Q2 2025 Cabot Corp Operating Results Call
Good day and thank you for standing by welcome to the Cabot second quarter 2025 earnings Conference call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question answer session to ask a question. During this session you will need to press star one on your telephone you will then hear an automated message advising your hand, just raised to withdraw your question. Please press star one again, please be advised that today's conference is being run.
Speaker Change: For that I would now like to hand, the conference over to your Speaker today, Steve Delahunt, Vice President Treasurer and Investor Relations. Please go ahead.
Thanks, Steve and good morning, I would like to welcome you to the Cabot Corporation earnings teleconference.
Speaker Change: Me today are Sean Keohane, CEO, and President and Erica Mclaughlin Executive Vice President and CFO.
Speaker Change: Last night, we released results for our second quarter fiscal year 2025 copies of which are posted in the Investor Relations section of our website.
Speaker Change: 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 the call.
Speaker Change: During this conference call, we will make forward looking statements about our expected future operational and financial performance.
Speaker Change: Each forward looking statements subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements.
Speaker Change: Additional information regarding these factors appears in the press release, we issued last night and in our 10-K for the fiscal year ended September 32024, and in subsequent filings, we make with the SEC all of which are available on the company website.
Speaker Change: In order to provide greater transparency regarding our operating performance, we refer to certain non-GAAP financial measures that involve adjustments to GAAP results.
Speaker Change: The non-GAAP financial measures 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 investors section of our website.
Speaker Change: I will now turn the call over to Sean who will discuss the second quarter highlights and the expected impacts to our business from recent tariff announcements.
Eric: Eric <unk> will review, the second quarter financial highlights and the business segment results.
Eric: Following this Sean will discuss our outlook for fiscal 2025, and then open the floor to questions Sean.
Speaker Change: Thank you, Steve Good morning, ladies and gentlemen, and welcome to our call today.
Speaker Change: I am pleased with our strong second quarter results, which were in line with our expectations.
Speaker Change: We delivered Q2 adjusted earnings per share of $1 90.
Speaker Change: Which is up 7% as compared to the same period in the prior year.
Speaker Change: When combined with first quarter results adjusted earnings per share grew 10% in the first half of fiscal 2025 as compared to the same period in fiscal 2024.
Speaker Change: Overall, we continue to execute at a high level and demonstrate agility in this dynamic and challenging macroeconomic environment.
Speaker Change: EBIT in reinforcement materials was $131 million up 1% sequentially and down 12% year over year.
Speaker Change: And this business remains strong despite the volume headwinds from lower tire demand within the quarter.
Speaker Change: EBIT in performance chemicals was up 61% compared to the second quarter of fiscal 2024, driven by improved margins and higher volumes, particularly in the fumed silica product line.
Speaker Change: Volumes in this segment have generally stabilized and reconnected to underlying demand drivers in our key end markets.
Speaker Change: Additionally, we continue to make strong commercial progress in the battery materials product line generating year over year volume growth of 10% in the first half of fiscal 2025 with a solid level of profit growth.
Speaker Change: Our strategy is to focus on the high performance segment of the market in China with differentiated products, while developing the business with customers that are building battery plants in the western economies.
Speaker Change: While the development of battery production in North America, and Europe is developing more slowly than originally anticipated. We continue to believe these markets will become large and therefore remain a key growth priority for us.
Speaker Change: Returning capital to shareholders remains an important component of our capital allocation framework and in the quarter, we returned $70 million to shareholders through a combination of share repurchases and dividends.
Speaker Change: Given the strength of our underlying business fundamentals and conviction in the long term cash flow generation of our portfolio yesterday, we announced a 5% increase in our quarterly dividend.
Speaker Change: This is consistent with our capital allocation framework to increase the dividend as our earnings and cash flows grow.
Speaker Change: We have increased our annual dividend per share payment every calendar year for the last 10 years.
Speaker Change: As a result of the recent tariff announcements I thought it would be helpful to provide more detail on our direct tariff exposures by region.
Speaker Change: Given that we have a make and sell in region model. Our businesses are largely insulated from direct tariff impacts and we are well positioned to support our customers and capture growth from shifting downstream supply chains.
Speaker Change: And each of our major regions, the Americas, EMEA and Asia Pacific at least 95% of our volumes within those regions are produced in that same region.
Speaker Change: Specifically in North America, our products are considered U S. MCA compliant and therefore, we expect no impact at this time from any tariffs in this region.
Speaker Change: Between the major regions. There are small amounts of cross border sales for some of our high end specialty products, where we are directly exposed to tariff increases.
Speaker Change: In those cases, we expect to be able to pass on any tariffs through contractual formulas and by implementing increases in spot pricing.
Speaker Change: While the current tariff landscape is highly dynamic with varying levels of implemented proposed and pause tariffs around the world. The Cabot team continues to respond well in support of our customers and we believe that our direct exposure is manageable.
Speaker Change: The uncertainty is however, causing customers to adopt a cautious costs during the short term around inventory levels. As we are seeing signs of customers curtailing production to reduce inventory levels and manage risk until the trade picture becomes more clear.
Speaker Change: To address the uncertainty caused by tariff policies, we are executing a broad range of countermeasures first and foremost we are working closely with our customers to understand how their production might shift as a result of tariffs policies and offering volume support from our expansive global plant network.
Speaker Change: In the limited number of cases, where our products are exposed to direct tariffs, we expect to recover the impacts through formula and spot pricing adjustments.
Speaker Change: We expect our near term volumes to be impacted by customers adopting a more cautious approach to inventory levels and are implementing a range of product optimization actions across our global plant network.
Speaker Change: We are also executing fixed cost and procurement initiatives that we expect will contribute $30 million of savings in fiscal year 2025.
Speaker Change: And finally, we will adjust the timing of some capital projects to align with customer demand, resulting in a lower capex forecast, which is now expected to be in the range of $250 million to $275 million.
Speaker Change: Despite the uncertainty caused by tariff policies, we believe the fundamentals of our company remain very strong and are creating for tomorrow strategy positions us well for long term shareholder value creation.
Speaker Change: Several features of our company that we believe distinguish us from competition and set us up for long term success.
Speaker Change: First Cabot as a global company with assets in sales that are relatively equally distributed across the three major regions of the world The Americas, EMEA and Asia Pacific.
Speaker Change: This balanced geographic footprint and model would make in region selling region.
Speaker Change: More important than ever in this changing global trade environment.
Speaker Change: And each of these regions, we have local assets and local management teams to serve our customers, giving us unique market insights and the necessary experience to navigate local complexities and capture growth.
Speaker Change: We believe our track record of strong cash generation and our investment grade balance sheet allow us to weather economic cycles, while enabling the capacity to fund strategic growth investments and return consistent robust levels of cash to shareholders.
Speaker Change: As I mentioned earlier in my remarks yesterday, we increased our dividend by 5% and expect to return meaningful cash through share repurchases in fiscal 2025.
Speaker Change: And finally I believe this management team has demonstrated a commitment to disciplined execution, resulting in our ability to navigate through dynamic macroeconomic environment, while achieving our goals and delivering strong shareholder returns.
Speaker Change: I will now turn it over to Erica to discuss the financial results for the quarter Erica. Thanks, John I will start by discussing results for the company and then review the segment results.
Erica Mclaughlin: Adjusted earnings per share for the second quarter of fiscal 2025, 7% from $1 78 in the second quarter of fiscal 2024 to $1 90 with growth in the performance chemicals segment, partially offset by a decline in the reinforcement materials segment.
Erica Mclaughlin: Cash flow from operations was $73 million in the quarter, which included a working capital increase of $76 million discretionary free cash flow was $110 million and accordingly.
Erica Mclaughlin: The cash balance at the end of the quarter was $213 million and our liquidity position remained strong at approximately $1 2 billion.
Erica Mclaughlin: Capital expenditures for the second quarter of fiscal 2025 were $72 million, and we expect $250 million to $275 million of capital spending for the fiscal year.
Erica Mclaughlin: Additional uses of cash during the second quarter were $23 million for dividends and $47 million for share repurchases.
Erica Mclaughlin: That balance is $1 8 billion and our net debt to EBITDA was one four times.
Erica Mclaughlin: And year to date operating tax rate for fiscal 2025 was 28% and we continue to anticipate our operating tax rate for fiscal 2025 to be in the range of 27% to 29%.
Erica Mclaughlin: Now moving to reinforcement materials.
Erica Mclaughlin: In the first quarter EBIT for reinforcement materials was $131 million, which was a decrease of $18 million as compared to the same period in the prior year.
Erica Mclaughlin: The decrease was primarily driven by lower global volumes, which were down 7% year over year from lower tire demand and the contract outcomes in South America regionally volumes were down 9% in the Americas, 8% in Asia Pacific and 1% in Europe.
Erica Mclaughlin: Looking to the third quarter fiscal 2025, we expect reinforcement materials EBIT to be down modestly as compared to the second quarter of fiscal 2025 as global macroeconomic uncertainty is expected to cause customers to be cautious about orders and inventory levels.
Erica Mclaughlin: Now turning to performance chemicals, EBIT increased by $19 million in the second fiscal quarter as compared to the same period in fiscal 2024.
Erica Mclaughlin: The increase in the second quarter was due to higher volumes and higher gross profit per ton volumes were up 4% year over year, driven by higher volumes in our fume metal oxides product line as we saw reconnection of underlying demand through our volumes in construction in semiconductor applications as compared to the prior year.
As we've noted before axiom metal oxide product line has above average margins for the segment. So the increased volumes in this product line drove meaningful improvement in EBIT for the segment.
Erica Mclaughlin: The improvement in gross profit per ton was driven by targeted price increases and cost savings and optimization measures across the segment.
Erica Mclaughlin: Looking ahead to the third quarter of fiscal 2025, we expect performance chemicals EBIT to be in line with the second quarter of fiscal 2020 side as seasonal increases are largely offset by customer destocking in China as customers remain cautious about inventory levels, given the tariff policy situation.
Erica Mclaughlin: I will now turn the call back over to Sean to discuss the fiscal year outlook.
Sean Keohane: Thanks Erica.
Sean Keohane: When we set our fiscal year 2025 of adjusted earnings per share guidance back in November we werent anticipating tariffs and we assumed global GDP growth as projected at that time.
Speaker Change: <unk> the situation has changed dramatically with significant tariffs announced by the U S administration and corresponding Counteraction.
Speaker Change: While the situation remains extremely dynamic the uncertainty is beginning to have an impact on the order patterns at our customers as they adopt a more cautious posture on inventory levels.
Speaker Change: At the start of the fiscal year, we're expecting volumes in reinforcement materials to grow in the low single digit percentage and volumes in performance chemicals to increase in the mid single digit percentage.
Speaker Change: I'd also assume november's foreign exchange rates and the forward curve for oil at that time.
Speaker Change: While we delivered as planned through the first half of the fiscal year. The escalating tariff war in recent months is causing uncertainty for customers and therefore is now expected to impact our demand levels in the second half of the year.
Speaker Change: At the same time, we are facing a slowing GDP outlook and lower energy prices, which negatively impact our energy center revenue and the benefit from our yield improvement projects.
Speaker Change: To respond to the weaker demand environment, we've been executing a range of procurement and cost savings initiatives. These measures are a combination of belt tightening targeted restructuring actions and procurement savings, which we expect to total approximately $30 million in the fiscal year <unk>.
Speaker Change: These steps have been helpful, but did not fully offset the expected volume impact in the second half of our fiscal year.
Speaker Change: In reinforcement materials, we now expect volumes to decline in the low single digit percentage for the fiscal year and in performance chemicals, we are expecting volume growth in the low single digit percentage.
Speaker Change: With this backdrop in mind I'll talk about our 2025 outlook.
Speaker Change: First as I mentioned previously we feel very good about the first half results, which were in line with our expectations.
Speaker Change: In the first half of fiscal 2025 adjusted earnings per share was up 10% as compared to the prior year, while adjusted EBITDA was up 7% over the same period.
Speaker Change: These results had us on a path to achieve our full year adjusted EPS guidance range.
Speaker Change: But we are now in a period of uncertainty around trade policy, which is causing cautious customer order patterns, resulting in lower volume estimates in both segments.
Speaker Change: Based primarily on the change of our volume outlook. We now expect full year adjusted earnings per share to be in the range of $7 15 to $7 50.
Speaker Change: This range, which is a decrease of about three 5% at the midpoint includes our proactive countermeasures just discussed.
Speaker Change: Our outlook also reflects April foreign exchange rates and the forward curve for both energy and interest rates.
Speaker Change: This revised range continues to represent earnings growth in the fiscal year. Despite the significant uncertainty caused by tariff announcements.
Speaker Change: Cash generation is expected to remain strong and we expect to return a robust amount of cash to shareholders through dividends and share repurchases.
Speaker Change: Our recent announcement of a 5% increase in our dividend is consistent with our expectation to grow the dividend over time as earnings and cash flows grow.
Speaker Change: We also expect to repurchase between $100 million and $200 million of shares in fiscal 2025.
Speaker Change: Despite the current environment I remain very pleased with how the company is positioned today.
Speaker Change: I believe we have the right strategy and capital allocation priorities and I am confident in our team's agility and execution capabilities.
Speaker Change: Thank you very much for joining us today and I'll now turn the call back over for our Q&A session.
Speaker Change: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
Speaker Change: And our first question today comes from John Roberts of Mizuho. Your line is open.
John Roberts: Thank you I just wanted to do a little bit of bridge work on the reinforcement volumes. So you went from plus low single digit for the year to down low single digit for the year. So several percentage point swing, that's there and it's all in the second half I guess.
John Roberts: The first half was on it looks like it down 3% in the first half, but you were plus one in the first quarter and minus seven in the second quarter.
John Roberts: So.
John Roberts: That seems like you were expecting a lot of gain in the second half originally and I don't know whats the second half kind of look like second half to second half.
John Roberts: Sure John So maybe just a bit of.
John Roberts: Just a bit of context around volumes first off and then ill try to address your <unk> question there.
John Roberts: Because I think the volume picture.
John Roberts: Globally developed a bit differently, depending on the region. So maybe just a quick walk around the world and then and then again I'll address that bridge question.
John Roberts: In the in the Americas as you saw in the press release in the comments here volumes were down.
John Roberts: Pretty sharply the volume decline was driven by South America, where we saw lower contract volume outcomes. As we told you last quarter. Additionally, I think that market remains difficult in the near term as they are seeing an elevated level of.
John Roberts: Chinese tire imports in North America tire import levels were about the same as last year.
John Roberts: And we only saw a small decline in our volumes.
John Roberts: As.
John Roberts: Passenger car and <unk> in particular was.
John Roberts: And this was this was called out by many of the global tire makers.
John Roberts: <unk> market was a bit soft on economic uncertainty as well so the Americas was heavily influenced by by South America.
John Roberts: In Asia, we saw volumes down, 8% with China being the biggest driver.
John Roberts: Last year demand stayed really strong through the lunar new year holiday as our customers produce very aggressively at that time for the export markets. This year. What we saw was a more normalized lunar new year holiday, where customers curtailed production given the sort of mounting global trade uncertainty and as they work down.
John Roberts: <unk> so in Asia. It was really a difference in how China develops and then in Europe volumes were about flat year over year. As we told you last quarter, we picked up some volumes in the contract season as customers expressed continued preference for local production.
John Roberts: Sometimes new lanes that U.
John Roberts: Pick up can be a little slower to ramp up as customers manage their inventories, but we would expect these volumes to build as we move through the balance of the year. So that's a little bit of sort of a walk of what's what's happening.
John Roberts: If you around the world if you look at the the RM volume bridge.
John Roberts: We said we were going to be up low single digits in November based on market projections for demand at that time and then in in December.
John Roberts: When we commented on on our guide.
John Roberts: We were expecting sort of flat.
John Roberts: Because updates on the market view for tire production in auto were coming through and they were being they were being downgraded.
John Roberts: And now we sit here expecting down low single.
John Roberts: Digits.
For the full year.
John Roberts: As we're starting to see cautiousness from.
John Roberts: From customers, so that's kind of the picture.
John Roberts: Now certainly we were expecting.
John Roberts: A stronger second half as you as you pointed out.
John Roberts: I think that's pretty consistent with what the tire makers are calling for I believe Michelle when it in their call talked about a stronger second half, but it's unclear whether whether that will actually happen and it's important to remember our second half.
John Roberts: And ends in September 30, whereas most of those companies, calling for a stronger second half.
John Roberts: Orion December year end. So we may not we may not see much of that if it materializes.
John Roberts: But that's a.
John Roberts: A bit of a picture on the on the volume front, John hopefully that's helpful.
John Roberts: Tire imports into the U S. Accelerate ahead of the tariffs and is there an air pocket here on the other side of the tariffs.
John Roberts: Yeah, so the tariff the entire import levels into into the U S were about the same as they were a year ago. So no meaningful change year over year, they had elevated and remained at that level, but no no significant change.
John Roberts: If you look at this period versus same period last year.
John Roberts: Thank you.
John Roberts: Thank you.
Speaker Change: And our next question comes from Jeff Zekauskas of Jpmorgan. Your line is open.
Jeff Zekauskas: Thanks, very much and your reinforcement.
Speaker Change: Materials segment.
Jeff Zekauskas: How does volume split between.
Jeff Zekauskas: North America, South America roughly.
Jeff Zekauskas: Roughly.
Jeff Zekauskas: So South America would be a smaller market.
Jeff Zekauskas: Jeff relative to relative to North America, but declines were greater than in South America. So you could you could kind of look at it is.
Jeff Zekauskas: Sort of 60 ish percent.
Jeff Zekauskas: North America Fortyish percent, South America, some somewhere in and around that split.
Jeff Zekauskas: And then South American volumes were down close to 20% in the quarter.
Jeff Zekauskas: Quite quite quite sharply youre, probably in the Zip code.
Speaker Change: Is that a trend that you expect to continue over the next couple of quarters.
Speaker Change: We would expect it to sort of hold at the level that it's at right now until we see.
Speaker Change: Trade situation settles out.
Speaker Change: The South America market is.
Speaker Change: Is being impacted by tire imports and so we would expect that.
Speaker Change: To hold that's our current assumption.
Speaker Change: Assumption on it Jeff, but I think thats reasonable given all of the uncertainty right now.
Speaker Change: Can you talk about the underlying price dynamics.
Speaker Change: The reinforcement materials segment.
Speaker Change: The price dynamic is consistent with what we shared last quarter. When we came through the contract negotiations we shared that pricing was was largely in the flat range.
Speaker Change: Through the contracts and so obviously, we are operating under those contracts right now so they're not changes.
Speaker Change: During the year because most of the business in the west is.
Speaker Change: Is contracted in Asia Pacific, which is a more more of a spot market.
Speaker Change: I would say margins or pricing levels are.
Speaker Change: Holding fairly fairly steady, but those are at a lower level than the margin levels and in the west there's always a little bit of.
Speaker Change: Cycling of.
Speaker Change: Price and margin depending on how raw materials move because those are <unk>.
Speaker Change: <unk> market.
Speaker Change: Those are spot price.
Speaker Change: The markets and so.
Speaker Change: You got to adjust quickly.
Speaker Change: If raw materials are moving around.
Speaker Change: And prices in South America.
Speaker Change: Those are largely contract so consistent with my contract comments I just shared.
Speaker Change: And then lastly, what's going on with your Energy Center revenues.
Speaker Change: What was the change perhaps in the first half what you expect for the change in the second half and some kind of revenue terms.
Speaker Change: Yes, so so most of the co gen impact and the companies in reinforcement materials, where we have where we have the energy centers and that's where the biggest volumes obviously for carbon black are for that segment. The energy center impact the way that we think about it.
Speaker Change: As net of utilities, so the energy center benefits net of utilities.
Speaker Change: And in Q2, it was really flat year over year. So no impact we are expecting some second half impact as we see oil prices decline here given the economic uncertainty that's really all in the end tie back to tariffs, but as lower energy price.
Speaker Change: <unk> are expected to flow through again, we're holding the forward curve as our assumption. So we would expect some back half.
Speaker Change: Packed probably in the mid single digit millions impact.
Speaker Change: Headwinds in the second half.
Speaker Change: But first first in this quarter was it was it was not.
Speaker Change: Part of the story.
Speaker Change: Okay, great. Thank you so much.
Speaker Change: Sure.
Speaker Change: Thank you.
Speaker Change: And our next question comes from Josh Spector of UBS. Your line is open.
Speaker Change: Yes, hi, good morning, I wanted to ask on performance chemicals, you made the comments around seasonal increases offset by China Destocking.
Speaker Change: A lot of mixed signals in our covered around what we're seeing in terms of seasonal improvement. So I wanted to focus on that and just ask.
Speaker Change: Where you see kind of a normal seasonal trend playing out either market or region, and where your assumptions around a more muted trends sequentially.
Josh: Yes, Hi, Josh.
Speaker Change: So we have certain applications that.
Speaker Change: Our more focused around.
Speaker Change: The spring weather.
Speaker Change: So you could call them sort of.
Speaker Change: AG farming related type applications.
Speaker Change: So youll see on the coding side of the house.
Speaker Change: Youll see the decorative coatings market start to pick up in the spring time here, that's a normal season.
Speaker Change: Seasonal housing trend and so we see we see those markets responding as they as they normally do I would not say there is any.
Speaker Change: Real change in those but thats thats basically the the.
Speaker Change: Seasonal dynamic that you see I guess the other one.
Speaker Change: Might call it a seasonal dynamic is.
Speaker Change: Usually this quarter is.
Stronger in China as they come off the March quarter, which has the Chinese new year.
Speaker Change: Holiday Inn, and so normally you see this quarter being quite.
Speaker Change: Quite a strong quarter for performance performance chemicals, I think the one difference we're seeing right now.
Speaker Change: Is the just general uncertainty related to <unk>.
Speaker Change: Tariff negotiations where.
Speaker Change: I wouldn't say, it's changing any of these sort of seasonal patterns, but just in general customers.
Speaker Change: Customers are exhibiting a little more of a cautious posture on on things and not.
Speaker Change: Not wanting to get out over their skis on inventory levels and kind of ordering what they know there they have orders for themselves rather than building to stock and I think that that general trend, while we view it as a temporary phenomenon. It is something that we.
Speaker Change: Are beginning to see in the early parts of this quarter and we'd expect our expectation is that that that will continue.
Speaker Change: Continue at least through the quarter here until we see how things settle out on the trade tariff negotiation front.
Speaker Change: Thanks that helps.
Speaker Change: So I wanted to ask on the cost savings just the cadence if you can give some color there so the $30 million how does that layer in over the next couple of quarters, I guess does that sort of higher run rate number when we think about a full year.
Speaker Change: And is any of that temporary or is all of that permanent. Thank you.
Speaker Change: Okay Josh.
Josh: Address that so I think the cost savings in nature across the fixed cost and procurement initiatives that we have underway.
Speaker Change: I would say there are a variety of semi.
Josh: Belt tightenings in like in my temporary like things like travel.
Speaker Change: Some are related to more <unk>.
Josh: Structural I'd say restructuring actions.
Josh: Continue our procurement efforts that will continue so I would say, it's a mix within the year.
Josh: If you think about the $30 million, we said in the first half we recognized probably about one third of that most of it in Q2.
Josh: And then so we would expect about two thirds in the second half of the year.
Josh: Okay.
Josh: So that doesn't really build sequentially, then if youre recognizing about $10 million now thats kind of 20 million $10 million a quarter is that is that right or is that wrong.
Josh: That's right. It's more ratable is included a quarter from Q2.
Josh: Okay. Thank you.
Josh: Thank you and as a reminder, if you have a question. Please press star one one.
Speaker Change: And our next question comes from Laurence Alexander of Jefferies. Your line is open.
Dan Rizzo: Good morning, This is Dan Rizzo on for Laurence.
Speaker Change: Just wondering with all the volatility.
Speaker Change: The threat of tariffs.
Speaker Change: Industry capital capital utilization is now as opposed to what it was say last quarter last year.
Dan Rizzo: Hi, Dan sorry, there was a bit of.
Dan Rizzo: Difficulty on the on the transition there with the call, but I think youre asking about capacity utilization is at it that's correct yes.
Dan Rizzo: Yes, yes, so when we look at capacity.
Dan Rizzo: Capacity utilization.
Dan Rizzo: And of course depends by business I think if you look at reinforcement materials.
Dan Rizzo: I would say, it's pretty consistent with where things were.
Dan Rizzo: Last quarter it varies a bit by region I think in in North America Utilizations are.
Dan Rizzo: In the 80, low <unk> sort of a range.
Dan Rizzo: For the industry.
Dan Rizzo: In Europe, it would be higher than that I would say sort of upper eighties.
Dan Rizzo: Range.
Because.
Dan Rizzo: In Europe year.
Dan Rizzo: Your suite of net short of capacity. So they rely on imports and has a strong preference for regional supply. So the utilizations are as would be expected higher higher there and then in Asia Pacific.
Dan Rizzo: What we see is that where we're running generally our plants at at a pretty high level. So normally in China, where we're sort of in the 90 ish percent range.
Dan Rizzo: As we look forward.
Dan Rizzo: Given the uncertainty around tariffs and people operating with more cautiously that will.
Dan Rizzo: Level of utilization will probably pull down a little bit there.
Dan Rizzo: But for us.
Dan Rizzo: But.
Dan Rizzo: That's that's kind of how how utilizations sit at this point and again.
Dan Rizzo: Our view here is people are just.
Dan Rizzo: Operating a bit cautiously in the in the short term here and taking some temporary actions to adjust inventories and just be cautious generally.
Dan Rizzo: So we don't at this point see it as a.
Dan Rizzo: Structural.
Dan Rizzo: The decline and we're not we're not calling for a recession, that's not some modest what's assumed in our.
Dan Rizzo: In our guide here, it's really.
Temporary cautious sort of inventory pullback.
Speaker Change: Okay. That's very helpful and then.
Speaker Change: You mentioned capex going down to $2 50 to 275, but I think you said, there's still a growth component of that I was wondering how much of that is kind of growth capex and how much is maintenance.
Speaker Change: I don't know at this point.
Speaker Change: Yes, yes sure yes, so what we're doing on the Capex front as we've been consistently talking about is making sure that were.
Speaker Change: Trying to pace our growth investments with.
Speaker Change: With actual market demand and.
Speaker Change: So.
Speaker Change: The pair back there on on Capex is really around the timing of growth investments and just trying to adjust those as as we're seeing market demand pick up.
Speaker Change: In terms of the total capex.
Speaker Change: Yes.
Dan Rizzo: It is split Dan so probably about $100 million is growth related I would say the largest project. There is the completion of our new capacity in Indonesia.
Speaker Change: For the reinforcement materials segment.
Dan Rizzo: Thank you very much.
Speaker Change: Thank you I'm showing no further questions at this time I would like to turn it back to Sean Cohen for closing remarks.
Speaker Change: Great. Thank you very much for joining us today and for your continued support of Cabot and we look forward to speaking with you again next quarter have a great day.
Speaker Change: This concludes today's conference call. Thank you for participating and you may now disconnect.
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