Cabot Corp Provides Update Regarding the Coronavirus Impact
March 30 2020 - 8:00AM
Business Wire
Maintains strong liquidity and balance sheet;
withdraws previous fiscal 2020 earnings guidance
Cabot Corporation (NYSE: CBT) today provided an update regarding
the impact of the coronavirus pandemic to its business and
subsequent actions that the company is taking in response to the
situation.
President and CEO Sean Keohane, said, “Our first priority is to
protect our employees and those within the communities in which we
operate. We are following all local regulations and guidance issued
by relevant authorities, and have implemented policies to restrict
global travel and allow remote work wherever possible. We are
restricting access to our facilities to critical personnel only and
have implemented temperature screenings, enhanced personal
protective equipment and on-site hygiene practices, and policies to
promote social distancing. We continue to monitor the situation
closely and we will take further action as necessary.”
In addition, we continue to supply our customers around the
world and we have contingency plans in place to respond to the
needs of our customers. The financial results for our second fiscal
quarter are expected to be solid. While there was an adverse impact
during the quarter to our sales volumes in China related to the
coronavirus, there was strong demand in the rest of the world in
January, February and early March. However, with the uncertainty in
the future demand for our products, we are withdrawing our previous
financial guidance for fiscal year 2020, which did not include any
impact from the coronavirus. We plan to update our view on the
outlook when we have more visibility into demand.
Financial Detail
We continue to maintain a strong balance sheet. As of December
31, 2019, we had $173 million in cash and cash equivalents and $1.1
billion in total debt, giving effect to net debt of $933 million.
This translated to total net leverage of 1.8 (net debt to trailing
twelve months Adjusted EBITDA). We currently have borrowing
availability under our revolving credit facilities of $1.1 billion.
The financial covenant in our corporate credit facility is a total
debt to Adjusted EBITDA limit of 3.5x. Given this balance sheet
profile and available liquidity, we are well positioned to operate
in a challenging near-term demand environment.
Regarding cash flow, we are aggressively managing our net
working capital, which includes an expected reduction in the third
fiscal quarter from declining raw material costs and lower
inventory levels. We are also ensuring our capital allocation
actions align with the current environment. In order to maximize
free cash flow, we are assessing opportunities to reduce previous
plans for capital spending. We also expect to close on our
previously announced acquisition of Shenzhen Sanshun Nano New
Materials Co., Ltd. in early April. In addition, we have halted
share repurchases in the near-term. We have paid a dividend
consistently since going public in 1968 and expect to continue
payment of the dividend going forward.
Keohane continued, “I remain confident that the underlying
fundamentals of our businesses are strong. However, we are taking
swift action to better align our cost structure and working capital
needs to the near-term demand patterns. We are making prudent
capital allocation decisions to ensure our cash flow and liquidity
profile remain robust. I am confident in our team’s ability to
manage the company through this uncertain time and emerge very
well-positioned as the environment improves.”
About Cabot Corporation
Cabot Corporation (NYSE: CBT) is a global specialty chemicals
and performance materials company, headquartered in Boston,
Massachusetts. The company is a leading provider of rubber and
specialty carbons, activated carbon, inkjet colorants,
masterbatches and conductive compounds, fumed silica, and aerogel.
For more information on Cabot, please visit the company’s website
at: http://www.cabotcorp.com. The Company encourages investors and
potential investors to consult the Cabot website regularly.
Cautionary Statement Concerning Forward-Looking
Statements – This release contains forward-looking statements
concerning Cabot, including our expectations for our financial
results in the second fiscal quarter and our expectations for net
working capital in the third fiscal quarter, when we expect to
complete our previously announced acquisition of Shenzhen Sanshun
Nano New Materials Co., Ltd., and our expectations concerning
liquidity, indebtedness, cash flow, cost savings opportunities, our
dividend practices, demand for our products, and the impact on
Cabot from the coronavirus. Forward-looking statements are based on
management’s expectations as well as estimates and assumptions
prepared by management that, although they believe them to be
reasonable, are inherently uncertain. These statements involve
risks and uncertainties, including, but not limited to, the effects
of the coronavirus in the geographies where we operate, the end
markets we serve and on our customers, and our ability to maximize
cash flows and generate cost savings as appropriate during this
dynamic period of uncertainty , as well as those referenced in our
Annual Report on Form 10-K for the year ended September 30, 2019
and subsequent SEC filings.
The extent and duration of the impact of the coronavirus
pandemic on our business and operations is highly uncertain.
Factors that will influence the impact on our business and
operations include the duration and extent of the pandemic, the
extent of imposed or recommended containment and mitigation
measures, and the general economic consequences of the pandemic.
Except as explicitly stated in this release, Cabot undertakes no
obligation to update or revise any of the forward-looking
statements contained herein, whether as a result of new
information, future events or otherwise.
Net leverage. To calculate “net leverage” we divide net
debt over Adjusted EBITDA.
Adjusted EBITDA. Adjusted EBITDA reflects Total Segment
EBITDA and is further adjusted for unallocated corporate costs,
which included unallocated corporate overhead expenses such as
certain corporate salaries and headquarter expenses, plus costs
related to corporate projects and initiatives.
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Investor Contact: Steve Delahunt (617) 342-6255
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