Cabot To Boost Global Carbon Black Capacity On Strong Demand

Cabot Corporation (NYSE:CBT) is adding considerable capacity to its global network of carbon black plants. The company is expanding its global capacity by more than 300,000 metric tons through a combination of operational improvements, plant expansion and debottlenecking projects.

Cabot will add capacity of roughly 160,000 metric tons through an expansion at its facility in Cilegon, Indonesia. This will serve the increasing demand of carbon black in Southeast Asia, which is expanding at 4-5% per annum. The company expects product from this expansion to be available for sale by late 2020 or early 2021.

Moreover, Cabot is investing roughly $50 million in debottlenecking projects and operational improvements across 18 of its carbon black facilities. The move will provide an additional 150,000 metric tons of increased carbon black capacity available for industrial rubber, tire and specialty carbon customers. Notably, the company has already completed about a third of this capacity expansion and it expects the project to reach full completion by 2021. These investments are expected to increase its global carbon black capacity to roughly 2.5 million metric tons.

Cabot’s shares have lost 7% in the past three months, underperforming the industry’s 3.3% decline.

Cabot incurred net loss of $173 million or $2.80 per share in the second quarter of fiscal 2018 (ended Mar 31, 2018) against net profit of $74 million or $1.19 a year ago. Barring one-time items, adjusted earnings for the reported quarter were $1.04 per share (up from 88 cents a year ago), which surpassed the Zacks Consensus Estimate of $1.00.

Cabot, during second-quarter fiscal 2018 earnings call, stated that it expects the Reinforcement Materials segment to continue strong performance for the remainder of the year on the back of strong execution in a favorable market. For the Performance Chemicals segment, it expects to maintain margins while driving volume growth.

The company sees ongoing competitive pressures to impact results in the Purification Solutions unit amid lower variable costs and higher seasonal volumes in the second half of the year. For the Specialty Fluids segment, it expects the startup of drilling activity on previously awarded projects, which is likely to drive results for rest of the year.

Cabot Corporation Price and Consensus

Cabot Corporation Price and Consensus | Cabot Corporation Quote

Zacks Rank & Stocks to Consider

Cabot currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks worth considering in the basic materials space include The Chemours Company (NYSE:CC) , Westlake Chemical Corporation (NYSE:WLK) and Huntsman Corporation (NYSE:HUN) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Chemours has an expected long-term earnings growth rate of 15.5%. Its shares have gained 21.7% in a year.

Westlake Chemical has an expected long-term earnings growth rate of 12.2%. Its shares have rallied 96.2% in a year.

Huntsman has an expected long-term earnings growth rate of 8.3%. Its shares have moved up 29.4% in a year.

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