Good day, everyone, and thank you for standing by. Welcome to the Fourth Quarter 2024 Cabot Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. Now, I'll pass the call over to the Vice President, Treasurer and Investor Relations, Steve Delahunt. Please go ahead.

Thanks, Carmen, and good morning. I would like to welcome you to the Cabot Corporation 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 fourth quarter of fiscal year 2024, 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 the 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 ended September 30, 2023, and in subsequent filings we make with the SEC, all of which are also 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 measures presented should not be considered to be an alternative to the financial measure required by GAAP. Any 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 Investor section of our website. Also, as we typically do each year, I'd like to remind you that over the next several weeks, in connection with the vesting of restricted stock awards issued under our long-term incentive equity program, officers of the company will be selling shares to pay tax and other obligations related to their rewards. I will now turn the call over to Sean, who will discuss our success against our 2021 Investor Day objectives, followed by our fiscal 2024 highlights, including our cash flow results and capital allocation for the year, and finally, our 2024 sustainability highlights. Erica will review the corporate financial details and business segment results for the fourth quarter and fiscal year. Following this, Sean will provide a 2025 outlook and some closing comments and open the floor to questions. Sean?

Thank you, Steve. Good morning, ladies and gentlemen, and welcome to our call today. Fiscal year 2024 was one marked by tremendous accomplishments for our company. We concluded our 2021 Investor Day three-year goal period, having achieved an adjusted earnings per share growth CAGR of 12%, which represents the top end of our target range of 8% to 12%. We also generated $1.2 billion of cumulative discretionary free cash flow over that three-year period, a very strong result compared to our Investor Day goal of greater than $1 billion. During our Investor Day in 2021, we launched our Creating for Tomorrow strategy. This strategy seeks to leverage our global leadership, innovation capabilities, and commitment to operational excellence to drive strong growth of earnings and cash flow. When we set our three-year targets in December of 2021, we made certain demand and market assumptions based on the environment at that time. While many of those key assumptions turned into headwinds since 2021, particularly the end market growth rates and foreign exchange rates, it hasn't impacted our focus on achieving our corporate objectives. I am immensely proud of the entire Cabot team, resilience and agility they 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. In fiscal year 2024, we delivered adjusted earnings per share of $7.06, an increase of 31% year-over-year, and total segment EBIT of $701 million, an increase of 15% year-over-year. In our business segments, Reinforcement Materials EBIT 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. Performance Chemicals segment EBIT increased 31% year-over-year to $164 million, as we saw our volumes reconnect with underlying demand in the second…

Thanks, Sean. Adjusted EPS in the fourth quarter was $1.80. This performance was 9% above the same quarter last year, driven by higher EBIT in the Performance Chemicals segment and a benefit from a lower tax rate, partially offset by lower EBIT in our Reinforcement Materials segment. Cash flow from operations was strong at $204 million in the quarter, which included a working capital decrease of $39 million. Discretionary free cash flow was $105 million in the quarter. We ended the quarter with a cash balance of $223 million and our liquidity position remains strong at approximately $1.4 billion. Capital expenditures for the fourth quarter of fiscal 2024 were $92 million. Additional uses of cash during the fourth quarter were $24 million for dividends and $66 million for share repurchases. Our debt balance was $1.1 billion and our net debt to EBITDA remained at 1.2 times. 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, impacts related to the devaluation in Argentina, and differences in withholding taxes on foreign earnings. We anticipate our operating tax rate for fiscal 2025 to be in the range of 27% to 29%. 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. Now, moving to Reinforcement Materials. EBIT decreased by $11 million in the fourth quarter, compared to the same period last year. The decrease was primarily due to lower volumes, a less favorable geographic mix, and higher costs, partially offset by higher pricing and improved product mix in our 2024 calendar year customer agreements. The higher costs were driven by the…

Thanks, Erica. For the past nine years, this management team has driven a consistent strategy, focused on strengthening our leading portfolio of global businesses, investing for advantaged growth in 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 returned to shareholders. Delivering on our commitments is paramount to this management team, and we have accomplished that despite a turbulent global environment. 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. 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. 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% to 10% from our 2024 results. We expect continued earnings growth in Reinforcement Materials and a steady recovery in Performance Chemicals. In Reinforcement Materials, we expect global volume growth and higher unit margins. The segment is also expected to have higher costs from the startup of our final air pollution control project in the US 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. Foreign exchange rates, interest rates, and energy prices can all impact positioning in the range. The midpoint of our range assumes relatively consistent FX rates and interest rates moving in line with current market…

Thank you so much. [Operator Instructions] Please stand by for our first question, and it comes from the line of John Roberts with Mizuho. Please proceed.

Hi. Great. Thank you. 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.

Yeah, good morning, John. As we had commented last quarter, we definitely saw a return to more normalized volumes and mix in the segment in the back half of 2024. And certainly, a piece of that was improvement in the semiconductor application, so where fumed silica goes into CMP, as you point out. And so, we saw a continuation of that certainly into Q4, and I would say it's running at fairly normal rates right now. I don't think we're seeing any particular signs of [deterioration] (ph). I would say, it's sort of returned back to what we would think would be normalized levels compared to what we saw in early '24 and most of '23, where it was very, very weak. I think on the automotive side, the outlook for calendar year 2025 is for auto production to grow, 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. But that's the expectation that we would be building around at this point as it relates to automotive.

And then, what's the revenue capacity of the EV battery materials plant that you're targeting for the US?

So the plant is targeted to start up in 2028. Of course, we're in final stages right now of negotiations with the Department of Energy, but the high-level timeline is something in that range. And we'd be producing both carbon nanotubes, as well as conductive additive dispersion there. Our expectation on that project is that it would generate IRRs in the sort of 20%-ish range -- something in that range, and the total capital for that is around $180 million, of which 50-ish -- $50 million would be covered by this grant. So that's kind of a high-level sense of how we would see the economics. Again, startup would be in 2028.

All right. Thank you.

Thank you so much. And one moment for our next question, and is from the line of Joshua Spector with UBS. Please proceed.

Hi, good morning, everyone. It's Chris Perrella on for Josh. I wanted to follow up with the RM demand. 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 US and what's the latest you're seeing there?

Yeah. So, good morning. So we -- as Erica commented, we did see a solid October volume and certainly the return of normalized patterns related to the Mexican drought issue. So, I think that's good. The expectation for 2025 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 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. There certainly are 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 light truck tires. Those just went into effect last month. And then more recently, anti-dumping duties imposed by the US on Thai truck tires, TBR tires. And so, certainly some pushback to the elevated level of tire imports on the sort of trade and tariff front. And then, some signals as well that the Western tire producers may be adjusting strategy a bit and defending share against the imports more. So, it's certainly a dynamic situation, and one that 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 the current level of imports, but we'll have to see how these competing forces 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 $6 billion of projects that are underway in the US for expansion, as well as modernization in Mexico, US, and Canada. So, our expectation longer term is that tire production will grow here in North America to support miles driven and provide regional capacity.

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? Thank you.

Yeah. So, we expect to be in the range of $250 million 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 US at a point in Louisiana, as well as the completion of our new production unit in Indonesia that will 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.

Great. Thank you very much.

Thank you. One moment for our next question, that comes from the line of Jeff Zekauskas with JPMorgan. Please proceed.

Thanks very much. I think your battery materials demand in the United States has contracted for eight quarters in a row. Can you comment on that? What's behind that? Is it just too expensive to make tires in the US?

Yeah. Good morning, Jeff. I just want to clarify. I think you said battery materials has contracted for eight quarters. I think -- you mean, tire?

Reinforcement Materials, forgive me.

Yeah, sure. Well, certainly what we have seen is that Asian tire imports have increased over the last one year to two years and that's been accelerating, I would say. 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 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. So, certainly a dynamic situation, as I just commented on, there's some pushback here, both in terms of tariffs, as well as anti-dumping duties. So, I wouldn't say it is so much a question of being uncompetitive. I think it's more a question of is China dumping tires and certainly with some recent anti-dumping duties imposed in this particular case against Thai tires, I think there are questions around that. Certainly, in the long term, the tire makers have committed a lot of capital into North America to build additional capacity and to modernize plants, which are much more automated than they used to be. So, given the level of automation, the low electricity costs, the fact that synthetic rubber is very competitive here given the competitiveness of the petrochemical industry in the US, I think all of those factors would say that it is a competitive place to make tires and a place where a significant amount of capacity is going to be needed 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 coming months and year.

So in the context of all that, how are your price negotiations going in the United States on for the upcoming year? Is your general expectation that you'll be up or down or flat, or you can't tell?

Yeah. So this year, negotiations, Jeff, are playing out along the timeline that's 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 competitive nature of that information. Now, with that, I would say the environment in Europe remains firm, I would say. Demand in the Americas is certainly impacted by the near-term elevated Asian imports, but the long-term supply side fundamentals haven't changed here with no new capacity adds and higher costs related to environmental regulations. So I would say that supply side picture remains the same. Now, as we indicated in our guide, we are expecting margin improvement in Reinforcement Materials in the fiscal year. So, that's our current expectation.

And maybe quickly, two other issues. Can you tell us how your battery materials business did for the quarter and for the year, both in terms of sales and EBITDA in 2024? And are you beginning to get energy benefits in Europe as gas prices have moved up?

Sorry, Jeff. Just repeat the last part of that question. It faded out. Energy benefit in Europe? I didn't get the last part.

Yeah. So, natural gas costs in Europe are now, I don't know, $13 an MMBtu.

Yeah.

Yeah. And so, because of your cogen capabilities in Europe, does that give you a benefit -- or is that giving you a benefit?

Yeah. Okay. So yeah, two questions there. So, on the battery front, our volumes were up in 2024, and ex-investment in future projects, our margins were -- profits were up, but we were investing quite a bit to drive future programs and to drive future investment projects, including the project that we recently announced in the DOE -- with the DOE here in the US. So, I would say, progress, but the environment in China remains competitive and that today, still accounts for 75% to 80% of battery production remains -- is produced in China. So, our plan here is that -- our view is that, over time, as this market bifurcates and you have production in the West 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. And certainly, the pricing and profit margins and the competitive dynamics are quite different inside and outside of China. And our sales today outside of China and margins are substantially better. So I think as that bifurcation plays out, then we're expecting the profits to grow in this product line and to become a material contributor to the earnings growth of overall Cabot Corp. So that's a bit of what's happening right now in the battery market. In terms of energy prices, as it relates to cogen, each asset where we have a cogeneration facility is a little bit different in terms of the type of energy we produce and the marker against which -- the energy marker against which that is priced. I would say, overall, what you've been seeing is that the forward curve on oil and -- is sort of trending down a little bit. So that may put a little pressure on the profits out of the energy centers in 2025. But that's a dynamic situation. It very much depends on the pricing of the underlying energy, and that can move quickly, as we have seen.

Thank you so much.

Thank you. [Operator Instructions] Our next question is from Laurence Alexander with Jefferies. Please proceed.

Good morning. This is Dan Rizzo on for Laurence. You talked a bit about maintenance costs in Q4, and I was just wondering what the outlook is for maintenance costs and maybe turnarounds in '25 versus '24, if it's going to be less or more, or how we should think about it?

Hi, Dan. This is Erica. So maintenance 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 cost from Q4 to Q1. In the Performance Chemicals segment, there were maintenance costs in Q4. We expect relatively flat performance on EBIT there. So, we wouldn't expect a big change as you think about Performance Chemicals.

Yeah, I was thinking about the year -- the whole year, not just Q1. I don't know how that's going to play out.

Yeah, I think, from a maintenance perspective, there wouldn't be a material change year-over-year to think about on the fixed cost profile for the segment...

All right. Thank you.

...related to maintenance, yeah.

No, no, that's very helpful. Thanks. And then you mentioned your -- the Western tire producers kind of defending their share, which I assume means getting aggressive with prices. And I was wondering if that's how you're thinking about it, too, and how that could potentially affect you with contracts and with -- I don't know, just with the outlook?

Yeah. So, I mean, I think there is some evidence in the tire retail channel and in the industry reports there that the Western tire makers are getting a little more aggressive to defend their position most likely, I would say, probably in their -- what they call their Tier-2 brands. Certainly, they've all had a strategy of 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 the smaller rim sizes. But I think -- given the elevated level of tire imports, I think it makes sense that there'd be some level of defense there by them to defend their share in those more competitive ends of the market. So, I think we'll have to see how that plays out. And then, the other factor, as I commented on, is what happens on the trade front. Certainly, combination of tariffs and anti-dumping duties are currently being implemented and whether more comes, given the trade policies of the incoming administration in the US, difficult to read that at this point. But I think it's pretty clear there's some pushback against this elevated level of imports here. And depending on where that goes, that obviously will have impact on what the demand for carbon black will be in the region. And again, our current view at this point is for modest improvement in 2025 in terms of carbon black demand in the Americas.

Thank you very much.

Thank you so much. And as I see no further questions in the queue, I will conclude the Q&A session and turn the call back to Sean Keohane for final remarks.

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, 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, and thank you very much for supporting Cabot, and we look forward to seeing you soon.

And thank you all who participated in today's conference. You may now disconnect. Good day, everyone.