demand from battery energy storage systems and EV adoption.

    02

    Role in Data Center Infrastructure

    Cabot's materials are increasingly supporting the build-out of data center infrastructure, particularly with the acceleration of AI-driven demand. The company's battery materials are critical for long-duration storage, power stabilization, and uninterruptible power in Battery Energy Storage Systems (BESS). Beyond battery materials, the broader Performance Chemicals portfolio contributes to power distribution cables, thermal management systems, adhesives, sealants, and bonding paste for wind turbines, positioning Cabot across the power generation and storage value chain.

    03

    Network Optimization and Cost Reduction Initiatives

    Cabot is implementing proactive countermeasures to reinforce its leadership and sustain margins, including programs targeting $30 million in cost savings during fiscal 2026. These savings stem from procurement, headcount reductions, and process technology improvements. Additionally, the company announced capacity rationalization actions, ceasing manufacturing in Argentina and intending to cease production at multiple lines in the Netherlands, representing 120,000 metric tons of capacity. These actions are expected to yield an annual run rate cost benefit of $22 million by mid-calendar 2027.

    04

    Geopolitical and Input Cost Management

    The company has limited direct exposure to the Middle East and utilizes its global asset footprint to ensure supply chain resilience. Reinforcement Materials contracts include raw material pass-through mechanisms to protect margins from feedstock cost volatility. In Performance Chemicals, proactive pricing actions, including a price increase of up to 20% in Specialty Carbons and Specialty Compounds, were implemented in March to offset rising input costs, demonstrating dynamic margin management.

    05

    Balanced Capital Allocation and Financial Strength

    Cabot maintains a balanced and disciplined capital allocation framework, prioritizing capital expenditures for asset maintenance and high-confidence growth projects, while also returning capital to shareholders. The company executed $100 million in share repurchases year-to-date and increased its dividend by 5%. With an investment-grade balance sheet, $1.3 billion of liquidity, and a net debt-to-EBITDA ratio of 1.5x, Cabot possesses significant flexibility to fund strategic growth and shareholder returns.

    AI-generated summary of the company’s earnings call. Not investment advice.