We use cookies to improve your experience, analyze site usage, and show relevant ads. Go to our Privacy Policy for details.
The call describes a balanced picture: robust cash generation, strong growth and high margins in Battery Materials and better-than-expected Performance Chemicals results, coupled with active shareholder returns and disciplined capital allocation. Offsetting these positives are meaningful near-term headwinds in Reinforcement Materials (EBIT down 29% YoY), input-cost and geopolitical uncertainty, and announced capacity rationalizations with execution costs. Management is taking cost savings, pricing and network optimization actions and reaffirmed full-year guidance, but risks remain if demand softens.
Cabot reaffirmed fiscal 2026 adjusted EPS guidance of $6.00–$6.50 per share, noting that the range assumes pricing actions will offset higher input costs and that the key variable is customer demand (upper end if demand holds, midpoint assumes modest Q4 moderation, lower end if demand softens); they also expect Reinforcement Materials Q3 sequential EBIT improvement of $5–$7M and Performance Chemicals EBIT to be relatively flat sequentially. Management reiterated full‑year capital expenditures of $200–$230M and a $30M cost‑savings target for fiscal ’26, announced capacity rationalization of ~120,000 metric tons targeting ~ $22M annual run‑rate cost benefit by mid‑calendar 2027 with ~$24M cash cost to execute over 2–3 years, and said Battery Materials should generate roughly $40M of EBITDA in FY26 (trailing‑12‑month EBITDA margin ~24%). Financial flexibility metrics cited include Q2 cash from operations of $77M, discretionary free cash flow of $63M, cash balance $252M, total liquidity of ~ $1.3B, debt $1.3B with net debt/EBITDA of 1.5x; capital returned includes a 5% dividend increase to $1.89 annualized and $100M of share repurchases YTD (including $49M in Q2), $73M returned in the quarter, operating tax rate guidance 27–29%, and targeted pricing actions (up to ~20% in March in certain Specialty Carbons/Compounds) to protect margins.
Operating cash flow of $77 million and discretionary free cash flow of $63 million in Q2. Cash balance of $252 million and total liquidity of approximately $1.3 billion. Net debt-to-EBITDA of 1.5x provides financial flexibility.
Returned $73 million to shareholders in the quarter ($49 million share repurchases, $24 million dividends). Year-to-date share repurchases of $100 million. Announced a 5% increase in the quarterly dividend to an annualized $1.89 per share.
Battery Materials revenue grew 43% year-over-year. Trailing 12-month EBITDA margins for the business are ~24%. Company expects Battery Materials to generate approximately $40 million of EBITDA in fiscal 2026 as capacity is fully available to support demand.
Performance Chemicals segment EBIT of $59 million, up 18% year-over-year, driven by higher gross profit per ton from favorable product mix and optimization. Volumes increased in Battery Materials and Specialty Carbons product lines.
Executing programs targeting $30 million in fiscal 2026 savings (procurement, headcount reductions, process technology) and on track to hit target. Announced targeted capacity rationalization actions expected to deliver ~$22 million annual run-rate cost benefit by mid-2027.
Reduced full-year capital expenditure expectation to $200 million–$230 million (Q2 capex $45 million) to align investment with current environment while preserving investment in high-confidence growth projects.
Reaffirmed adjusted EPS guidance for fiscal 2026 in the range $6.00 to $6.50 per share, reflecting confidence in cash generation, pricing actions and cost countermeasures despite macro and energy uncertainties.
Company highlighted strategic role of materials across data center infrastructure and BESS (battery energy storage systems), emphasizing conductive additives, fumed metal oxides and aerogel opportunities tied to AI/data center growth and renewable integration.
Thank you for standing by, and welcome to Cabot's Second Quarter Fiscal Year 2026 Earnings Conference Call. [Operator Instructions]. I would now like to hand the call over to Robert Rist, Vice President of Investor Relations. Please go ahead.
Thank you, Latif. Good morning. I'd like to welcome you to the Cabot Corporation's earnings teleconference. With me today are Sean Keohane, CEO and President; and Erica McLaughlin, Executive Vice President and CFO. Last night, we released results for our second quarter of fiscal 2026, copies of which are posted in the Investor Relations section of our website. 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 this call. During this conference call, we will make forward-looking statements about our expected future operational and financial performance. Each forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements.
Additional information regarding these factors appears under the heading Forward-Looking Statements in the press release we issued last night and in our annual report on Form 10-K for the fiscal year ending September 30, 2025, and in subsequent filings we make with the SEC, all of which are available on the company's website. In order to provide greater transparency regarding our operating performance, we refer to certain non-GAAP financial measures that involve adjustments to GAAP results. Any non-GAAP financial me...
