Q4 2024 Cabot Corp Earnings Call
Good day everyone and thank you for standing by. Welcome to the 4th quarter 2024, Cablet earnings conference call. At this time, all participants are in a listen-only mode.
After this speaker's presentation, there will be a question and unsusession. To participate, you will need to press star one-one on your telephone. You will then hear a message, advising your hand is raised.
To withdraw your questions simply press star one one again. Please, via BIs that today's conference is being recorded. Now we'll pass the call over to the BIs President, Tresher, any best of relations, see if Delahunt, please go ahead.
Speaker Change: Thanks Carmen and good morning. I was like to welcome you to the Cated Corporation for Learning's Teleconference.
CEO and President and Erica McLaughlin, Executive Vice President and CFO.
Speaker Change: Last night we released results for our fourth quarter of fiscal year 2024, copies of which are posted in the Investor Relations section of our website.
Speaker Change: The slide deck that a company just calls also available in the Investor Relations portion of our website and will be available in conjunction with the replay of the call.
Speaker Change: During this conference call, we will make forward-looking statements about our expected future operation of financial performance.
Each forward-looking statement subject to risk-sensitive, that could cause actual results to different materialies from those projected in such statements.
Speaker Change: A dishelling for May, Sean Regarding, each factor appears under the heading for looking statements.
Speaker Change: and the press release we should last night and that our annual report on form 10K for the fiscal year ended September 30, 2023 and in subsequent findings we make with the SEC, all of which are also available on the company's website.
Speaker Change: In order to provide great transparency regarding our operating performance, we refer to certain non-gaps financial measures that have all the adjustments to gap results.
Speaker Change: and he non-gap financial measures presented should not be considered to be an alternative to financial measures required by Gap.
and he non-gap financial measures referenced on this call are reconciled to the most directly call for both gap financial measures in the table at the end of our earnings release issue last night and available in the investor section of our website.
Speaker Change: Also, as we typically do each year, I'd like to remind you that over the next several weeks in connection with the best thing of restricted stock awards, you should under our long term Senate Equity Program. Officers of the company will be selling shares to pay tax and other obligations related to their rewards.
Speaker Change: Hello now to the call over to Sean who will discuss our success against our 2021 and best of day objectives. Follow by our fiscal 2024 highlights, including our cash flow results and capital allocation for the year.
and finally our 2024 Sustainability Highlight. Erica will review the corporate financial details and business segment results for the fourth quarter in fiscal year following this Sean will provide a 2025 outlook and some closing comments and open the floor to questions. Sean?
Sean: Thank you Steve, good morning ladies and gentlemen and welcome to our call today.
Sean: fiscal year 2024 was one mark to determine this accomplishments for our company.
Sean: We concluded our 2021 investor day three year goal period, having achieved and its digital earnings per shared growth KGR of 12%, which represents the top end of our target range of 8 to 12%.
Speaker Change: We also generated $1.2 billion of cumulade discretionary free cash flow over that three-year period. A very strong result compared to our investor-day goal of greater than $1 billion.
Speaker Change: During our investor day in 2021, we launched our creating for tomorrow's strategy.
Speaker Change: This strategy seeks to leverage our global leadership, innovation capabilities and commitment to operational excellence to drive strong growth of earnings and cash flow.
Speaker Change: When we set our three-year targets in December of 2021, we made certain demands and market assumptions based on the environment at that time.
Speaker Change: While many of those key assumptions turned into Headwind since 2021, particularly the end market growth rates and foreign exchange rates, it has an impact that our focus on achieving our corporate objectives.
Speaker Change: Ilamensely proud of the entire cabin team, resilience and agility that demonstrated in navigating a turbulent global economic environment these past three years, always maintaining a focus on supporting our customers and delivering on our commitments.
Speaker Change: In fiscal year 2024, we delivered a just-it earnings per share of $7.6 an increase of 31% year over year, and total segmented of $71 million an increase of 15% year over year.
In our business segments, reinforcement materials even increased 11% year over year to 537 million. Driven by higher volumes and improved pricing and product mix in our 2023 and 2024 customer agreements.
Speaker Change: Performance Chemical segment EBIT increase 31% year over year to 164 million. As we saw our volumes reconnect with underlying demand in the second half of the fiscal year, and a more normalized product mix that drove improved margins.
The Cabot portfolio has robust cash flow characteristics in our performance in fiscal 2024 marked a continuation of those fundamentals.
Speaker Change: In the fiscal year we generated strong operating cash flow of $692 million in discretionary free cash flow of $479 million.
Speaker Change: Our cast-generation power is the source of our shareholder value creation strategy.
Speaker Change: with these strong cash flows. We seek to allocate capital inside a balanced framework, focused on three priorities.
First, ensuring our asset base is well maintained to provide a reliable and sustainable offering to our customers.
Speaker Change: Second, underwriting high confidence growth projects to deliver long term earnings growth.
and Thurme returning capital to shareholders to dividends and share repurchases.
Speaker Change: The strength of our cash flow allows us to execute against these priorities while maintaining our strong investment grade balance sheet.
Speaker Change: In fiscal year 2024, we paid 93 million in dividends, including an 8% increase in our last May, reflecting our confidence in the long-term cash flow outlook for our company.
Speaker Change: We have maintained a continuous and growing dividend since 1968 and we would expect to continue raising the dividend over time as our running scroll.
Speaker Change: We also repurchased 170 million of shares in fiscal year 2024, which combined with dividends total 216,5 million of capital returns to shareholders, representing approximately 55% of discretionary free cash.
Speaker Change: Going forward we feel very good about our cast generation power, balance sheet flexibility, and future growth investment opportunities to continue driving talk to your shareholder returns.
Speaker Change: Now turning to sustainability. Fiscal year 2024 has been a dynamic year progress marked by several key sustainability achievements.
Speaker Change: As we integrate sustainability into our creating for tomorrow's strategy, we think about it in terms of being a responsible operator and through the lens of enabling applications for our customers.
Speaker Change: Ultimately, our investments in this space must generate returns because they drive efficiency in our operations through circularity, our value by our customers and their downstream consumers, or our enabling new sectors of growth.
Speaker Change: In June, we published our 2024 Sustainability Report highlighting our recent performance in advancements toward our 2025 sustainability goals, as well as our vision for enabling the more sustainable future.
Speaker Change: At that time, we had achieved nine of our 14, 20, 25 sustainability goals ahead of schedule, while we continue to progress to target on the remaining goals.
Speaker Change: Among the key milestones, we achieved our goal of exporting 200% of the energy that we import, exemplifying our commitment to circularity by leveraging the waste energy in our manufacturing process to produce co-generation power which is CO2-free and provides a valuable profit stream.
Speaker Change: Our customers continue to seek more circular and sustainable products if they drive their growth strategies and this represents a long-term innovation opportunity for Canada.
Speaker Change: In fiscal year 2024, we introduced several new products made with sustainable materials, including our new universal, circular black master batches designed to deliver reliable performance, quality and consistency across multiple applications.
Speaker Change: We also launched Propel E8 Engineer Reinforce and Carbon Black promoting enhanced efficiency and increased durability for EV and high performance tire formulations.
Speaker Change: Our leadership and sustainability continues to be recognized externally. We again achieve the platinum rating from EcoVadis, marking the fourth consecutive year, and placing us in the top 1% of the base of chemical sector.
Speaker Change: Additionally, our E2C product earned the entire technology international 2024 award for innovation and excellence, highlighting our contributions to a more sustainable tire development.
Speaker Change: And finally, we are proud to have been selected by the U.S. Department of Energy for a grant to support the build-out of the domestic battery chemistry supply chain.
Speaker Change: I'd like to take a few minutes now to elaborate on this DOE grant selection.
Speaker Change: In September, Cabot was selected for a $50 million grant by the U.S. Department of Energy as part of the bipartisan infrastructure law.
Speaker Change: We are now in negotiations to finalize the terms of that award.
Speaker Change: The grant will be used to develop a new US-based manufacturing facility to produce battery-grade, carbon-anotuned, and conductive-added dispersions at commercial scale.
Speaker Change: With our broad portfolio of conductive analysts for the battery industry and our established relationships with the leading battery manufacturers globally. We are well positioned to capitalize on the growth opportunity as key to factories are constructed here in North America.
Speaker Change: This investment will help us scale the production of domestic capacity and accelerate the U.S. battery chemistry value chain.
Speaker Change: We continue to believe that battery materials will be an important growth driver to cabin-surning's over time as the production of batteries by-for-case into a western market and a China market. We look forward to working closely with the Department of Energy and our stakeholders to ensure the success of this important project.
Speaker Change: Over all, we had a very strong year in 2024 and a well-positioned fit of future. I'll now turn the call over to Erica to discuss the financial and performance results of the quarter in more detail. Thanks, Sean.
Erica Mclaughlin: A just city PS in the fourth quarter was $1.80. This performance was 9% of the same quarter last year, driven by higher EBIT in the performance chemical segments and a benefit from a lower tax rate, partially offset by lower EBIT in our reinforcement materials segment.
Speaker Change: Casual from operations was strong at 204 million in the quarter, which included a working capital of decrease of 39 million. The Swiss-Innery Free Casual was 105 million in the quarter.
Speaker Change: We ended the quarter with a cash balance of 223 million and our liquidity position remains strong at approximately 1.4 billion.
Speaker Change: Capital expenditures for the fourth quarter of fiscal 2024 were 92 million.
Speaker Change: Additionally, uses a cash during the fourth quarter, we're $24 million for dividends and $66 million for share repurchases. Our debt balance was 1.1 billion and our net debt to EBITDA remains at 1.2 times.
Speaker Change: The operating tax rate for fiscal year 2024 was 26% as compared to 28% in fiscal 2023. The lower tax rate was driven by a more favorable geographic mix of earnings.
Speaker Change: Impact related to the devaluation in Argentina and differences in withholding taxes on foreign earnings.
Speaker Change: We anticipate our operating tax rate for fiscal 2025 to be in the range of 27% to 29%.
Speaker Change: The expected increase year over year is driven by our outlook related to Argentina and the new OECD global minimum tax implementation, which increases our tax rate in certain lower tax jurisdictions.
Speaker Change: Now moving to reinforcement materials.
Speaker Change: Ebit decreased by $11 million in the fourth quarter compared to the same period last year.
Speaker Change: The decrease was primarily due to lower volumes, a less favorable geographic mix and higher cost. Partially offset by higher pricing and improved product mix in our 2024 calendar year customer agreement.
Speaker Change: The higher costs were driven by the timing of maintenance and other third party spend, as well as higher expense related to incentive compensation as compared to the prior year.
Speaker Change: Global Evolions are down 1% year over year due to a 7% decline in volumes in the Americas, partially offset by 4% growth in Asia Pacific and 3% growth in Europe.
Speaker Change: While in the Americas, we're negatively impacted by the lingering effects of the weather-related events in Mexico and lower production levels that our tire customers in the Americas give in the higher level of tire imports from Asia into the region.
Speaker Change: In the third quarter, we declare force, measure our plant, and ultimately our Mexico, given the drought in the country, which caused customer to shift orders to other carbon-black suppliers.
Speaker Change: This demand shift continues longer than expected and impacted results in the fourth quarter. While this impact was longer than we expected, we believe that customers have returned to their normal, normal purchasing patterns, which is supported by our stronger regional volumes in October.
Speaker Change: Looking to the first quarter of fiscal 2025, we expect a sequential increase in EBIT, primarily due to $10 million of lower cost.
Speaker Change: We expect quarterly sequential volumes to be relatively consistent, as the increase in volumes in Mexico is expected to be largely offset by normal calendar year-end seasonal patterns.
Speaker Change: Now turning to performance chemicals. During the fourth quarter of fiscal 2024, EBIT for this segment increased by $8 million as compared to the same period in the prior year.
Speaker Change: The increase in the fourth quarter was due to higher volumes and a more favorable product mix, partially offset by higher costs.
Speaker Change: volumes were higher by 2% in the quarter compared to the same period in the prior year as resale volumes reconnect to underlying demand drivers as compared to the destocking behavior in the prior year.
Speaker Change: Higher margins for the quarter were driven by improved product mix as the higher volumes were in higher margin applications including electronics and automotive applications.
Speaker Change: Higher costs were largely due to increased level of plant maintenance, higher incentive compensation, and the unfavorable effect of inventory reductions.
Speaker Change: Looking ahead to the first quarter of fiscal 2025, we expect EBIT to remain relatively consistent with the fourth quarter. We expect strong demand in Asia volumes to be largely offset by seasonally lower volumes in the Americas and Europe.
Speaker Change: I will now turn it back to Sean to discuss our 2025 Outlook. Sean. Thanks, Erica.
Sean Regarding: For the past nine years, this management team has driven a consistent strategy focused on strengthening our leading portfolio global businesses
Sean Regarding: investing for advantage growth and applications where we have a right to win and deploying our strong cash flow power within a balanced capital allocation framework with a robust level of cash return to shareholders.
Sean Regarding: Delivering on our commitments is paramount to this management team, and we have accomplished that despite a turbulent global environment.
Sean Regarding: For the years 2016 through 2024, we have grown adjusted EPS at a CAGR of 12% and have increased our level of discretionary free cash flow from approximately $250 million to over $450 million in fiscal 2024.
Sean Regarding: As we look forward, we believe our global scale, broad geographic footprint, innovation capabilities, and foundation of operational excellence will drive continued growth of earnings and cash flow.
Sean Regarding: Overall, we expect fiscal year 2025 adjusted earnings per share to be in the range of $7.40 to $7.80, which represents growth of 5-10% from our 2024 results.
Sean Regarding: We expect continued earnings growth and reinforcement materials and a steady recovery in performance chemicals.
In reinforcement materials, we expect global volume growth and higher unit margins.
Sean Regarding: The segment is also expected to have higher costs from the startup of our final air pollution control project in the U.S. and the commissioning of our new unit in Indonesia.
In performance chemicals, we expect the EBIT run rate we experienced in the second half of fiscal 2024 to continue into fiscal 2025 with year-over-year volume growth in the mid-single digits and steady unit margins.
Sean Regarding: Foreign exchange rates, interest rates, and energy prices can all impact positioning in the range.
Sean Regarding: The midpoint of our range assumes relatively consistent FX rates and interest rates moving in line with current market expectations, and we are assuming the forward curve for oil.
Sean Regarding: Overall, for the company, we would anticipate lower unallocated corporate cost and lower interest expense, which is expected to be offset by lower general unallocated income driven by lower investment income mainly related to the cash we held in Argentina in the first half of 2024.
Sean Regarding: We also have assumed a tax rate to be in the range of 27 to 29 percent, so at the midpoint, it is two points higher than fiscal year 2024.
Sean Regarding: We expect to generate strong cash flow from operations and discretionary free cash flow driven by robust EBITDA to support strategic growth investments and continued return of capital to shareholders.
Sean Regarding: I believe 2025 will be another successful year for Cabot as we pursue advantaged long-term growth with disciplined capital allocation to drive superior shareholder returns.
Sean Regarding: Thank you very much for participating in the call today, and I hope you will all join us on December 4th for our Investor Day. At that session, we will outline the next phase of strategy development for the company, key growth initiatives, as well as our next set of long-term financial targets.
Sean Regarding: I'll now turn the call back over for a question and answer session.
Speaker Change: Thank you so much, and as a reminder, to ask a question, simply press star 11 on your telephone and wait for your name to be announced. To remove yourself, simply press star 11 again. Please stand by for our first question.
Speaker Change: And it comes from the line of John Roberts with Mizzou Hall. Please proceed.
John Roberts: All right, great. Thank you.
John Roberts: The silica business seems like the stronger area in performance chemicals. I assume that's what you were talking about in terms of the mix improvement. Could you talk about if you're seeing any slowdown in semiconductor applications or the automotive applications? Those are two markets that both seem to be decelerating right now.
Speaker Change: Yeah, good morning, John. As we had commented last quarter, we definitely saw a return to more normalized
John Roberts: volumes and and mix in the segment in the back half of.
Speaker Change: 2024. And certainly a piece of that was improvement in the semiconductor application. So where fume silica goes into CMP, as you as you point out. And so we saw a continuation of that certainly into Q4. And I would say it's running at, you know, fairly normal rates right now. I don't think we're seeing any particular signs of
Speaker Change: I would say it's sort of returned back to what we would think would be normalized levels.
Speaker Change: compared to
Speaker Change: You know, compared to what we saw in early 24 and most of 23, where it was very, very, it was very, very weak.
Speaker Change: I think on the on the automotive side, you know, the outlook for.
Speaker Change: calendar year 2025 is for auto production to grow.
Speaker Change: I think a touch lower than 2% is sort of the latest outlook. That is a downward revision, I think from where IHS was before, they were maybe a point higher than that.
Speaker Change: but that's the expectation that we would be building around at this point as it relates to automotive.
Speaker Change: And then, what's the revenue capacity of the EV battery materials plant that you're targeting for the U.S.?
Speaker Change: So the plant is targeted to start up in
Speaker Change: 2028. Of course, we're in final stages right now of negotiations with the Department of Energy, but the high level timeline is
Speaker Change: is something in that range and would be producing both carbon nanotubes as well as conductive additive dispersion.
Speaker Change: Our expectation on that project is that it would generate IRRs in the sort of 20-ish percent range, something in that range.
Speaker Change: The total capital for that is around $180 million, of which $50 million would be.
Speaker Change: be covered by this grant, so that's.
Speaker Change: kind of a high-level sense of how we would see the economics, again, startup would be in 2028.
Speaker Change: All right, thank you.
Speaker Change: Thank you so much, and one moment for our next question.
Speaker Change: and he's from the line of Joshua Spector with UPS. Please proceed. Hi, good morning, everyone. It's Chris Perella on for Josh. I wanted to follow up with the RM demand.
Speaker Change: What are you seeing, I guess, the return in the December quarter? And then how do you see the cadence of volumes for the year and I guess the dynamic between the Asian imports coming into the U.S. and what's the latest you're seeing there?
Speaker Change: Yes, so good morning.
Speaker Change: So we, as Erica commented, we did see a, you know, a solid October volume and certainly the return of normalized patterns related to the Mexican drought issue. So, so I think that's, that's, that's good.
Speaker Change: In terms of tire production, globally is fairly modest, low single-digit sort of expectation and certainly in the Americas, our outlook would be for modest growth.
Speaker Change: in 2025. Now, as you point out, we have seen an impact in the region from higher levels of tire imports in the more recent quarters here, and so our outlook would be for effectively no fundamental change from that current level of imports.
Speaker Change: There certainly are.
Speaker Change: signs of pushback against the trend of elevated imports. So we've seen recently tariffs imposed in Mexico, for example, on Chinese passenger car and truck tires.
Speaker Change: Those just went into effect last month, and then more recently, anti-dumping duties imposed by the U.S.
Speaker Change: on truck tires, TBR tires, and so certainly some pushback to the elevated level of tire imports on the sort of trade and tariff front.
Speaker Change: And then some signals as well that the Western Tire producers, you know, may be adjusting strategy a bit and defending share against the imports more. So it's certainly a dynamic situation and one that, you know, we're watching and managing closely. But on balance, our outlook would be for modest growth in 2025 in the Americas. No fundamental change to that.
Speaker Change: the current level of imports. But we'll have to see how these.
Speaker Change: you know, competing forces.
Speaker Change: play out here. Certainly there's a lot of investment in North America in the tire sector. There are several consultants that have said somewhere in the order of six billion dollars of projects that are
Speaker Change: underway in the U.S. for expansion as well as modernization.
Speaker Change: in Mexico, U.S., and Canada, so, you know, our expectation longer term is that tire production will grow here in North America to support miles driven and provide regional capacity.
Speaker Change: No, that's great. And just a quick one on the CapEx step up for this fiscal year. I guess, what are the moving parts there and what's driving the incremental rise?
Speaker Change: Thank you. Yeah, so we expect to be in the range of 250 to 300 million. So I would say in the zone of where we've been, the midpoint of that range would be a modest increase over 2024. The primary drivers there would be the completion of our final air pollution control project in the U.S. in Louisiana, as well as the completion of our new production unit in Indonesia.
Speaker Change: that'll be coming online in the back half of 2025. And then finally, some spending related to growth projects in the battery space. But those would be the primary drivers of the modest increment up.
Speaker Change: Great. Thank you very much.
Speaker Change: Thank you.
Speaker Change: One moment for our next question that comes from the line of Jeff Sekolskas with JPMorgan. Please proceed.
Jeff Sekolskas: Thanks very much.
Jeff Sekolskas: and Sean Keohane. Thank you.
Jeff Sekolskas: I think your battery materials demand in the United States has contracted for eight quarters in a row.
Jeff Sekolskas: Can you comment on that? What's behind that? Is it just too expensive to make?
Jeff Sekolskas: tires in the U.S.
Sean Keohane: Yeah, good morning, Jeff. I just want to clarify. I think you said battery materials is contracted three quarters. I think you mean higher reinforcement materials
Jeff Sekolskas: for KIPPNER.
Speaker Change: Yeah, yeah, sure, sure. Well, certainly, you know, what we've seen is that Asian tire imports have increased over the last, you know, one to two years.
Speaker Change: and that's been accelerating, I would say.
Speaker Change: Now, it's important to remember that the global tire market is dependent on Asian tires and has been for some time, and that will continue, but we certainly have seen a more elevated level in the recent quarters as China.
Speaker Change: you know, tries to export their way out of economic weakness and we've seen the ASEAN countries really step up their level of exports to North America and South America.
Speaker Change: So certainly a dynamic situation, as I just commented on, there's some.
Speaker Change: pushback here, both in terms of tariffs as well as anti-dumping duty. So I wouldn't say it is so much a question of being uncompetitive. I think it's more a question of, you know, is China
Speaker Change: To support the growth in the industry, but there are forces at play right now from a trade standpoint that I think are pushing against each other and we'll have to see how those shake out here in the.
Speaker Change: In the coming months and year.
Speaker Change: Okay.
Speaker Change: So in the context of all of that how are your price negotiations going.
Speaker Change: In the United States.
Speaker Change: For the upcoming year.
Speaker Change: CRE general expectation that youll be.
Speaker Change: Down or flat.
Speaker Change: Or you can't tell.
Speaker Change: Yes. So this year negotiations, Jeff for playing out along the timeline that historically happened where most of the contracts are finalized in the fall here. So we're in the midst of those discussions with customers as we go right now so it would be inappropriate for me to comment on contract outcomes given the.
Speaker Change: Live nature of that information.
Speaker Change: Now with that I would say the environment.
Speaker Change: In Europe remains.
Speaker Change: Firm I would say demand in the Americas certainly impacted by.
Speaker Change: Near term elevated.
Speaker Change: Asian imports, but the long term supply side fundamentals havent changed here with no new capacity adds and.
Speaker Change: And higher costs related to environmental.
Speaker Change: Regulations so.
Speaker Change: I would say that supply side picture remains the same now as we indicated in in our guide we are expecting margin improvement in reinforcement materials.
Speaker Change: In the fiscal year.
Speaker Change: So that's our current expectation.
Speaker Change: And maybe quickly.
Speaker Change: Two other issues can you.
Speaker Change: Tell us how your battery materials business.
Speaker Change: For the quarter and for the year.
Speaker Change: Both in terms of sales and EBITDA in two.
Speaker Change: 2024.
Speaker Change: And are you beginning to get.
Speaker Change: Energy benefits in Europe as gas prices have stopped.
Speaker Change: Sorry, Jeff just repeat the last part of that question. It faded out energy benefit in Europe I didn't get the last part of that so natural gas costs in Europe are now I don't know $13 Btu.
Speaker Change: Yes.
Speaker Change: And so because of your co gen.
Speaker Change: Capabilities in Europe does that give you a benefit or is that giving you a benefit.
Speaker Change: Yeah, Okay. So two questions there so on on the battery front our volumes were up.
Speaker Change: In.
Speaker Change: In 2024.
Speaker Change: And ex investment in future projects are.
Speaker Change: Our our margins, where our profits were up but we were investing.
Speaker Change: Quite a bit to drive future programs and to drive.
Speaker Change: Future investment projects, including.
Speaker Change: The project that we recently announced in the dose.
Speaker Change: With the Doe here in the U S. So.
Speaker Change: I would say progress but.
Speaker Change: The environment in China remains competitive.
Speaker Change: And that today is still accounts for 75% to 80% of battery production.
Speaker Change: Remains.
Speaker Change: Is produced in China. So.
Speaker Change: Our plan here is that our view is that over time as.
Speaker Change: This market bifurcate and you have production in the west.
Speaker Change: Balanced out by the end of the decade. The expectation is that tire production would be about 50 50, 50% produced in China, 50% outside of China.
Speaker Change: And certainly the pricing and profit margins in the competitive dynamics.
Speaker Change: Are quite different inside and outside of China, and our sales today outside of China.
Speaker Change: And margins are.
Speaker Change: Are substantially better so I think as that bifurcation plays out then we're expecting the profits to grow in this in this product line in two.
Speaker Change: Become a material contributor to the earnings growth of overall.
Speaker Change: Overall Cabot Corp. So that's a bit of what's what's what's happening right now in the battery market.
Speaker Change: In terms of energy prices as it relates to co gen.
Speaker Change: Each asset where we have cogeneration facility.
Speaker Change: <unk> is a little bit different in terms of the type of energy we produce.
Speaker Change: And the marker again switch that the energy marker against which that is.
Speaker Change: That is priced I would say overall, what you have been seeing is that.
Speaker Change: <unk>.
Speaker Change: The forward curve on on oil and is sort of trending down.
Speaker Change: A little bit so that may that may put a little pressure on the.
Speaker Change: The profits out of the energy centers in 2025.
Speaker Change: So that's a dynamic situation that very much depends on.
Speaker Change: On the pricing of the underlying energy and.
Speaker Change: And that that can move quickly as we've as we've seen.
Speaker Change: Thank you so much.
Speaker Change: Thank you Elena Sorry reminder, that is star one one <unk> do have a question.
Speaker Change: Our next question is from Laurence Alexander with Jefferies. Please proceed.
Speaker Change: This is Dan Rizzo on for Laurence.
Dan Rizzo: You talked a bit about maintenance costs in Q4, and I was just wondering what the outlook is for maintenance.
Dan Rizzo: And maybe turnarounds in 'twenty five versus 24 months can be less or more how we should think about it.
Dan Rizzo: Hi, Dan this is Erica.
Dan Rizzo: No.
Speaker Change: <unk> was higher in Q4, we talked about in reinforcement materials, we would expect the cost picture going into Q1 to be down. So as I commented, we would expect a $10 million decrease in costs from Q4 to Q1.
Speaker Change: <unk>.
Speaker Change: The performance chemicals segment that where maintenance costs in Q4, we expect relatively.
Speaker Change: Flat performance on EBIT, there, so we wouldn't expect a big.
Speaker Change: Change as you think about performance chemicals.
Speaker Change: Yes, I was thinking about the whole year, not just Q1 I don't know if how that is going to play out.
Speaker Change: Yes, I think from a maintenance perspective, there wouldn't be a material change year over year.
Speaker Change: To think about on a fixed cost profile for the segment.
Speaker Change: Alright, thank you.
Speaker Change: It related to maintenance Yep.
Speaker Change: That's very helpful. Thanks, and then you mentioned.
Speaker Change: Western tire producers kind of defending their share, which I assume means.
Speaker Change: Getting aggressive with prices and I was wondering if thats, how youre thinking about <unk> and how that could potentially affect you with contracts and with just with the outlook.
Speaker Change: Yes, so I mean, I think there is some evidence in the in the tire retail.
Speaker Change: Channel and in the.
Speaker Change: The industry reports there that.
Speaker Change: That the western tire makers are getting a little more aggressive to defend their their position most likely I would I would say probably in there.
Speaker Change: Call their tier two brands.
Speaker Change: Certainly they have all had a strategy of.
Speaker Change: Really promoting the high value tires, so the 18 inch and greater tires things like that and that is a growing part of the market as compared to.
Speaker Change: The smaller rim sizes, but.
Speaker Change: But I think given the elevated level of <unk>.
Speaker Change: Imports.
Speaker Change: I think.
Speaker Change: It makes sense that they would be.
Speaker Change: Some level of defense there by them to defend their share.
Speaker Change: In in those more competitive.
Speaker Change: So the market. So so I think we will have to see how that plays out and then the other factor as I commented on is what happens on the on the trade front.
Speaker Change: Certainly a combination of tariffs and anti dumping duties.
Speaker Change: Our currently.
Speaker Change: Being implemented and whether more comes given.
Speaker Change: The trade policies of.
Speaker Change: The incoming administration in the U S.
Speaker Change: Difficult to read that at this point, but I think it's pretty clear that there is some pushback against this elevated level.
Speaker Change: Imports here and depending on where that goes that obviously.
Speaker Change: We will have impact on what the demand for carbon black will be.
Speaker Change: In in the in the region.
Speaker Change: Again, our current view.
Speaker Change: At this point is for for modest improvement.
Speaker Change: In 2025 in terms of carbon black demand in the Americas.
Speaker Change: Thank you very much.
Speaker Change: Thank you so much and I see.
Speaker Change: No further questions in the queue I will conclude the Q&A session and turn the call back to Sean Keohane for final remarks.
Sean Keohane: Great. Thank you very much Carmen and thank you all for joining our call today and I do hope you all can join US on December 4th for our Investor Day, where we look forward to discussing the next phase of strategy development for the company.
Speaker Change: Our priority growth investments over the next three years as well as our next set of long term financial targets. So hope you all can join us.
Speaker Change: Thank you very much for supporting cabinet and we'll look forward to seeing you soon.
Speaker Change: And thank you all who participated in today's conference you may now disconnect Good day everyone.
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