Cabot Corporation (CBT) Q1 2026 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the First Quarter Fiscal Year 2026 Cabot Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would like now to turn the conference over to Robert Rist, Vice President, Investor Relations and Corporate Planning. Please go ahead, sir.

Thank you, Michelle. 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 first 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 and future operational and financial performance. Each forward-looking statement is subject to the 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 Investor Relations section of the 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 measure presented should not be considered to be an alternative to 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 Relations section of our website. I will now turn the call over to Sean, who will discuss the first quarter highlights, followed by several company and business updates. Erica will review the corporate financial details and the business segment results for the first quarter. Following this, Sean will provide an update to our 2026 outlook, discuss market demand drivers, provide some closing comments and then open the floor to questions. Sean?

Thank you, Rob. Good morning, ladies and gentlemen, and welcome to our call today. In the first quarter, we continued to execute at a high level in a challenging economic environment, delivering adjusted earnings per share of $1.53 in the quarter. EBIT in the Reinforcement Materials segment declined by 22% compared to the first quarter of fiscal 2025 in what remains a challenging demand environment. This decline was driven primarily by lower volumes in the Americas and Asia Pacific. EBIT in the Performance Chemicals segment increased by 7% compared to the first quarter of fiscal 2025 on a more favorable product mix and continued momentum in our Battery Materials product line. Later in the presentation, I'll spend more time highlighting the strong performance and momentum we see in this growth vector, including the exciting announcement of our multiyear agreement with PowerCo. Operating cash flow was strong in the quarter, which allows us to invest to sustain our high-quality asset base and gives us the flexibility to invest in high confidence growth projects while returning significant levels of cash to shareholders. As we indicated in our fourth quarter fiscal 2025 call, the global demand environment, particularly in the Reinforcement Materials segment remains challenging. Tire production levels have been depressed and are lagging growth in miles driven as inflation has likely caused a delay in the replacement cycle and a trade-down effect at the lower end of the market. In the Western geographies of the Americas and Europe, we have seen several years of tire production declines, which has impacted carbon black utilization rates. Tire imports from Asia continue to take share from domestically produced tires. And while Western countries are taking increasingly aggressive actions to address unfair trade practices, we have yet to see tariffs or other trade measures result in a meaningful decline in the flow of imported tires. In the United States, imports from Asia have declined sequentially in the last few months, but remain up approximately 4% year-over-year. In Brazil, tariffs have helped slow the flow of imported tires, particularly from China, resulting in a 4% year-over-year decline in 2025 of passenger car tire imports. In Europe, tire imports continue to be at elevated levels as few protection measures have been implemented to date. The tire industry currently has an antidumping petition under review with a determination scheduled for June of 2026. It is against this backdrop that we conducted our annual negotiations in Reinforcement Materials for our calendar year 2026 supply agreements. As we communicated in November, these negotiations were challenging and took longer to conclude. As you know, our tire agreements are heavily concentrated in the Americas and Europe as Asia Pacific is largely a spot market. The level of tire imports from Asia into the Western regions contributed to a reduction in local tire production, leading to a decline in local carbon black capacity utilization in a more intense competitive environment. In the Americas, we faced pricing pressure as carbon black industry utilization rates dipped below 80%. In Europe, the challenges were even more pronounced with both pricing and volumes coming under pressure as tire imports increased 8% year-to-date November 2025. Pricing declined across Western regions and in defending our pricing levels, we lost volume in Europe. Pricing impacts varied by region, but were generally in the range of 7% to 9% decline as compared to 2025 levels, reflecting the competitive pressures in the market. Across all regions, we continue to price our products based on our value proposition of reliable in-region supply, quality, sustainability and innovation. However, the competitive dynamics negatively impacted the outcome of the negotiations. As we look forward, the picture on regional carbon black utilizations is a dynamic one. There are some recent signals that trade protection measures may be starting to have an impact on tire imports in the Americas, and we do see the global tire majors actively investing to reinvigorate and defend their Tier 2 tire brands. Furthermore, there is an expectation embedded in global data's tire production forecast for 2026 for growth in Western geographies as demand recovers from depressed levels. While these factors would be supportive of an improving regional utilization picture for our Reinforcement Materials segment, we are taking a series of actions to reinforce our leadership and to provide a foundation for sustained strong margins and cash generation. In fiscal year 2025, we delivered $50 million of cost savings, and we expect to maintain these benefits in fiscal 2026. While we have new growth assets coming online that we anticipate will increase costs in fiscal year 2026, we expect these new assets will drive bottom line profitability. We also are focused on additional programs in fiscal 2026 that are targeted to reduce existing costs by another $30 million. These programs include procurement savings, headcount reductions in Reinforcement Materials and benefits from accelerating technology deployment for improved yield and manufacturing efficiencies that we expect will be rolled out during fiscal 2026 and into fiscal 2027. In addition to cost actions, we have reduced our capital expenditures for the full year to align with the current market environment. We are tensioning this spend while continuing to maintain our assets and invest in attractive growth opportunities to sustain strategic momentum. We expect our new CapEx range to be approximately $60 million lower at the midpoint compared to 2025 actuals, which would support robust free cash flow generation, enabling us to sustain a high level of cash return to shareholders through dividends and share repurchases. Finally, as a result of the declining carbon black utilization levels in Western geographies, we believe it is prudent to look at our network capacity and align it to current demand levels. With this in mind, we are finalizing plans to rationalize carbon black capacity in the Americas and Europe to position us to operate more efficiently, enhance profitability and maintain flexibility as we navigate this challenging demand environment. We will communicate any decisions when they are made. Before I hand it over to Erica to discuss our financial performance, I also want to highlight an area of our portfolio that continues to perform well, our battery materials product line. We are a global leader in this space with the broadest range of conductive additives, formulations and blends and strong participation with leading global customers. Battery Materials represents a significant strategic opportunity for Cabot, and we are excited about the progress we've made and the momentum we see ahead. Our Battery Materials product line delivered another strong quarter with revenue growth of 39% compared to the first quarter of fiscal 2025. This growth reflects the continued momentum in electric vehicle and energy storage applications as well as the benefits of new customer agreements and capacity expansions that we believe position us well for sustained performance. EBITDA margins in this product line remain attractive running at 22% on a trailing 12-month basis, which underscores the strength of our technology and disciplined execution of our strategy. Global demand for lithium-ion batteries is expected to accelerate meaningfully over the remainder of the decade, with the sector projected to grow at roughly a 20% compound annual growth rate through 2030. This expected growth is being driven by both the continued rise in electric vehicle adoption on a global basis and also by the rapid rollout of large-scale battery energy storage systems. We believe our LITX and ENERMAX brands are increasingly well positioned. These brands bring together our most advanced conductive additives, formulations and blends, solutions that are enabling superior battery performance in both EV applications and battery ESS installations. A critical element of our battery materials strategy is to establish incumbency in the Western geographies as gigafactories are built there. Last month, we signed a multiyear agreement with PowerCo, and I want to take a moment to highlight why we believe this is such an important milestone for our battery materials product line. PowerCo is a subsidiary of Volkswagen Group, the second largest auto producer globally with a broad and deep lineup of electric vehicles. VW has made clear its strategic intent to produce a substantial portion of its own batteries through the build-out of several gigafactories, and this agreement positions Cabot squarely at the center of that strategy. The agreement represents the first step in what we expect will be a multisite, multiyear expansion of PowerCo's battery production footprint. Securing this agreement not only reinforces our leadership position in conductive additives formulations and blends for lithium-ion battery applications, but it also creates a strong foundation for growth as PowerCo scales its operations. We are excited about the opportunity to grow alongside an industry leader and deepen our role as a trusted partner in the global EV battery value chain. Over time, we expect this agreement to be a material contributor to profit growth in our Battery Materials product line. It underscores the strength of our technology and the confidence our customers have in Cabot as a leader in this space. As I mentioned, one area that is helping to fuel the strong growth in our Battery Materials product line is the rapidly growing battery energy storage systems application. These systems play a critical role in enabling clean, reliable and flexible power for the energy grid, renewable energy sources and the fast-growing network of data centers. As demand for uninterrupted power supply accelerates, driven in part by the proliferation of AI-enabled data centers, the demand for battery ESS is expected to grow at a 26% compound annual growth rate through 2030. Cabot is well positioned to capitalize on this growth. Our advanced conductive additives, formulations and blends are designed to improve cycle life and enhance battery efficiency, delivering the performance that customers in this application require. As we look ahead, we anticipate that battery ESS will be a significant contributor to the long-term growth of our Battery Materials product line. We expect the combination of this rapidly expanding sector and the larger battery electric vehicle market to create a powerful growth engine for Cabot. With strong fundamentals, increasing demand for energy storage and Cabot's differentiated technology, we believe we are well positioned to create a high-growth business that can drive long-term shareholder value creation. I'll now turn the call over to Erica to discuss the financial and performance results of the quarter in more detail. Erica?

Thanks, Sean. Adjusted EPS in the first quarter was $1.53. This performance was 13% below the same quarter last year, driven by lower EBIT in our Reinforcement Materials segment, partially offset by higher EBIT in our Performance Chemicals segment. Cash flow from operations was strong at $126 million in the quarter, which included a working capital decrease of $5 million. Discretionary free cash flow was $71 million in the quarter. We ended the quarter with a cash balance of $230 million, and our liquidity position remains strong at approximately $1.4 billion. Capital expenditures for the first quarter of 2026 were $69 million, and we expect capital expenditures in fiscal 2026 to be between $200 million and $230 million. Additional uses of cash during the first quarter were $24 million for dividends and $52 million for share repurchases. Our debt balance was $1.1 billion, and our net debt-to-EBITDA remained at 1.2x as of December 31, 2025. The operating tax rate for the first quarter was 28%, and we continue to 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 $28 million in the first fiscal quarter compared to the same period last year, primarily due to lower volumes, which were down 7% year-over-year. Regionally, volumes were down 15% in the Americas and 7% in Asia Pacific, while volumes in Europe were up 6%. Volumes were impacted by lower production levels and year-end inventory management by our tire customers in the Americas and increased competitive intensity in Asia Pacific. Looking to the second quarter of fiscal 2026, we expect a sequential decrease in EBIT of approximately $5 million to $10 million, driven by the outcomes of our calendar year 2026 customer agreements, partially offset by higher volumes from seasonal improvements. As fiscal 2026 progresses, we expect to see improving EBIT in the third and fourth quarters as compared to the second quarter, driven by the benefits from our new capacity in Indonesia and our acquisition in Mexico as well as improved costs from the countermeasures we are driving. Now turning to Performance Chemicals. During the first quarter of fiscal 2026, EBIT for the segment increased by $3 million as compared to the same period in the prior year. The increase in the first quarter was due to higher gross profit per ton from a more favorable product mix and continued optimization and cost reduction efforts. Volumes were lower by 3% year-over-year, primarily due to lower demand in Europe. Looking ahead to the second quarter of fiscal 2026, we expect EBIT to remain relatively consistent with the first quarter as sequential volume improvement in the Western regions is expected to be offset by the timing of costs. As fiscal 2026 progresses, we expect to see improving EBIT in the third and fourth quarters as compared to the second quarter, driven by stronger volumes in the back half of the year. I will now turn it back to Sean to discuss our 2026 outlook. Sean?

Thanks, Erica. As we look to the balance of fiscal year 2026, we are narrowing our adjusted earnings per share guidance range to between $6 and $6.50. This guidance incorporates the final outcomes of our calendar year 2026 annual Reinforcement Materials customer agreements that I discussed earlier. In terms of assumptions that underpin this outlook, in Reinforcement Materials, we anticipate volumes to be relatively flat year-over-year, which includes the impact of the first quarter volumes and some volume loss in Europe in our calendar year '26 customer agreements, which are offset by volumes from new assets, including our new line in Indonesia and our plant acquisition in Mexico. We closed this acquisition at the end of January and results will be consolidated starting in February. Our outlook also reflects lower pricing year-over-year driven by the annual agreements that I discussed earlier. In Performance Chemicals, we anticipate low single-digit volume growth year-over-year, driven by our Battery Materials product line and tailwinds in certain end markets such as infrastructure and consumer. We expect to maintain our gross profit per ton as compared to the prior year. Our balance sheet continues to be very strong with net debt-to-EBITDA of 1.2x as of December 31, 2025. We anticipate continued strong free cash flow generation driven by robust operating cash flow and moderating CapEx spending. The combination of balance sheet strength and cash flow generating capacity allows for significant flexibility in our usage of cash, which we plan to invest to maintain our global asset base, drive strategic growth opportunities and return cash to shareholders through dividends and share repurchases. While the current environment remains challenging, there are a number of factors that would provide support for an improved demand profile over the medium and longer term. As I've discussed, for Reinforcement Materials, demand in the Western geographies has been impacted by elevated tire imports and depressed tire sales. Looking forward, industry forecasts project domestic tire production in the Western regions to return to growth in 2026 and 2027. The rate and pace of this recovery will likely be influenced in part by trade measures on tire imports, such as tariffs and antidumping duties, which are currently playing out across the various regions. In addition, pent-up demand for a delayed tire replacement cycle is expected to support volume growth as consumers return to more normal buying patterns as inflation abates and interest rates move down. At the same time, the global tire manufacturers are reinvigorating and leveraging their Tier 2 brands to defend share from Asian tire imports into Western geographies, which should help stabilize regional demand and support volume growth moving forward. In Performance Chemicals, we expect our diverse portfolio of applications to deliver GDP plus growth over time. While some end markets such as housing and construction and consumer durable applications remain subdued, we see strong growth prospects in certain applications that are driven by macro tailwinds. As I discussed previously, our Battery Materials product line is expected to continue benefiting from the rapid build-out of battery energy storage systems and continued penetration of electric vehicles, particularly in Asia and Europe. Beyond batteries, our product sales into infrastructure-related applications continue to experience strong demand as our consumer and semiconductor-related applications. As we look ahead, we would expect a continued easing of inflation and a further rate cut cycle to be supportive of demand levels overall. Given our broad global footprint and recognized technology leadership, we believe we are well positioned to capture value as demand recovers. While the environment remains dynamic, we are focused on leveraging Cabot's strengths to position the company for long-term success. It starts with our leadership position. Cabot is a proven technology leader with the widest global scale in our industry, and this positions us well to win and outcompete others. Our large global network of competitive assets and leading technologies enable us to optimize globally, serve customers effectively and maximize returns. In the current environment, our focus will be on global asset optimization, process technology deployment, efficiency programs and cost reductions to extend our leadership position and maintain our strong margins. The cash flow characteristics of Cabot and our investment-grade balance sheet are enduring strengths of the company. The financial capacity allows us to fund strategic growth opportunities while maintaining a high level of cash return through dividends and share repurchases. We expect cash flow and liquidity to remain strong, and our investment-grade balance sheet provides great flexibility to execute our Creating for Tomorrow strategy. Finally, we see clear growth opportunities ahead and are investing to win. We are building momentum in our Battery Materials product line, which is a proven high-growth platform supported by strong macro tailwinds fueling the data center build-out and electrification of mobility. In the infrastructure sector, wire and cable applications and investments in alternative energy generation are experiencing robust growth, and Cabot's products and global footprint are well recognized by leading customers in these key applications. Cabot is well positioned to navigate the current uncertainty, and this management team brings a track record of experience, disciplined execution and a commitment to shareholder value creation. I am confident in our ability to execute our strategy and to return to a path for growth beyond 2026. I will now turn the call back over for our Q&A session.

[Operator Instructions] And our first question will come from John Roberts with Mizuho.

I think the Asia country tire export data leads the U.S. import data by a couple of months. What are you seeing on those tires that are leaving the ports in Asia?

John, I would say the picture kind of remains pretty consistent. I think in the Americas, we're definitely seeing in more recent months that the tire imports have been coming down a bit sequentially, certainly in North America. And I think the current data would be consistent with that. So we'll have to see how that plays out, but that would be the current view. And certainly, in South America, the import levels have -- as a result of tariff measures down there, particularly in Brazil, have resulted in a modest year-over-year decline. And again, I think current data would be consistent with that. So there can be turbulence here, of course, as regional -- as various regions implement various protective policies, you can have a bit of channel stuffing that can happen ahead of changes in those policies. But I would see that those directional trends, I think, seem to be continuing. So we'll be watching that closely. In Europe, I think there haven't been significant measures put in place yet. There is an antidumping duty petition that's under review right now. So we'll have to see what happens there. So I would say the tire imports continue into Europe.

And is the volume weakness in Europe silicas just the construction silicones market? Or is it being exacerbated by Dow's silanes closure?

Yes. I would say, overall, our demand has not been materially impacted by Dow's silanes closure. We reached an agreement there to be compensated for any nonperformance or underperformance that contract calls for. I think Europe, just in general, is weaker in terms of housing and construction, which is a big end market for silicones. And so I would say it's more of a general market weakness than anything specific.

And the next question will come from Kevin Estok with Jefferies.

So just real quick, on your multiyear supply agreement with PowerCo, I guess, have you quantified what the, I guess, expected earnings contribution is from this agreement?

Kevin, we have not for obvious confidentiality reasons. But obviously, the agreement is an important one strategically because of how significant PowerCo, we expect will be given VW's very broad lineup of EVs and their intent to make a substantial portion of their own batteries, number one. Number two, as part of our strategy, we not only compete and do very well as a leader in China, but our strategy calls for establishing incumbency outside of China as battery gigafactories get developed. And this contract is an important one in that -- in pursuit of that strategy.

Okay. Understood. And I guess my second question would be just -- so obviously, you're largely a make-in region, sell-in region model. But I guess I was wondering what the magnitude of your cross-border specialty product sales where that were basically exposed to tariffs. And I guess, whether you had any pricing mechanisms that would recover some of those costs?

Sorry, Kevin, could you just repeat, you're talking about in the Reinforcement segment? Or are you talking about in Performance Chemicals?

Actually -- well, either of you, if you have any, I guess, any points there, yes.

Yes. No, the company is largely a make-in region, sell-in region. We do have some relatively small volumes of products in Performance Chemicals that move across regions, given the unique and specialty nature of certain technologies, they're not necessarily replicated in every region. And so there are some small cross-regional volumes that do move there, but they would be quite small in the overall -- as an overall proportion of Cabot sales. And so we've not really had any material impacts in those product lines as a result of the trade tensions that are underway globally.

And our next question will come from David Begleiter with Deutsche Bank.

Sean, can you talk to how your new Mexico plant fits into Americas manufacturing footprint now that you look to close capacity in the Americas?

Yes, sure, David. So the Mexico plant is an important one strategically. As you know, we already have a plant in Mexico in Altamira, very close by to where this plant is. So there will certainly be operational synergies as we integrate this site into our existing management structure there in Mexico. And Mexico continues to be an important market where there is tire expansion. And so we see this as an important strategic asset. I think the other thing to remember here is I think it's an important and strong signal of our long-term partnership with Bridgestone. This agreement has a long-term supply agreement, providing materials back to Bridgestone for use in their tire production in Mexico and in the Americas. So it's underpinned by a long-term agreement. So I think our view here is that it fits in strategically given our existing footprint and the integration with our assets there as well as the close partnership with customers that are investing in that region for growth in tire production.

Very clear. That's helpful. And one more question, Sean. Can you talk to on your annual contracts, how the volumes were realized by region, North America, South America and Europe for the upcoming -- for the current year?

Sure. So in terms of the contract agreements from a volume standpoint, I would say, overall, as was commented earlier, we're expecting volumes across Reinforcement to be relatively flat globally. And -- but if we look at the contract specifically, I would say in the Americas, there's basically no real change in share position here. So we would expect those volumes to sort of grow with market, which will be kind of flattish is the outlook, a little bit up perhaps, but in that range. And then in Europe, we did lose some volume in the contract negotiations there. And so we would expect European volumes to be down in 2026.

And our next question will come from Josh Spector with UBS.

I had 2 questions just on the Battery Materials piece. I mean I think if we go back a couple of years ago, you sized that business as something like $25 million in EBITDA, and we expected it to grow, then there was pricing pressure and it came down. So can you help us re-level set to the earnings in that business in fiscal '25? And then second, I think a lot of the growth in conductive additives were more about energy density. We talked about EV batteries and extended range. Does conductive carbons have the same value add in battery energy storage systems where maybe the space requirement isn't as much of a constraint. Just curious if you can comment on those 2 pieces.

Sure. Thank you, Josh. So in terms of the ESS application and the EV application, there are similarities in terms of expectations for battery performance, but there are also some differences. You highlighted one of the biggest ones, which is, obviously, in an EV, there's a space constraint. And so trying to pack more energy density into smaller space is important, and that leads to slightly different requirements in terms of the conductive additives and the blends or formulations of those additives to meet that requirement, whereas energy storage systems generally are less space constrained. And so I would say that's the most significant difference. In both cases, they require high-value conductive additives and blends and formulations of those to optimize the performance. So the profitability of both of these applications is quite good. So we're excited about the build-out there. Certainly, the momentum behind the build-out of energy storage is accelerating. And then outside of -- when you look at China and Europe for EVs, there's continued penetration there. With respect to the overall profitability of the business, we have not disclosed a more recent number. You are correct back in that period of time where we were. And then the industry went through a sort of prolonged destocking cycle. So I would say it took a while to kind of level out. I think people realize that there was excess inventory of battery cells in '23 and into 2024. So there was kind of a normalizing that's been quite difficult to figure out what the current run rate is. That being said, we have been growing very nicely here in this business, and I commented earlier on our overall profit EBITDA margin level in this business. So you can see that it's a material contributor to the Performance Chemicals segment and one that we believe will grow as the build-out outside of China happens to be a material contributor to Cabot. That's certainly our aspiration here, and we're making investments to make that happen. And we sit here today in a really strong position. We've got the broadest range of conductive additives and an ability to formulate blends of both conductive carbons and carbon nanotubes and carbon nanostructures. And I think that portfolio is a distinguishing one and then the global footprint that we offer as customers build out outside of China is an important feature of Cabot's position here, and we're very well positioned with the top global producers around the world as they're building out. So we feel like we're hitting the milestones here. And in any new business, there's always some choppiness as things evolve, but we're focused on the long term here and very pleased with the momentum we're seeing.

[Operator Instructions] The next question comes from Lydia Huang with JPMorgan.

How does it affect your margins when you sell to a higher mix of lower-tier tires versus when you sell to more higher-tier tires? And have there been changes to your customer mix?

Lydia, so I would say in terms of the major customer mix, I would say, not major changes to that mix or profile as we look out into 2026. I think your question about profitability by tire, I think it's important to think about this in a couple of different ways. First of all, every tire has several grades of carbon black in it, depending on which part of the tire you're talking about. So each is specifically designed to impart performance in that part of the tire architecture. So segmentation is important for us, not only in terms of customers, which types of tires and then which grades of carbon black we try to tailor for different parts of each tire. And so the market choices and the segmentation are important. Traditionally, what you find is that reinforcing grades impart more performance on the tire. Those are the ones that are on the tread or part of the tread architecture. And so that's very important in terms of delivering not only the wear but the fuel economy requirements of the tire. So you'd traditionally see higher performance related to those types of grades. But the segmentation is a very important part of how we run this business, both customer types of tires, whether they're for domestic or export as well as which products we try to tailor for different parts of the tire.

And how is reinforcement materials volume trending quarter-to-date in the Americas compared to the December quarter? And are the performances different in South America and in North America?

So in terms of volumes so far in January, we are seeing that volumes are up a little bit year-over-year in the Americas. And so I think that's -- in Europe, that's positive. And then if you look at sequentially, it's up some 15-ish percent or something in that range, I think, sequentially. But that's not a surprise. You normally have a seasonally weaker December quarter. And I think that was even more pronounced as you saw in our volume results for December because of significant inventory management by customers at the end of the year. So seeing a sequential step-up like that was expected. So on a year-over-year basis through January, it seems like it's developing fine and as expected.

Thank you. I am showing no further questions in the queue at this time. I would now like to turn the call back over to Sean for closing remarks.

Great. Thank you, Michelle, and thank you all for joining today our Q1 call, and we look forward to talking with you again in the upcoming quarters, and thank you for your continued support of Cabot Corporation. Have a great day.

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