Cabot (NYSE:CBT) reported second-quarter fiscal 2026 results highlighting what executives described as strong execution amid a “challenging and very dynamic environment,” including heightened geopolitical uncertainty and rising energy and transportation costs. The company delivered adjusted earnings per share of $1.61, and management reaffirmed its full-year adjusted EPS guidance range of $6.00 to $6.50.
Quarterly performance: Reinforcement down, Performance Chemicals up
CEO and President Sean Keohane said the company’s “global footprint and highly developed operating platform” helped it respond quickly to shifting customer needs while implementing countermeasures to protect profitability as costs rose.
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In the Reinforcement Materials segment, Cabot posted EBIT of $93 million, down 29% year over year and “in line with our expectations,” Keohane said. He attributed the decline to lower gross profit per ton driven by calendar year 2026 customer agreement outcomes and increased competitive intensity in Asia Pacific, which more than offset a 3% increase in volumes.
Executive Vice President and CFO Erica McLaughlin provided additional detail, saying volume increases were seen in all regions, including 5% in Asia, 3% in Europe, and 1% in the Americas.
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Performance Chemicals delivered EBIT of $59 million, up 18% from the prior-year quarter. Keohane said results were supported by momentum in battery materials and specialty carbons, along with improved product mix and optimization efforts. McLaughlin said Performance Chemicals benefited from higher gross profit per ton driven mainly by favorable mix and optimization, with volumes growing year over year in both battery materials and specialty carbons.
Cash flow, capital returns, and dividend increase
Cabot generated $77 million in cash from operations during the quarter, and McLaughlin said discretionary free cash flow was $63 million. The company returned $73 million to shareholders through dividends ($24 million) and share repurchases ($49 million).
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Keohane noted Cabot recently announced a 5% increase in its quarterly dividend. On an annualized basis, the new dividend rate will be $1.89 per share, up from $1.80 previously, which he said aligns with the company’s “balanced capital allocation framework.”
On the balance sheet, McLaughlin said Cabot ended the quarter with $252 million in cash and approximately $1.3 billion of liquidity. Debt was $1.3 billion, and net debt to EBITDA was 1.5x as of March 31. She also said the operating tax rate was 28% in the quarter, and the company continues to expect fiscal 2026’s operating tax rate to be 27% to 29%.
Battery materials growth and data center demand themes
Keohane emphasized battery materials as a strategic growth driver, describing Cabot’s portfolio of conductive additives, formulations, and blends, as well as related offerings such as fumed metal oxide products used in cathode and separator coatings and aerogel for thermal management.
He said battery materials delivered 43% revenue growth year over year in the quarter, driven by continued growth in China and Europe, with trailing 12-month EBITDA margins of approximately 24%. Keohane added that the business is “scaling meaningfully,” and Cabot expects to generate approximately $40 million of EBITDA in fiscal 2026 from the battery materials product line.
Keohane also pointed to data centers as a strategic focus area, citing the role of battery energy storage systems (BESS) in providing long-duration storage, power stabilization, and uninterruptible power. He said Cabot’s battery materials portfolio supports performance requirements in these energy storage applications, and that the broader Performance Chemicals portfolio also participates in data center-related infrastructure applications, including power distribution cables, thermal management systems, adhesives and sealants, and bonding paste for wind turbines.
Cost actions, capex reduction, and capacity rationalization plans
Keohane said Cabot remains on track to deliver $30 million in fiscal 2026 savings from cost reduction programs, including procurement savings, headcount reductions in Reinforcement Materials and supporting functions, and accelerated deployment of process technology to improve yields and manufacturing efficiencies.
He also reiterated that the company reduced its full-year capital expenditures outlook to $200 million to $230 million to align with the current environment. McLaughlin said second-quarter capex was $45 million.
In addition, Cabot announced targeted asset rationalization actions in South America and Europe to better align its manufacturing network with current demand levels and improve long-term competitiveness. Keohane said the company has ceased manufacturing at its Argentina reinforcing carbons facility and intends to cease production at multiple manufacturing lines at its Netherlands carbon black facility, subject to consultation processes.
Keohane said the actions represent approximately 120,000 metric tons of capacity and target an annual run-rate cost benefit of about $22 million, with full delivery targeted by the middle of calendar 2027. He said the expected cash cost to execute the closures is about $24 million over the next two to three fiscal years, and that Cabot anticipates maintaining sales by supplying customers from other locations in its global network.
Outlook reaffirmed amid geopolitical and demand uncertainty
Cabot reaffirmed its full-year adjusted EPS guidance of $6.00 to $6.50. Keohane said the range incorporates assumptions on energy prices and macroeconomic factors, and that despite higher input costs the company expects to maintain stable margins through pricing actions across both segments.
He identified customer demand levels—particularly in the fourth quarter—as a key variable, noting that volumes accelerated in March and remained strong into April, but that Middle East conflict adds uncertainty. Keohane said if demand holds, results would trend toward the upper end of guidance, while softer demand due to supply chain disruptions or more cautious purchasing behavior amid higher energy costs and economic uncertainty could push performance toward the lower end. He added that these dynamics could be more pronounced in regions such as Asia, where customers rely more on the Middle East for raw materials.
McLaughlin said Cabot has limited direct exposure to the Middle East from a revenue and raw material sourcing standpoint, and that its global footprint supports supply chain resilience. She noted Reinforcement Materials contracts include raw material pass-through mechanisms to help protect margins from feedstock volatility, and said the company took proactive pricing actions in Performance Chemicals, including a price increase “of up to 20%” implemented in March in specialty carbons and specialty compounds to offset rising input costs.
During the question-and-answer session, Keohane said consumer demand softness would typically show up faster in Reinforcement Materials than Performance Chemicals due to shorter value chains, and he said Cabot’s pass-through mechanisms in Reinforcement Materials were previously adjusted so “there is no lag” in the contract mechanisms. Keohane also pointed to signs of moderation in tire imports into North America, citing reported data showing imports down 12% in the September-to-February period compared with the prior six months, while noting Europe remains “more mixed” as anti-dumping measures are under review with an expected June determination.
For the third quarter, McLaughlin said the company expects Reinforcement Materials EBIT to improve sequentially by $5 million to $7 million due to higher gross profit per ton from favorable mix and yield improvements, and a full quarter of operations from the acquired asset in Mexico. She said Performance Chemicals EBIT is expected to be relatively consistent sequentially, with stable volumes and gross profit per ton.
About Cabot (NYSE:CBT)
Cabot Corporation is a global specialty chemicals and performance materials company headquartered in Boston, Massachusetts. Founded in 1882 by Godfrey Lowell Cabot, the company has grown into a diversified manufacturer with operations across North America, Europe, Asia and Latin America. Cabot serves a wide range of end markets, including automotive, industrial, energy, and consumer products, supplying essential ingredients that enhance performance, durability and functionality.
The company operates two primary segments: Reinforcement Materials and Performance Materials.
The article “Cabot Q2 Earnings Call Highlights” was originally published by MarketBeat.
