Cabot Corporation (NYSE:CBT) Q4 2019 Earnings Conference Call - Final Transcript

Nov 05, 2019 • 02:00 pm ET

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Cabot Corporation (NYSE:CBT) Q4 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] Our first question comes from Mike Leithead with Barclays. your line is now open.

Analyst
Mike Leithead

I guess first to start in Reinforcement Materials I was hoping you could maybe parse apart the performance of your China business versus your non-China business both how they performed in the fourth quarter and how you expect them to trend into 2020.

Executive
Sean D. Keohane

Hey, Mike so I think as you know China accounts for about 40% of the world's tire production and correspondingly something in that range in terms of the world's carbon black business. And the Asia market tends to be more spot and the western more mature markets tend to be more contract-based. So as we progressed through the year in 2019 what you saw was largely an unchanged story where the results of our contract our customer agreements in 2019 were favorable and that was largely offset by a more competitive intensity in Asia Pacific. All in given the environment we're quite pleased with the result and I think it speaks to the robustness of the business. But story in Q4 really didn't change much compared to the way the story unfolded throughout the full fiscal year. It was really those 2 components that were playing out.

Analyst
Mike Leithead

And how are you thinking about those 2 businesses going into next year?

Executive
Sean D. Keohane

Yes. So our view right now Mike is that we certainly don't see any catalysts that will cause at this stage a change in the macroeconomic factors here. So our thinking right now is that 2020 will set up to be fairly similar to 2019. And that kind of informs the middle of the road in terms of our range. And then there are factors that drive us above that. And depending on how they play out and those same factors could drive us below. But on balance we see an unchanged environment in 2020 kind of lining up with the middle of that range.

Analyst
Mike Leithead

If I could just ask one last one on Reinforcement Materials. For 2020 contract pricing have those negotiations been completed yet at this point? And I guess any color you could give on the level of pricing benefit you assume in your guidance would be helpful.

Executive
Sean D. Keohane

Sure. So while the macro environment may not be exactly what we had hoped for or at the level that it was last year I would say the overall supply/demand balance remains favorable especially in the Western regions where most of our business is contracted. And the contract process is taking a little bit longer this year due to changing market environment but also the impact of MARPOL and our efforts to educate customers on the important transition to get protection mechanisms in place here. I've spoken in the past about how we have put DCAs or deliberate cost adjustments in place in most contracts. We had those in place in 2019. And for those where we didn't we actually moved to raise prices to recover any of that. But as