Driven by Asian markets, Cabot's rubber carbon black business made up for the decline in sales

Cabot's reinforcing materials division achieved significant profit growth in the fourth quarter of fiscal 2023. The division provides carbon black to the tire and rubber industries. Earnings before interest and tax (EBIT) for carbon black for rubber increased 23% year-on-year to US$134 million (approximately RMB 980 million) in the last fiscal quarter ended September 30. This growth is mainly due to good negotiated prices with customers in 2023 and a better product portfolio.

The report showed that although sales fell year-on-year in the U.S. and Europe, Middle East and Africa (EMEA), a 3% growth in the Asian market offset this decline. Full-year profit reached $482 million, an increase of 18% year-on-year, while sales fell 4% to $2.5 billion.

Regarding the outlook for 2024, Cabot's President and CEO Sean Keohane expects sales growth to remain low in single digits, while agreed prices will increase in 2024 and the product portfolio will improve. He added: "We believe that in major end markets, destocking is basically over. The operating rate in the fourth quarter laid a solid foundation for the reinforcing materials department. As for costs, we expect future pricing and product mix to offset some of the increased costs."

It is understood that the record performance of Cabot's reinforcing materials division is due to its local supply business model. Keohane said this is particularly important in the face of rising geopolitical tensions, which are putting pressure on global supply chains.

He also pointed out that long-term demand for replacement tires in the reinforcing materials business and support from the balance of supply and demand in mature regions have driven business improvements over the past eight years. However, as Russian carbon black will be subject to sanctions, its use in Europe will be more restricted. At the same time, stricter environmental regulations require manufacturers to make significant investment in emissions reduction, doubling the cost of new production capacity and requiring recycling in the form of price increases.

Cabot's rubber carbon black business has a good outlook, supported by favorable long-term needs and growing need for innovation.