Cabot Corporation (CBT) Q4 2025 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the Q4 FY 2025 Cabot earnings conference call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Steve Delahunt, Vice President, Investor Relations and Treasurer. Please go ahead, sir.

Thanks, Michelle, 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 2025, copies of which are posted in the Investor Relations section of our website. The slide deck that accompanies this call is also available on 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, 2024, 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 financial measures required by GAAP. Any non-GAAP financial measures referenced on this call are reconciled to the most directly comparable GAAP financial measure in the table at the end of our earnings release issued last night and available in the Investors section of our website. Also, as we do typically each year, I would 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 the fiscal 2025 highlights, our cash flow results and our strategic highlights for the year. Erica will review the corporate financial details and business segment results for the fourth quarter and fiscal year. Following this, Sean will provide a 2026 outlook and some closing comments and then open the floor to questions. Sean?

Thank you, Steve. Good morning, ladies and gentlemen, and welcome to our call. Before we move into year-end highlights, I'd like to take a moment to share an important update regarding our Investor Relations leadership. As a [Technical Difficulty]

Ladies and gentlemen, please stand by. Your conference call will resume momentarily. Ladies and gentlemen, please stand by. We are having technical difficulties and your conference will resume momentarily. Ladies and gentlemen, thank you for standing by. I would now like to hand the conference back over to your speaker, Sean Keohane. Please go ahead, sir.

Thank you, Michelle, and apologies everyone. We seem to have a challenge with our connection there. So let me pick up where we left off. I want to first begin by taking a moment to share an update regarding our Investor Relations leadership. As announced earlier, Robert Rist will be stepping into the role of Vice President of Investor Relations and Corporate Planning. He'll be transitioning into the role over the course of the first quarter of fiscal year 2026, succeeding Steve Delahunt, who will continue with Cabot as Vice President and Treasurer. Rob has been with Cabot since 2007 and has held a number of key leadership roles across the company in corporate strategy, corporate planning and within our Reinforcement Materials segment and finance organization. He brings a strong understanding of our business and financial priorities, and his strategic insight and financial acumen will be instrumental as he helps lead our engagement with the investor community. I want to sincerely thank Steve for his many contributions to our Investor Relations function over the past 9 years. His leadership has built a strong foundation for our investor engagement, and we are grateful for his continued service and treasury. Steve and I have worked together in this capacity for my entire tenure as CEO, and I've always been impressed with his intellect, teamwork and most of all, how he lives our Cabot values of integrity, respect, excellence and responsibility. I'm confident that this transition will be seamless, and we look forward to continued momentum in our IR efforts. Fiscal year 2025 was characterized by a turbulent macroeconomic, geopolitical and global trade environment, but it was a year in which the enduring strengths of Cabot were exhibited. We executed well and delivered strong results. In fiscal year 2025, we delivered a record adjusted earnings per share of $7.25, which represents an increase of 3% year-over-year. I'm very pleased with our performance, particularly in light of the fact that volumes across both segments were down year-over-year and substantially below our expectations at the beginning of the fiscal year. Total consolidated EBIT increased year-over-year with Reinforcement Materials EBIT down 5% and Performance Chemicals EBIT up 18%. We continue to generate strong cash flow, which supported our capital priorities and a significant return of cash to shareholders. I'm immensely proud of the Cabot team for the resilience they demonstrated and the countermeasure mindset that they brought to their daily work to support our customers and deliver earnings growth in a very difficult and dynamic environment. Looking a bit deeper at our financial metrics, fiscal year 2025 marked another year of strong overall performance in terms of profitability, cash flow generation and balance sheet strength. For the year, we generated adjusted EBITDA of $804 million, which was up 3% year-over-year and represents a 22% margin. While our end market volumes were down, we were able to more than offset this weakness by optimizing across our global footprint of assets, reducing costs and driving disciplined execution across our operating platform of commercial and operational excellence. The quality of our returns remained strong with an adjusted ROIC of 18%, and we delivered these results while maintaining our strong balance sheet. In dynamic and turbulent times, balance sheet strength and liquidity are essential, and Cabot continues to exhibit these distinguishing features. We finished fiscal 2025 with net debt-to-EBITDA of 1.2x and liquidity of $1.5 billion, which gives us tremendous flexibility to invest in strategic organic and inorganic projects to grow the long-term earnings of the company while returning a significant amount of cash to shareholders. Overall, I am very pleased with our performance across our financial metrics, and this puts us in a good position to navigate these uncertain times and remain committed to our long-term strategic growth priorities. The Cabot portfolio has robust cash flow characteristics and fiscal 2025 marked another year of strong performance, where we generated operating cash flow of $665 million and free cash flow of $391 million. The cash generation power of our portfolio is a central element of our shareholder value creation strategy. With these strong cash flows, we seek to allocate capital inside a balanced framework focused on 3 priorities: first, ensuring our asset base is well maintained to provide a reliable and sustainable offering to our customers; second, underwriting high confidence organic and inorganic growth investments to deliver long-term earnings growth; and third, returning capital to shareholders through dividends and share repurchases. The strength of our cash flows allows us to execute against these priorities while maintaining our strong investment-grade balance sheet. In fiscal year 2025, we paid $96 million in dividends, including a 5% increase announced in May, reflecting our confidence in the long-term cash flow outlook of the company. We've maintained a continuous and growing dividend since 1968, and we would expect to continue raising the dividend over time as our earnings and cash flows grow. We also repurchased $168 million of shares in fiscal year 2025, which reduced our outstanding share count by 3% and when combined with dividends, totaled $264 million of capital returned to shareholders. Overall, we feel very good about our long-term cash generation power and balance sheet strength, which provides us with great strategic flexibility. During our fiscal year, we also made important progress on key elements of our Creating for Tomorrow strategy. I'll spend a few minutes now highlighting some important accomplishments that are part of our strategy to deliver long-term shareholder value creation. In July, we announced that Cabot has entered into a definitive agreement to acquire Bridgestone's reinforcing carbon plant in Mexico. This manufacturing facility is located in close proximity to Cabot's current reinforcing carbons facility in Altamira, Mexico and strengthens our partnership with Bridgestone through the long-term supply of reinforcing carbon products from this plant. The facility also has the capacity to manufacture additional reinforcing carbons, providing flexibility to support broader customer needs and future growth opportunities for Cabot. The transaction is expected to close in the second fiscal quarter, subject to regulatory approvals and to be accretive in the first year. This is an example of how we are deploying our strong cash flow to fund an attractive acquisition that strengthens our portfolio, drives incremental growth and is accretive to earnings. We are pleased with the earnings progression and strategic developments in our Performance Chemicals segment despite persistent end market weakness in certain important sectors such as automotive and construction. While we believe the end markets of automotive and construction will improve over time from their current cyclical lows, we are focused on targeted applications where the macro trends are favorable. Specific sectors include infrastructure and alternative energy, digitalization and consumer-driven applications. Success across these sectors was an important contributor to the earnings -- increased earnings in the segment in fiscal '25. The demand for conductive carbons for power distribution cables is supported by growth in power generation and distribution, and this application is expected to grow in the 8% range through the end of the decade. Fumed silica for the CMP application is one where we saw a strong double-digit growth in 2025 as broad digitalization and automation trends drive a greater need for semiconductor chips. And finally, consumer spending has been a pretty resilient driver of economic growth globally and our specialty carbons, specialty compounds, fumed silicas and aerogel materials are all benefiting from this strength. Sustainability is central to who we are at Cabot, and we continue to be recognized for excellence. As we discussed last quarter, we are proud to have received a Platinum rating from EcoVadis for the fifth consecutive year. EcoVadis is the world's largest and most trusted provider of business sustainability ratings with more than 150,000 rated companies. A Platinum rating is the highest level of achievement and places Cabot among the top 1% of companies in the manufacturing of basic chemicals. This prestigious recognition underscores Cabot's commitment to transparency and provides our customers with visibility into our sustainability performance. In the fourth quarter, we also published our 2025 sustainability report, outlining our progress to date and our direction for the future. In this publication, we reported our strong progress against our calendar year 2025 goals and also unveiled our 2030 sustainability targets, which reflect our ambition to continuously drive measurable impact for our stakeholders. And finally, we continue to make strong progress in building a leading Battery Materials business that we believe can become a material contributor to Cabot over the long-term. Our strategic development approach is based on a mix of organic technology development efforts that build on our core conductive carbons and thermos management technologies, coupled with strategic M&A to broaden our product lines and access new technologies. In fiscal 2025, we executed well against our strategy, growing total contribution margin by 20% year-over-year. We continue to pursue what we call a bifurcation strategy with tailored approaches to China, coupled with a focus on building incumbency in the western geographies, where local supply and service is of strategic value. Product development is essential in this fast cycle industry, and we made important progress on this front in 2025. We recently launched a new conductive carbon product developed for use in lithium-ion batteries for energy storage systems, or ESS. This high-performance conductive additive delivers enhanced conductivity, longer cycle life and improved processability for ESS cells used in residential, commercial and industrial applications. The global ESS market is growing rapidly, driven by the rising demand for grid flexibility, the transition to renewable energy and the need for storage solutions that support the rapid build-out of data centers. Our LITX 95F solution addresses these challenges by delivering key performance and efficiency advantages that are vital for accelerating ESS adoption. In addition to our segmented efforts to capture the ESS opportunity, we continue to realize strong volume growth in our high-performance conductive additive blends. This was a core thesis of our decision to acquire Shenzhen Shanshan Nano Materials (sic ) [ Shenzhen Sanshun Nano New Materials ], and I'm very pleased with the strong growth in sales of these products to leading global battery producers in 2025. As we look ahead in this business, our outlook remains positive, supported by the expectation that the lithium-ion battery market will grow at a compound annual rate of approximately 20% over the next 3 years. We believe we are well positioned to capitalize on this growth opportunity and build a global leadership position that creates significant long-term value for our shareholders. I'll now turn the call over to Erica to discuss the financial and performance results of the quarter in more detail.

Thanks, Sean. Adjusted EPS in the fourth quarter was $1.70. This performance was 6% below the same quarter last year, driven by lower EBIT in both our Reinforcement Materials and Performance Chemicals segments. Cash flow from operations was strong at $219 million in the quarter, which included a working capital decrease of $69 million. Free cash flow was $155 million in the quarter. We ended the quarter with a cash balance of $258 million, and our liquidity position remains strong at approximately $1.5 billion. Capital expenditures for the fourth quarter of fiscal 2025 were $64 million, and we expect capital expenditures in fiscal 2026 to be between $200 million to $250 million. Additional uses of cash during the fourth quarter were $25 million for dividends and $39 million for share repurchases. Our debt balance was $1.1 billion, and our net debt-to-EBITDA remained at 1.2x. The operating tax rate for fiscal year 2025 was 27% as compared to 26% in fiscal 2024. The higher tax rate was driven by the geographic mix of earnings and the new OECD global minimum tax implementation, which increased our tax rate in certain lower tax jurisdictions. We anticipate our operating tax rate for fiscal 2026 to be in the range of 27% to 29%. Now moving to Reinforcement Materials. EBIT decreased by $4 million in the fourth quarter compared to the same period last year, primarily due to lower volumes, which were down 5% year-over-year. The decline in volumes was due to weaker customer demand driven by the uncertainty from tariffs and a weaker global macroeconomic environment. In the Americas, the lower volumes were also driven by the continuation of elevated level of Asian tire imports. Regionally, volumes were down 7% in the Americas and 6% in Asia Pacific, while volumes in Europe were up 5%. The lower volumes were partially offset by continued optimization and cost reduction efforts in the segment. EBIT for fiscal 2025 was $29 million below the prior year, driven by 5% lower volumes. Volumes declined in both the Americas and Asia, and the decline in volumes was partially offset by lower costs and favorable foreign currency impacts. Looking to the first quarter of fiscal 2026, we expect a sequential decrease in EBIT of approximately $15 million to $20 million, driven by lower volumes in the Americas and Europe and increased competitive intensity in Asia. Seasonally lower volumes in the Americas and Europe are also expected to negatively impact regional mix. Volumes are also expected to be sequentially lower as customers manage their year-end inventory levels. Now turning to Performance Chemicals. During the fourth quarter of fiscal 2025, EBIT for the segment decreased by $2 million as compared to the same period in the prior year. The decrease in the fourth quarter was due to lower volumes. Volumes were lower by 5% year-over-year, primarily due to lower volumes in the European region, particularly in construction-related applications. EBIT in fiscal 2025 was $30 million higher than the prior year. The increase was driven by higher volumes in the fumed metal oxides and battery materials product lines. The segment also benefited from continued optimization and cost reduction efforts throughout the year. Looking ahead to the first quarter of fiscal 2026, we expect EBIT to remain relatively consistent with the fourth quarter, as modest sequential volume improvement is expected to be largely offset by the timing of higher costs. I'll now turn it back to Sean to discuss the 2026 outlook. Sean?

Thanks, Erica. Fiscal year 2025 certainly developed differently than we expected just 1 year ago. Automotive production in the Western economies contracted in 2025 and elevated Asian tire imports into Western geographies continue to persist. Additionally, global manufacturing PMI was in or near contraction territory for most of 2025, and the expected interest rate cut cycle was slower than expected, leaving the housing and construction sector in a trough. In addition, 2025 was characterized by global trade turbulence, which is making it very difficult to determine long-term durable demand levels. As we look to 2026, we don't yet see signs of improvement across these dimensions. While trade policy is trending toward regionalization, and this aligns well with our model of make in region, sell in region, it will likely take some time for end markets and supply chains to find their new normal. In 2026, we now expect light vehicle auto production in North America and Europe to decline for a third year in a row. In terms of the tire sector, the persistent elevated level of tire imports from Asia has reduced domestic tire production in the Americas and Europe, thereby creating a more challenging competitive environment for tire manufacturers and their suppliers, including carbon black producers. Furthermore, global manufacturing PMI continues to straddle 50 with no clear catalyst to move firmly above 50 and into expansionary territory. With this as a market backdrop, we expect adjusted earnings per share in fiscal year 2026 to take a step back from our strong performance in 2025. Acknowledging there is significant uncertainty in both end market demand and the range of outcomes in our annual tire contract negotiations, we expect fiscal year 2026 adjusted earnings per share to be between $6 and $7. Our range includes various scenarios related to volumes and pricing outcomes across our businesses. The lower end of the range would reflect a weak demand environment and pricing pressures in 2026. The higher end of the range would reflect the ability to largely offset pricing pressures with volumes, optimization, cost savings and benefits from our growth investments. As we think about the segment outlook for fiscal 2026, in Reinforcement Materials, we are currently negotiating our calendar year contracts. While we expect outcomes to be varied across customers, our expectation is that overall contract outcomes will be lower than the prior year. Our customers are facing challenges in the Western regions from Asian tire imports along with macroeconomic uncertainty and are pushing hard on suppliers given these dynamics. This is causing challenging contract discussions with our customers that are taking longer to close. In addition, I would say the utilization situation in the Western regions is similar or slightly worse than the prior year. Tire imports from Asia have increased modestly year-to-date into the U.S. They've decreased modestly into South America, and they have risen more materially into Europe in 2025. Therefore, it is a challenging picture for local production of tires in the Americas and Europe, which in turn impacts our business in those regions. Our capacity in Asia enables participation in demand in Asia, but it is a competitive market at this time, requiring us to balance volumes and margins. Regarding Performance Chemicals, in 2025, we have seen rather strong demand in Asia, muted levels of demand in the Americas and challenging demand patterns in Europe. We anticipate these trends will continue in 2026. The challenges in Europe are also related to end product imports from Asia into Europe, which is impacting demand pull-through from our customers in the region. We are seeing positive demand in Asia as our customers benefit from strong export levels, and we're utilizing our capacity there quite well. While end market demand in construction and auto remains in a cyclical trough, we are seeing strong and improving demand in attractive end markets like battery materials as well as specific sectors, including infrastructure and alternative energy, digitalization and consumer-driven applications. We expect these growth areas, along with continued optimization across the segment to enable year-over-year growth in segment EBIT. We expect cash flow from operations to remain strong and our net debt to EBITDA to remain in a similar range to 2025. We expect the cash flows from operations will fund our capital expenditures, a strong dividend and share repurchases in the range of $100 million to $200 million. As we think about our longer-term outlook and the targets we set for 2027 at our Investor Day last year, it is clear that the assumptions we had 1 year ago are not playing out as planned. The targets were established based on a certain set of assumptions for our key end markets. Specifically, automotive production was forecasted to grow at a higher rate than we now see, and the Western markets were projected to be positive, which has not been the case in 2025 or the 2026 forecast. We expected tire production to grow globally, including in the Western markets, but the persistent level of Asian tire imports has impacted demand for our product in the Americas and Europe, resulting in a negative regional mix. With the change in the U.S. administration's policy towards electric vehicles, the outlook for batteries in the U.S. has also been reduced. And finally, the interest rate cut cycle that was projected at that time has been slower to develop, resulting in a delayed pick up in housing and construction sector. In addition to these end market factors, the global trade negotiations are creating significant uncertainty, and we have not yet seen a stable period to interpret a new normal for our key end markets. Given where we are today and our expectation for 2026, the implied recovery needed to achieve these targets by 2027 is not expected. We will, of course, monitor the external environment and its impacts on our business and continue to update you as our visibility improves. Certain of our end markets are suffering from cyclical headwinds, particularly the automotive and the building and construction sector, but we expect volumes in these applications will improve over time as interest rates are cut and strengthen the consumer. The biggest dynamic that is yet unclear is the impact of Asian tire imports on tire production volumes in the Western markets. At this point, we are observing mixed signs. In the U.S., there is a range of tariff levels that impact tires and antidumping duties have been levied on certain producers. We have not seen a decrease in imports into the U.S. based on the most recent data, which is year-to-date July, and it remains too early to determine if these actions will have a material impact on the flow of tires. In South America, we are seeing some evidence that trade actions are having a positive impact on the level of tire imports into Brazil. Currently, there are tariffs on passenger car and truck tires as well as antidumping duties on tires from certain countries, including China and Thailand. On a year-to-date basis through August, we have seen a decline in tire imports into Brazil. So that sign is encouraging. In Europe, there are very modest tariffs in place at this time on passenger car and truck tires. The EU is currently investigating allegations of dumping of passenger car tires from China and potential provisional measures may be introduced as early as December 2025. On truck tires, there are currently antidumping duties in place. Whether these levels are sufficient to change trade flows remains unclear. In addition to trade policy by different countries, we are also observing that the global tire majors appear to be taking steps to improve competitiveness and defend their Tier 2 brands. Both trade policy and actions by the global tire majors to defend their brands could have a favorable effect on tire production in the Western regions, but the magnitude and timing remain uncertain at this time. While there is uncertainty from the global trade dynamics and its impact on our end market demand, we are focused on leveraging our strengths to navigate the situation and position Cabot for long-term success. It starts with our capability as a strong operator. Over the past decade, we have created significant value through disciplined execution of our operating platform of commercial and operational excellence. In this turbulent time, our efforts on operational excellence will skew more towards yield and cost rather than asset availability. On the commercial excellence front, our strategy will seek to balance pricing and volume, and we will remain laser-focused on executing in key end markets where there are favorable tailwinds. As a global leader in our respective product lines, we have a large network of competitive assets and leading technologies that enable optimization to best serve our customers and maximize returns. In the current environment, our focus will be on global asset optimization, efficiency programs and cost reductions. Despite the more challenging environment, we expect cash flow and liquidity to remain strong, and our investment-grade balance sheet offers great strategic flexibility to execute our Creating for Tomorrow strategy. And finally, we will continue to be disciplined in our allocation of capital. We expect to deploy capital against high confidence strategic growth areas such as battery materials while maintaining a meaningful return of capital to shareholders. Cabot is well positioned to navigate the current uncertainty, and this management team brings a track record of experience and disciplined execution, both of which are important in these dynamic times. Thank you, and I will now turn the call back over for our question-and-answer session.

[Operator Instructions] Our first question will come from the line of John Roberts with Mizuho.

Are you seeing any volatility in your rubber black operating rates regionally? Or is it relatively stable? I know it's shifted, but I don't know if it's shifted and it's stabilized or it's still volatile.

Yes, John, I would say it's largely stable, but stable in the context of the elevated tire imports and how those have had an impact on demand in any given region. But if you look, for example, in North America, you'll see that tire imports were up modestly on a year-to-date basis. So that translated into largely stable operating levels in North America. So that's really the factor that's at play here, but we've been largely stable.

And then are you being impacted at all by Dow's silicone rationalization efforts in Europe?

So as you know, Dow has announced the closure of their siloxanes plant in Barry Wales, and we have a fumed silica plant next door to them where we exchange some feedstock and materials as part of a long-term agreement that goes out through the end of 2028. And we're currently in discussions with Dow on exactly how they'll perform against that contract.

Our next question comes from the line of David Begleiter with Deutsche Bank.

This is Emily Fusco on for Dave Begleiter. Maybe a question on tire contract prices. How much do you expect 2026 prices to be down or expectations by region? And maybe if you could give some color on what percentage of negotiations have been settled.

Sure. So what I can tell you is that we have completed roughly 25% of our contracts at this point, which is behind where we were at this time last year, where we were closer to 45% of the negotiations complete. And I think it's taking a little longer this year in part because everyone is having a difficult time trying to project exactly where their demand expectations should be for 2026, given all of the turbulence. I can't comment on final outcomes here as we're obviously far from done, and this is competitive information.

Our next question comes from the line of Joshua Spector with UBS.

It's Chris Perrella on for Josh. Could you elaborate on the -- for the Performance Chemicals, the underlying assumptions that you have baked into the guidance for this year in terms of volume and growth -- volume and price expectations or mix expectations?

Sure. So in Performance Chemicals, if you think about the basket of applications that we sell into, it typically over a longer period of time, will grow at sort of 1.5x to 2x GDP. Now what we are seeing in this segment is certain applications, particularly those in automotive and construction related are currently in what I would say is a cyclical trough. And so over time, we certainly expect those to improve, but the expectation of any material improvement into 2026, I think, is fairly limited. Now where we do have very positive expectations is in our targeted growth areas that I commented on in my prepared remarks, areas, including battery materials, the infrastructure applications, the broad trends around digitalization and how that's driving increased demand for our fumed silica for the CMP application for chip manufacturing. Those types of applications continue to exhibit strong growth, and we are performing well there. So when we look at the overall expectation for volumes, we certainly expect volumes to be up in 2026. But again, a mix of some headwinds that are more than being offset by these targeted applications with strong tailwinds.

And is there -- with -- depending on the application mix and your expectations, is there a mix uplift? Or is this -- I know the battery materials is kind of higher value, but is there a mix uplift expected this year?

Yes. I would say the mix is probably pretty balanced. These applications that are growing well have good strong margins. But as you might recall, volumes that get pulled through from the automotive sector typically have pretty high margins as well because that business tends to be specified. So I would say the margin uplift from mix would be fairly, I would say, fairly balanced. The trade-offs would be fairly balanced there.

[Operator Instructions] And our next question will come from the line of Kevin Estok with Jefferies.

I'm asking on behalf of Laurence. I was wondering if you could share a little bit about how maybe the regional utilization rates kind of shook out during the quarter, maybe by region, if you have that sort of data?

Sure, sure. So the regional picture has not really changed much from our prior comments. Certainly, in the Western regions, the impact from tire imports from Asia has reduced domestic production from our customers. I think if you go around the world, what you'll see in North America is that utilizations are somewhere between 75% and 80%. They're higher in Europe, I would say, somewhere in the 85-ish percent range, in part because Europe is a region that is net short of carbon black capacity and there's value that's placed on local supply. And we also had some contract volume pick up in last year's agreements. So overall, the utilizations are running in a higher place there. South America, they are lower and South America is a region that has been impacted by tire imports. But as I commented, we're starting to see trade policy and tariff policy begin to impact the level of tire imports. They're reducing the level of tire imports in the most recent data. So that's encouraging and hopefully will shift things back a bit in the region there to improve utilizations. But right now, those remain in the 70s at this point. And then if you look at Asia Pacific, we're running at quite high utilizations across our Asia assets as we typically do. And here, we're really choosing carefully the customers and products that we are supplying to maximize the value out of our Asian assets and to align our capacity with customers that really value our value proposition of product performance and quality and supply reliability. So that's a bit of a walk around the world in terms of utilization. I would say that's largely been the story throughout 2025. So no recent shift in that. And again, the question as we move forward is how do regional volumes develop in large part, given how tire imports are likely to play out.

And I would like to hand the conference back over to Sean Keohane for closing remarks.

Great. Thank you very much for joining us today. Apologies for the technical difficulty at the very beginning there, but glad we were able to get back connected here. Thank you for joining. Appreciate your support of Cabot, and we look forward to talking to you again throughout the next quarter. Thank you.

This concludes today's conference call. Thank you for participating, and you may now disconnect.