Chemicals manufacturer Cabot Corp. (CBT) reported Wednesday that profit for the first quarter climbed from last year, driven by higher sales and volumes, robust unit margins and delivery of restructuring savings.
In a statement, president and chief executive officer, Patrick Prevost said, "We are very pleased with our results, as we are performing at pre-downturn earnings levels despite lower sales volumes. Our ability to maintain unit margins through the downturn and the early delivery of our restructuring savings were critical to this performance."
The company added that it experienced continued improvement in its key end markets worldwide during the quarter, with emerging markets seeing the fastest growth. The company also sustained solid cash and balance sheet positions despite an increase in working capital that resulted from higher demand.
The Boston, Massachusetts-based company reported net income of $29 million or $0.44 per share for the first quarter, higher than $4 million or $0.06 per share in the prior-year quarter.
The results for the latest quarter include $13 million or $0.21 per share of certain items principally related to restructuring charges, while the year-ago quarter included $1 million or $0.02 per share of the same.
Excluding items, adjusted earnings for the quarter climbed $0.65 per share from $0.08 per share in year-ago quarter. On average, seven analysts polled by Thomson Reuters expected the company to report earnings of $0.27 per share. Analysts' estimates typically exclude special items.
Net sales and other operating revenues for the quarter rose to $679 million from $652 million in the same quarter last year. Wall Street analysts had a consensus revenue estimate of $619.50 million.
Total quarterly volumes increased 20% to 25% over first quarter of fiscal 2009 as demand continued to improve in key end markets.
Segment-wise, profit for the core segment for the first quarter rose to $47 million from $27 million, primarily due to Rubber blacks profits increasing to $42 million from $24 million in the year-ago quarter, as well as 24% higher volumes, lower fixed costs from restructuring savings and favorable utilization variances.
Performance segment profit climbed to $34 million from $3 million in the year-ago quarter, driven by higher volumes, lower fixed costs and favorable utilization variances. The new business segment loss remained flat with a year ago at $3 million, while segment profit for specialty fluids was $5 million, up a million from last year, reflecting higher margin rental revenue and a favorable service mix.
Income from operations for the first quarter surged to $51 million from $18 million in the prior-year quarter, while Selling and administrative expenses was $67 million, up from $56 million in the year-ago quarter. Gross profit for the quarter climbed to $136 million from $92 million in the same quarter last year.
Looking Ahead, "Our key end markets are showing continued signs of recovery which bodes well for the future. Given that we are seeing demand stabilize around current levels, a full recovery to pre-downturn volumes may occur at a more moderate pace. Our restructuring work is yielding benefits, recently completed energy investments will begin to show results in 2010 and our emerging market investments will enable growth in the coming years. In summary, we have weathered the economic downturn with a strong balance sheet and are confident we will deliver on our long-term financial goals," Prevost added.
Last month, KeyBanc Capital upgraded Cabot shares to 'Buy' from 'Hold' with a price target of $29. The brokerage also increased its 2010 EPS estimate to $1.40 from $1.25, while establishing its 2011 estimate of $1.85.
CBT closed Wednesday's regular trading session at $26.57, up $0.86 or 3.35% on a volume of 0.91 million shares, higher than the three-month average volume of 0.50 million shares.
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