Cabot Corporation Aktie

Thank you for standing by, and welcome to Cabot's Second Quarter Fiscal Year 2026 Earnings Conference Call. [Operator Instructions]. I would now like to hand the call over to Robert Rist, Vice President of Investor Relations. Please go ahead.

Thank you, Latif. Good morning. I'd like to welcome you to the Cabot Corporation's 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 second 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 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 ending September 30, 2025, and in subsequent filings we make with the SEC, all of which are 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 measure presented should not be considered to be an alternative to a financial measure required by GAAP. Any non-GAAP financial measure referenced on this call are reconciled to the most direct comparable GAAP financial measure in a table at the end of our earnings release issued last night and available in the Investors section of our website. I will now turn the call over to Sean, who will discuss the second quarter highlights, followed by several company and business updates. Erica will review the second quarter financial highlights and the business segment results. Following this, Sean will provide closing comments on our fiscal 2026 outlook and then open the floor to questions. Sean?

Thank you, Rob. Good morning, ladies and gentlemen, and welcome to our call today. I am pleased with our strong execution during the second quarter as we continue to operate at a high level in a challenging and very dynamic environment, delivering adjusted earnings per share of $1.61. While the Iran conflict introduced a new dimension of geopolitical uncertainty during the quarter, the resilience of the Cabot team and our enduring strength as a company once again served as the foundation for strong execution. Our global footprint and highly developed operating platform of commercial and operational excellence enabled us to take quick actions to support our customers' evolving needs and implement countermeasures to address rapidly rising energy and transportation costs to protect profitability.

While we have an unwavering commitment to disciplined daily execution, we also remain focused on the long term, guided by our Creating for Tomorrow strategy and the pillars of grow, innovate and optimize. During these dynamic times, we continue to make important strategic choices that will strengthen the company and build long-term shareholder value. I will highlight a few of these areas of focus in my upcoming remarks, but I will first provide a bit of color on business performance in the quarter.

EBIT in Reinforcement Materials segment was $93 million, down 29% from the prior year quarter and in line with our expectations. The segment's 3% higher volumes as compared to the prior year were more than offset by lower gross profit per ton driven by calendar year 2026 customer agreement outcomes and increased competitive intensity in Asia Pacific. The Performance Chemicals segment delivered a strong quarter with EBIT of $59 million, up 18% from a year ago, supported by continued momentum in our high-value battery materials and specialty carbons product lines, combined with higher gross profit per ton from an improved product mix and optimization efforts.

This result was ahead of our expectation as demand levels were stronger than expected, particularly in March. Operating cash flow was again solid in the quarter. We generated $77 million in cash from operations, which allowed us to return $73 million to shareholders through a combination of dividends and share repurchases. Given the strength of our underlying cash flow generation and our confidence in the long term, earlier this week, we announced a 5% increase in our quarterly dividend. On an annualized basis, the new dividend rate will be $1.89 per share versus $1.80 per share previously. This increase is consistent with our balanced capital allocation framework where we seek to allocate cash to support long-term strategic growth and return capital to shareholders.

As we did last quarter, I want to briefly highlight our Battery Materials product line, which delivered another strong quarter and continues to be an increasingly important strategic growth driver for Cabot. We remain very well positioned in this space with a differentiated portfolio of conductive additives, formulations and blends supported by deep customer relationships across the global battery value chain. While the foundation of our battery materials product line is built around our strength in conductive additives, we continue to broaden our participation in this application through our fumed metal oxide products used in cathode and separator coatings and aerogel for thermal management.

Our strategy is to leverage our deep application know-how, strong customer relationships and global footprint to support customers as they build gigafactories globally. In the second quarter, Battery Materials delivered 43% revenue growth year-over-year, driven by continued growth in China as well as Europe. Trailing 12-month EBITDA margins were approximately 24%. Performance was driven by strong execution of our existing customer programs, increasing penetration in energy storage applications and the benefit of capacity that is now fully available to support customer demand. Complementing our strong revenue in Asia, we remain focused on supporting our customers in Western geographies as new gigafactory capacity comes online. The multi-year PowerCo agreement announced last quarter is a good example of this approach, reinforcing our role as a trusted partner to leading OEMs and supporting long-term growth. As a result, this business is scaling meaningfully, and we expect to generate approximately $40 million of EBITDA in fiscal year 2026.

Continued investment in battery energy storage systems alongside continued EV adoption is driving robust demand for our portfolio and reinforces our confidence in the long-term trajectory of this business. Data centers are a strategic focus area for us, and I would like to highlight how Cabot's materials are supporting the build-out of data center infrastructure, particularly as AI-driven demand continues to accelerate. At the center of this ecosystem are the data centers themselves, which require highly reliable storage. Battery energy storage systems or BESS, play a critical role in data centers by providing long-duration storage, power stabilization and uninterruptible power. And our battery materials product portfolio is a key enabler of performance in these systems. Our conductive additives, formulations and blends are designed to improve battery reliability, efficiency and life cycle performance, supporting the increasingly demanding requirements of energy storage applications tied to data centers.

Beyond our battery materials product line, our broader Performance Chemicals portfolio plays an important role across data center infrastructure applications. This includes materials used in power distribution cables, thermal management systems, adhesives and sealants as well as bonding paste for wind turbines that support renewable energy generation feeding into the grid. Taken together, this opportunity underscores how Cabot materials are critical across the power generation and storage value chain from renewable generation to distribution and battery storage, positioning us well as customers invest to support data center growth.

Turning to our network optimization initiatives. We are taking a series of proactive countermeasures to reinforce our leadership position and sustain strong margins and cash generation in the current business environment. As a reminder, on the cost reduction front, we have been executing programs targeting $30 million in savings during fiscal '26, including procurement savings, headcount reductions in reinforcement materials and associated supporting functions and accelerated deployment of process technology to improve yield and manufacturing efficiencies. We are on track to hit this target.

Furthermore, as we noted last quarter, we have reduced our capital expenditures to a range of $200 million to $230 million for the full year to align with the current environment. In addition, this quarter, we are also taking specific capacity rationalization actions to better align our manufacturing network with current demand levels and to optimize our footprint for long-term strategic value. Yesterday, we announced targeted asset rationalization actions in South America and Europe. We have ceased manufacturing operations at our Argentina reinforcing carbons facility, and we intend to cease production at multiple manufacturing lines at our Netherlands carbon black facility, subject to consultation processes.

The actions in total represent approximately 120,000 metric tons of capacity, targeting an annual run rate cost benefit of approximately $22 million with full delivery of cost saving benefits targeted by the middle of calendar 2027. The expected cash cost to execute these closures is approximately $24 million over the next 2 to 3 fiscal years. Importantly, we are working with our existing customers and anticipate maintaining sales with supply from other Cabot locations across our global network. These are difficult but necessary actions, and I want to thank our employees for their significant contributions to Cabot over the years. I believe these actions will improve our operating efficiency and further enhance the competitiveness of our global network as we navigate this challenging demand environment. I will now turn it over to Erica to discuss the financial and performance results of the quarter in more detail. Erica?

Thanks, Sean. Adjusted earnings per share for the second quarter of fiscal 2026 was $1.61 compared to $1.90 in the second quarter of fiscal 2025, a decrease of 15% year-over-year. This decline was driven primarily by lower results in our Reinforcement Materials segment, partially offset by growth in our Performance Chemicals segment. Cash flow from operations was $77 million in the quarter and discretionary free cash flow was $63 million in the quarter. The cash balance at the end of the quarter was $252 million, and our liquidity position remains strong at approximately $1.3 billion. Capex expenditures for the second quarter of fiscal 2026 were $45 million. And as Sean noted, we continue to expect $200 million to $230 million of capital spending for the full fiscal year. Additional uses of cash during the second quarter included $24 million for the payment of dividends and $49 million for share repurchases, totaling $73 million returned to shareholders during the quarter. Our debt balance was $1.3 billion, and our net debt-to-EBITDA ratio was 1.5x as of March 31. The operating tax rate for the second 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. During the second quarter, EBIT for Reinforcement Materials was $93 million, which was a decrease of 29% as compared to the same period in the prior year. The decrease was driven primarily by lower gross profit per ton from the outcomes of our calendar year 2026 customer agreements and increased competitive intensity in Asia. These factors more than offset a 3% increase in volumes year-over-year, driven by increases in all three regions. Regionally, volumes were up 5% in Asia, 3% in Europe and up 1% in the Americas.

Looking to the third quarter of fiscal 2026, we expect higher sequential EBIT from higher gross profit per ton from a favorable product mix and yield improvements from efficiency programs. We also expect a full quarter of operations with our acquired asset in Mexico. We anticipate the sequential EBIT improvement to be in the range of $5 million to $7 million. Now turning to Performance Chemicals. During the second quarter of fiscal 2026, EBIT for the segment was $59 million, an increase of 18% compared to the second quarter of fiscal 2025. The increase was driven by higher gross profit per ton, primarily due to a favorable product mix and optimization efforts.

Additionally, the second quarter fiscal 2026 volumes grew year-over-year in both the Battery Materials and Specialty Carbons product lines. Looking ahead to the third quarter of fiscal 2026, we expect segment EBIT to be relatively consistent sequentially. We anticipate stable volumes and gross profit per ton sequentially. Before I turn it back over to Sean, I wanted to briefly address how recent geopolitical developments in the Middle East and energy market dynamics impact the company. First, we have limited direct exposure to the Middle East from both a revenue and a raw material sourcing standpoint. In addition, our competitive global asset footprint enables us to support customers across geographies, providing supply chain resilience even when conditions in a particular region become disruptive. In terms of recovering rising input costs, our reinforcement materials contracts are structured with raw material pass-through mechanisms, which help protect our margins from feedstock cost volatility driven by higher oil prices.

Additionally, we have taken proactive pricing actions in Performance Chemicals, including a price increase of up to 20% in our Specialty Carbons and Specialty Compounds product lines implemented in March to offset rising input costs. As input costs across our product lines are impacted, we remain dynamic in our pricing actions to ensure we maintain our margins. Finally, we have continued to have strong cash flow generation and ample liquidity to fund working capital needs that are impacted by higher energy prices. With approximately $1.3 billion of liquidity as of the end of March, we have significant capacity to absorb these dynamics while continuing to invest in our business and return cash to shareholders. Our sales volumes have remained strong to date, and we've had minimal impact from customer disruptions. Thus, Cabot is well positioned to navigate these challenging conditions, and we will remain dynamic in this uncertain environment. I will now turn it back to Sean to discuss our outlook and closing remarks. Sean?

Thanks, Erica. As we look ahead to the remainder of fiscal year 2026, we are reaffirming our adjusted earnings per share guidance for the full year to be in the range of $6.0 to $6.50 per share. There are several assumptions embedded across our guidance range, including expectations for energy prices and broader macroeconomic factors. Despite higher input costs, we anticipate that we will maintain stable margins as we expect pricing actions to offset higher costs across both segments. A significant variable across our guidance range is our assumption around customer demand levels, particularly as we move to the fourth quarter of the fiscal year. We exited the second quarter with encouraging momentum as volumes accelerated in March and remained strong into April.

That said, the conflict in the Middle East introduces uncertainty, particularly as we move to the fourth quarter of the fiscal year. It is this area that we are monitoring closely, and our forecasted range contemplates various scenarios. If current demand levels largely hold with customers continuing to maintain order patterns despite elevated energy prices and macroeconomic uncertainty, we would expect performance to track toward the upper end of our guidance. If there is a softening in demand driven by potential supply chain disruptions or more cautious customer purchasing behavior in response to higher energy costs and broader economic uncertainty, we would expect lower volumes and performance to trend towards the lower end of our guidance range. These dynamics could be more pronounced in certain regions such as Asia, where customers rely more on the Middle East for raw materials. The midpoint of our guidance would assume a modest moderation in demand in the fourth quarter. While there are various scenarios possible, I have confidence that we will effectively navigate this dynamic environment. We will continue to make decisions that enhance our competitiveness and position the company for long-term success.

The capacity rationalization actions that we announced in Argentina and intend to take in the Netherlands are designed to better align our production footprint with demand, improve efficiency and ensure the long-term competitiveness of our global network. In addition, as noted earlier, we continue to drive cost countermeasures, including procurement savings, headcount reductions and accelerated deployment of process technology to improve yield and manufacturing efficiencies. These actions are incremental to each other and should compound structural benefits over time. We continue to execute a balanced and disciplined capital allocation framework, prioritizing capital expenditures to maintain our world-class assets and invest in high confidence growth projects while also returning capital to shareholders. Year-to-date, we have executed $100 million in share repurchases and announced an increase in the dividend of 5%. Our investment-grade balance sheet with $1.3 billion of liquidity and Net Debt-to-EBITDA of 1.5x provides significant flexibility to execute our Creating for Tomorrow strategy, funding growth investments, particularly in Battery Materials, while sustaining a robust level of cash return to shareholders.

In summary, I'm incredibly proud of the Cabot team. Our leaders have shown a remarkable ability to not only deliver solid financial results, but also to accelerate strategic initiatives despite market volatility. The dedication, experience, agility and operational focus of our management team give me immense confidence as we drive our Creating for Tomorrow strategy. Thank you very much for joining us today. And I will now turn the call back over for our question-and-answer session.

Thankyou. [Operator Instructions]. Our first question comes from the line of John Roberts of Mizuho.

It's Edlain Rodriguez on behalf of John. Sean, quick question. So if you're going to start seeing any softening in consumer demand, like when does that start to manifest itself? Like how much visibility do you have? Like when would you start seeing that if it does occur?

Sure. So maybe just a reminder in terms of our product portfolio and how that's distributed across end markets. I think it's a quite diverse end market exposure where we sell into the replacement market for tire, which generally ends up being quite resilient and largely nondiscretionary over time as well as significant infrastructure segments. And then finally, things that go into more consumer demand. So it's a fairly diverse portfolio. With respect to consumer demand, you would normally see some lag across our Performance Chemicals segment because the value chains end up there longer. There are often 4 or 5 steps between us and the ultimate consumer. And so you might see a lag there of a quarter or two before those impacts really show. I would say in Reinforcement Materials, weakness would tend to -- in consumer activity would tend to manifest a little bit faster. The value chains are a little more shallow. And so you would start to see that a little bit faster, generally maybe sort of within a quarter. So I would point out those differences between the two segments, which are really driven more by sort of the depth or length of the value chain.

Okay. Makes sense. And one last one. In terms of like the pass-through mechanism you have in reinforcement for raw materials, like how long is the gap? And like is there a lag between -- yes, how long is the lag? And also, is it the same up and down? Like do you get to keep it like longer when it's favorable to you? Or does it apply the same time frame?

Sure. You might recall that we have adjusted these formula mechanisms a number of years ago so that the pass-through matches the actual flow of the raw material. So there is no lag in our contract mechanisms. And then in the spot markets where we participate, we move quickly. As Erica commented in her remarks, we move quickly on pricing to make sure that we maintain our margins, and that's, in fact, what we're doing.

Our next question comes from the line of Laurence Alexander of Jefferies.

Two questions on Reinforcement Materials. One, can you give a sense for what's driving the mix tailwind into Q3 and how sustainable that should be? And secondly, can you give an update on how you're thinking about trade flows and the pressure from Asian imports into the U.S. market?

Yes, Laurence, the question on mix is largely a customer mix driven phenomenon. And so we would expect that to remain. So -- but that's largely what it is. In terms of the trade flows, I think there are -- it remains still a dynamic situation. Certainly, in North America, there's been some more, I would say, somewhat positive momentum here where if you look at tire imports over the last 6 months of reported data, so this would be from the September to February period, they're down 12% as compared to the 6 months prior to that.

So I think a potential positive sign seeing some evidence of moderation in the tire imports into North America. So that's good. I would say Europe remains more mixed. There are antidumping measures that are under review right now in Europe, the expectation for determination is June, so next month. And so as is often the case when there are such dynamics at play, you can have a bit of movement or excess of inventory that might get shipped in advance of tires shipped in advance of the determination of those duties.

So we'll have to see how that settles out. So it remains a dynamic situation, but some positive indications certainly in North America, and we're continuing to watch this and manage it and take appropriate actions where we see there are longer term trends emerging. Certainly, that's in part, influencing our decisions around our announced capacity rationalization.

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

It's Chris Perrella on for Josh. Can you just take me through, I guess, the puts and takes of the Performance Chemicals performance in terms of mix shift? And is the 20% price increase that you guys have announced in March, is that across the entire segment? Or is that in specific value chains? And is that more about keeping up or maintaining margins? Or is there a potential for margin expansion there in the rest of the year?

Sure, Chris. So I would say the outperformance in Performance Chemicals was primarily driven by better volume and product mix, particularly in Specialty Carbons and Battery Materials, along with continued progress in optimization efforts here. So I think the mix uplift in Specialty Carbons and Battery Materials, we continue to be very positive about and continuing to grow those product lines, in particular in Battery Materials. We're seeing very, very strong growth here and have a leading position serving the global battery manufacturers and the expectation is that, that will continue. If you look at market forecast for growth driven by both battery energy storage, fueled by data center build-out, but also continued growth in EVs. The compound growth rate through the end of the decade is expected to be about 16%. So we would expect that, that lift would continue. With respect to the price increase question, the Specialty Carbons business has a mix of both contract and spot business, but I would say more spot, let's say, than typically in Reinforcement Materials. And so moving quickly on pricing is, of course, something that we do as part of managing this business. And with raw materials shooting up sharply and then associated costs, whether they're transportation costs, and other derivative costs, those are all moving up. And so the expectation is that we will recover and maintain our strong margins.

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

Sean, nice results. So just in Battery Materials, what are your expectations for EBITDA margins this year? And as you scale the business up, how high can you go from a margin perspective in this business?

Yes, sure. Thanks, David, for that comment. In Battery Materials, I commented where our trailing 12-month EBITDA margins are at about 24%, and we think those are reflective of the high quality of this business. Certainly, as we look forward, we're thinking about the growth in this business compounding driven by a few different factors. One, of course, is just the overall volume. And as I had mentioned, the volume expectation is by the -- through the end of this decade that overall battery production will grow at a compound annual growth rate of 16%, and we would expect to certainly grow at or above given our overall strong portfolio and footprint. So the volume lever is certainly one. And then how we participate both with customers and applications is an important factor here. And we're very focused on partnering with the leading customers and the advanced products that they need. And so we're always looking to upgrade the mix as part of that by being very focused on our participation with customers and applications.

And then finally, as you've heard me comment before, we believe the long term, this business really bifurcates -- right now, still 75-ish or so percent of batteries are produced in China today. And while China will remain a very, very important market for us and is the lion's share of our business today, the growth outside of China as gigafactories are built there, we believe, will be a positive for our business because we believe customers will look for local supply, and we believe we've got a unique ability given our global footprint relative to competition to serve our customers and meet their needs globally. And so building out the regional western part of this portfolio will be a driver of value here over time.

On top of our core conductive materials, as I mentioned in my comments, we continue to look for ways to broaden our participation in this overall application. And so we sell fumed metal oxides today into the battery application and continue to work with customers to try to grow that application, particularly for cathode and separator coatings.

And then finally, aerogel and thermal management, as you may have noticed, has been picking up in terms of demand for thermal management in batteries. And so our participation here is something that we're investing in to try to enhance our position there. So all of these factors are really kind of rolling together for, I think, what's an exciting trend for us in the battery business.

And just in Reinforcement Materials, can you talk to the 3% volume growth for the quarter? Was there any pre-buying? And especially in Europe, what's driving that positive inflection in volumes in Europe, Middle East and Africa thankyou.

Yes. So we're certainly pleased to see that volumes were up year-over-year, and they were up across all regions year-over-year. So I think that is positive. In the Reinforcement business, we really don't believe there was any real pre-buying in the quarter. There likely was a little bit of accelerated purchasing in Performance Chemicals in the quarter. But in Reinforcement Materials, we don't believe that to be the case. So in terms of the year-over-year, again, we did see growth across all three regions, which is positive, including in Europe, where we were up a few percent there. I think in some ways, there were some customer-specific opportunities that emerged where we were able to support customers and pick up some spot business. And so that was probably the largest driver. And then in North America, during the quarter, we began the production taking ownership of the New Mexico asset. And so there was some contribution from that in the quarter as that -- as we took over that asset. We'd certainly expect that to continue to ramp now that we own it fully and start to have full quarter impacts from that.

[Operator Instructions]. I would now like to turn the call back over to Sean Keohane for closing remarks. Sir?

Great. Thank you very much, Latif, and thank you all for joining today on our Q2 earnings call, and thank you for your support of Cabot, and we look forward to continuing our dialogue next quarter. Have a great day.

And this concludes today's conference call. Thank you for participating. You may now disconnect.

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.

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.

Good day, and thank you for standing by. Welcome to the Third Quarter 2025 Cabot Corporation 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.

Thank you, Jill, 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 third 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 in the press release we issued last night and in our 10-K for the fiscal year ended September 30, 2024, and in subsequent filings we make with the SEC, all of which are 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. The 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 Investors section of our website.

I will now turn the call over to Sean, who will discuss the third quarter highlights and some strategic highlights. Erica will review the third quarter financial results, along with the business segment results and provide an update on our M&A and capital allocation priorities. Following this, Sean will discuss our outlook for fiscal 2025 and then open the floor to questions. Sean?

Thank you, Steve, and good morning, ladies and gentlemen, and welcome to our call today. I am pleased with our strong third quarter results, which were a bit better than our expectations. We delivered Q3 adjusted earnings per share of $1.90, which was in line with our second quarter results and down 1% as compared to the same period in the prior year. Overall, we continue to execute at a high level and operate with agility in this dynamic and challenging macroeconomic environment. While both segments were impacted by 8% lower volumes year-over-year given the challenging macroeconomic backdrop, we largely offset these impacts through strong network optimization, cost management efforts and continued execution of commercial excellence actions.

Looking at the segments, we delivered solid EBIT results from Reinforcement Materials, which was down 6% year-over-year in the third quarter and strong EBIT results in Performance Chemicals, which was up 4% as compared to the third quarter of the prior year. The Cabot portfolio has strong cash flow characteristics, and this continued strength was exhibited in the quarter. We generated $249 million of operating cash flow in the third quarter, which funded our capital expenditures and enabled $64 million of cash returned to shareholders through a combination of share repurchases and dividends. During the quarter, we also made important progress on key elements of our Creating for Tomorrow strategy. I'll spend a few minutes now highlighting 4 accomplishments that are important elements of our strategy for long-term shareholder value creation.

Last night, we announced that Cabot has entered into a definitive agreement to acquire Bridgestone's reinforcing carbons plant in Mexico for $70 million. This manufacturing facility is located in close proximity to Cabot's current reinforcing carbons facility in Altamira, Mexico and strengthens our long-standing 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.

Furthermore, it underscores Bridgestone's confidence in Cabot as a trusted partner with a proven track record of delivering high-quality, reliable supply of reinforcing carbon products. The transaction is expected to close within 3 to 6 months 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.

Sustainability is at the heart of our purpose and integral to our strategy of creating value for our customers. Given that, we are especially proud of the various forms of external recognition that we have received over the years for our sustainability leadership. At the top of that list is the platinum rating we received 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 Battery Materials, we continue to execute well against our growth strategy to build a leadership position. Through the first 3 quarters of fiscal year 2025, we have increased contribution margin by 20% compared to the same period in fiscal year 2024. Our strategy is centered around the view that the battery industry is bifurcating with differences between China and the rest of the world. In China, growth is high with EV penetration now exceeding 50% of annual vehicle sales. The environment across the EV value chain is competitive, and our segment strategy -- segmentation strategy is focused on differentiation based on blends of conductive additives and targeting those customers that serve the higher-value segment of the domestic economy and the export market.

Outside of China, we are focused on building incumbent positions with the battery customers that are establishing manufacturing plants in the Western economies. These customers value our breadth of technology as we are the only global player that can produce both conductive carbons and carbon nanotubes as well as blends. Additionally, our global footprint is an important feature to address their desire for a local supply chain and strong regional application and sales support. While the build-out of battery production in North America and Europe is developing more slowly than originally anticipated, it is expected to grow at a compound annual growth rate of approximately 40% through 2030 and represent 25% to 30% of global production by that date.

Our strong reputation, breadth of product offering, global footprint and track record with the global battery producers set us up well to build an incumbent position in these geographies. We continue to believe these geographies will become large over time, driven by penetration of EVs and hybrid vehicles as well as the growth of energy storage batteries for data center and grid applications. This application remains an important strategic priority for us, and we intend to continue to invest prudently to build long-term value.

Moving now to strategic growth activities in other areas of Performance Chemicals. You will recall that we highlighted a number of important applications within this segment during our last Investor Day. Two of these priority areas are focused on the infrastructure and alternative energy sectors. Both of these sectors are growing at multiples of GDP, supported by strong macro tailwinds. In the infrastructure space, the wire and cable application is experiencing strong growth driven by electrical grid renewal, growth of power generation demands due to data centers and the development of alternative energy sources such as wind and solar. Our conductive carbons are a critical material in the performance of power distribution cables, and Cabot has built a strong reputation for quality, performance and reliability.

On a year-to-date basis through Q3, our volumes in this application have grown by 15% compared to the same period last year.

In the alternative energy space, Cabot is a leading provider of treated fumed silica for use in adhesive formulations that are critical in the manufacturing of wind turbine blades. Growth in this application is being driven by investments in alternative energy generation. And through the first 3 quarters of fiscal year 2025, our volumes have increased by 8% compared to the same period last year. Our strong product offering, global footprint and reputation for performance and quality have resulted in Cabot achieving a strong incumbent position with many leading customers.

I am very pleased with our strategic developments, and I'm confident that these pursuits will continue to build our long-term potential for sustained value creation. I will now turn it over to Erica to discuss the financial results for the quarter. Erica?

Thanks, John. I will start by discussing results for the company and then review the segment results. Adjusted earnings per share for the third quarter of fiscal 2025 declined 1% from $1.92 in the third quarter of fiscal 2024 to $1.90, driven by EBIT growth from the Performance Chemicals segment, partially offset by a decline in the Reinforcement Materials segment. Foreign currency impacts were minimal for the quarter and the operating tax rate remained at 28% Cash flow from operations was strong at $249 million in the quarter, which included a working capital decrease of $101 million, driven by lower accounts receivable and inventory balances. Discretionary free cash flow was $114 million in the quarter.

The cash balance at the end of the quarter was $239 million, and our liquidity position remains strong at approximately $1.4 billion. Capital expenditures for the third quarter of fiscal 2025 were $61 million, and we continue to expect between $250 million to $275 million of capital spending for the fiscal year. Our strong cash flow performance year-to-date enabled us to continue to pay our competitive dividend and repurchase shares. During the quarter, we used $24 million for the payment of dividends and $40 million for share repurchases. Our debt balance was $1.2 billion, and our net debt-to-EBITDA was 1.3x at the end of June.

The strength of our cash flow and balance sheet position us really well as we look ahead to continue to invest for growth, complete strategic acquisitions and return cash to shareholders. The year-to-date operating tax rate for fiscal 2025 was 28%, and we continue to anticipate our operating tax rate for fiscal 2025 to be in the range of 27% to 29%.

Now moving to Reinforcement Materials. During the third quarter, EBIT for Reinforcement Materials was $128 million, which was a decrease of $8 million as compared to the same period in the prior year. The decrease was primarily driven by lower global volumes, which were down 8% year-over-year due to lower customer demand driven by uncertainty from tariffs and a weaker global macroeconomic environment. Regionally, volumes were down 11% in Asia Pacific and 9% in the Americas, while volumes in Europe were up 4%. The lower volumes were partially offset by continued optimization and cost reduction efforts in the segment.

Looking to the fourth quarter of fiscal 2025, we expect a modest sequential EBIT decline in the segment as higher volumes expected in Asia are offset by higher costs anticipated sequentially. This expected EBIT would be slightly higher than the prior year fourth quarter EBIT, driven by our ongoing optimization and cost reduction efforts.

Now turning to Performance Chemicals. EBIT increased by $2 million in the third fiscal quarter as compared to the same period in fiscal 2024. The increase in the third quarter was due to higher gross profit per ton, partially offset by lower volumes. Global volumes were down 8% year-over-year, primarily due to lower customer demand driven by uncertainty from tariffs and the weaker global macroeconomic environment, particularly from lower demand in auto-related applications. The improvement in gross profit per ton was driven by continued optimization and cost management efforts in the quarter.

Looking ahead to the fourth quarter of fiscal 2025, we expect Performance Chemicals EBIT to be lower sequentially and relatively consistent with the prior year fourth quarter. The expected sequential decline is driven by seasonally lower volumes and higher anticipated costs in the fourth quarter as compared to the third quarter.

In summary, for the company, we expect our total segment EBIT for the fourth quarter to be largely consistent with the prior year fourth quarter. However, we expect a higher tax rate in the fourth quarter of fiscal 2025 as compared to the fourth quarter of fiscal 2024. Sean talked earlier about our agreement to acquire Bridgestone's reinforcing carbon plant in Mexico. This is a good example of the type of acquisition that aligns well with our strategy, I thought I would take a minute to remind you about our M&A priorities that we previously discussed at our 2024 Investor Day.

As we think about how M&A fits into the strategy, we look for acquisitions that one, strengthen our business competitive position; two, drive growth and our margin enhancing to the company; and three, provide attractive economic returns in a 3- to 5-year time frame. These opportunities include capability and capacity investments in high-growth areas of the company, including in the areas of batteries and conducted materials. We will look to increase scale, geographic access and participation across our carbon black and silica franchises, and we will also target technology investments in high-growth areas. With our strong operating cash flow performance and low net debt-to-EBITDA ratio, we believe we're well positioned to leverage various opportunities for the future, and we expect to continue our balanced approach to capital allocation.

With our disciplined approach to M&A opportunities, we will look to execute strategic acquisitions to improve scale, capabilities and participation across our key end markets. The agreement to acquire the plant in Mexico is a great example of the type of acquisitions that make strategic sense and are attractive financially. We will also prioritize high confidence, high growth projects. We have a number of exciting organic growth opportunities in our pipeline, and we think these projects offer a compelling business case to grow the company. We expect we'd be able to fund these investments with our strong operating cash flow. During fiscal 2025, we have completed our new unit in Indonesia for reinforcing carbons as well as an expansion of CNT capacity in China for battery materials.

In addition to these investments, we expect to maintain a competitive dividend yield. We increased the dividend by 5% in May of this year, and that we would expect that we would continue to increase the dividend in line with earnings growth. With the strength of our operating cash flow, we have also continued to repurchase shares. The Board increased the share authorization in the first fiscal quarter to 10 million shares and we expect to repurchase between $150 million to $200 million of shares in fiscal 2025. I will now turn the call back over to Sean to discuss the fiscal year outlook.

Thanks, Erica. I am pleased with another quarter of strong operating results in what was a very challenging environment. Based on the third quarter performance and our outlook for the fourth quarter, we are reaffirming our expected full year outlook of adjusted earnings per share to be in the range of $7.15 to $7.50. This range reflects year-over-year EPS growth for fiscal 2025 in what is a very weak environment driven by the uncertainty from tariffs and soft global macroeconomic conditions. At current demand levels, we would expect to be in the middle to lower end of the range. If the more recent tariff announcements were to translate into higher demand in the fourth fiscal quarter, we'd expect to be higher in the guidance range. .

To address the challenging environment, our efforts are intensely focused on execution of our operating platform of commercial and operational excellence. This includes working closely with our customers to understand how their production might shift as a result of tariff policies and offering volume support from our expansive global plant network. We have also implemented a range of countermeasures across our global network. These efforts include commercial actions to drive product and grade mix benefits as well as operational actions to optimize our assets and supply chain costs. We also remain on track with the fixed cost and procurement initiatives we discussed last quarter.

Our outlook for cash flow remains strong, and we will continue to deploy capital within our balanced framework. In addition to funding targeted organic growth projects and strategic M&A we expect to continue to return cash to shareholders through a competitive and growing dividend and remaining active in the share repurchase market. As we have in the past, you can expect us to be excellent stewards of cash, driving a disciplined and balanced approach to capital allocation.

Overall, I'm very pleased with how the company is responding in a very challenging environment. I am confident in our strategy and the execution capability of our team and remain excited about the long-term growth prospects of our portfolio. Thank you very much for joining us today. And I will now turn the call over for our Q&A session.

[Operator Instructions] Our first call comes from the line of John Roberts with Mizuho Group.

This is Saurabh Dhir from John Roberts line. I just want to understand the relationship between the tariffs and the demand in the North American region. At what tariff rates on the Southeast Asian countries would you expect? And then what do you think will be the tariff rates when the domestic production will become comparative with the imports?

Sure. Thanks for the question on tariffs as it relates to tires. Obviously, a very dynamic picture, one that's moving constantly. But let me try to provide a frame for where we are right now and then at a high level how we think about it. So for passenger car and light truck tires, there are a range of different levels that are out there right now. So let me sort of walk by major region.

I think in Southeast Asia, passenger car tires generally have tariffs in the 19% to 29% range. So this would include Thailand, Vietnam, Indonesia, these have been announced. In addition, there are company-specific antidumping duties and countervailing duties that may apply. So in certain cases, the number is higher than that 19% to 29% when you add the antidumping duties on top of tariffs. In terms of China tariffs on China, passenger car tires to the U.S. are approximately 70% which is the main reason why we see tire imports coming from Southeast Asia, not China into the U.S. And in addition, there are antidumping duties on us and countervailing duties on some of those tires as well. So on balance, that number is quite high. And therefore, the flow of Chinese tires to the U.S. is almost 0.

In terms of tariffs as it relates to Mexico and Canada, tires at this point as well as carbon black continue to be covered under the USMCA trade agreement. They're compliant with that, so therefore, remain at 0. So it's really a question of where our tariff and antidumping duty levels against Southeast Asian and Chinese tires principally. So I think directionally, you can see that tariffs and antidumping duties will likely have a positive effect on the market, therefore, kind of enhancing the competitiveness of local production. Exactly where tariffs end up is -- remains to be seen. But I think directionally, it will be supportive and make local production more competitive. But again, the magnitude and timing are a bit hard to predict.

I think in addition to this, it's encouraging to see some signs that the global tire majors are responding to the increased exports from Chinese OEMs that operate in ASEAN region by more aggressively defending and reinvigorating their Tier 2 brands recently Bridgestone unveiled the strategy to revitalize their Tier 2 Firestone brand, which I think really is illustrative of a strategy to defend the Tier 2 brands more aggressively. And Michelin on their call commented that they expect Tier 3 tire imports to reduce in the second half of 2025. So I think -- clearly, I think the trade actions and some specific targeted actions by the global tire majors to defend the Tier 2 brands would likely have a directionally positive impact on local production. But again, where things settle out remains to be seen.

Our next question comes from Jeff Zekauskas with JPMorgan.

In the Americas, was there a difference in your volumes in North America and South America or however you divide it?

Yes, sure. Thanks, Jeff. So in Reinforcement Materials, volumes in the Americas were down 9% year-over-year in the third quarter. Again, we sort of see this as largely driven by uncertainty from tariffs and weaker global macro environment. And we point to that because if you look at tire imports, they've largely leveled off in North America in May year-to-date and actually declined in South America, May year-to-date. So we sort of look at that and think that the declines are largely -- our market declines are largely in line with the market and driven by the uncertainty.

In terms of specifically the difference between the U.S. and South America. Yes, they are different and similar to the prior quarter as we discussed, where the volumes in South America were a bit weaker in part the weak market, but also some volume losses in contract season last year. We commented on that last quarter. So that continued.

Okay. And how is doing business at Altamira different than it was before if it is different? What is it like now to produce and ship from that plant have business conditions changed in the tariff regime that we're in?

Yes. So the tariff regime has not changed anything as it relates to tire production or carbon black. So tires continue to be covered with no tariffs because they're USMCA compliant. And then we are the sole manufacturer in Mexico today. And again, our customers there are -- for carbon black are largely Mexican located tire plants. So we don't really move carbon back too much into the U.S. It's basically for local product there. But there's no change in the tariff situation. They continue to be 0 tariffs because they're covered under USMCA. And that's our expectation as we move forward here.

And in terms of the specific transaction to acquire this, as Erica highlighted, is it's an attractive one for us in many ways. Obviously, we have a plant in very close proximity that we've operated successfully for a long time, and that it further builds our strategic position with Bridgestone and I think it's an expression of their confidence in Cabot. And so building on that makes a lot of sense. And we expect that this business will be attractive financially, in year 1 we would expect annual EBIT of around $10 million and year 2, EBIT of approximately $15 million with EBITDA in year 2 of approximately $20 million. So we see it as a financially attractive acquisition in addition to all the strategic benefits and our confidence in operating there is high. We've been there for many, many years.

Maybe lastly, have negotiations for carbon black prices in North America begun at all yet? Or is this the year where you expect them to begin later in the year?

Yes. We're in the early stages of contract negotiations, Jeff. So I would say the timing of things is progressing in a typical fashion. Usually starts in the summer and progresses through the fall.

The next question comes from the line of Josh Spector with UBS.

It's Chris Perrella on for Josh. Just a follow-up on that. Given the amount of the rise in tire imports ahead of the tariffs this year. How large is the inventory overhang do you think in the market? And at this point, would tariffs have an impact on demand in the last 2 months of the fiscal year for you at this point? Just trying to gauge potential upside and what the moving parts would be there.

Yes. So in terms of inventory levels, we don't see them at -- for tires, for example, if we look at the commentary from the various tire makers. It seems like they're largely in balance when you look at what the global Tier 1 tire makers are saying with the exception that they are identifying in some of the more budget brands, levels might be a bit elevated. But where that commentary exists, they seem to believe that will be brought back down to more normal levels here in this current quarter. So it doesn't seem based on commentary to be a significant issue naturally with all of the trade dynamics going on. There's some volatility there, but it seems to have -- seems to be settling down. So I would say that's where things are, our best view of where tire inventories are.

Certainly, on the tariff front, again, as I commented earlier, it remains a very dynamic situation. But directionally, I think we would expect tariffs and any additional antidumping duties that are in place would directionally make it more supportive for local production, local production being more competitive. But again, the magnitude and timing are certainly hard to predict.

I appreciate that, Sean. Is that more of a calendar 2026 benefit then potentially? And then just a quick follow-up on Brazil. If they raise countervailing duties potentially on tires, how much of your customers, not necessarily you, but would be shipping tires out of North America or out of the U.S. down to Brazil?

Yes. So I guess, back on the first part of the question, again, the timing is and the magnitude on tariffs and when the impact from that would flow through demand is definitely hard to predict. But again, directionally, I would say, supportive. But probably later this year, 2026 is -- later this year and into 2026 is when I would expect to see the result of those settle out as they get processed by the market and customers make adjustments there in their supply chain planning, I would say. And at the same time, as I said, I think some of the global majors are certainly working hard and investing to revitalize their Tier 2 brands. And to compete more aggressively to defend that share and exactly the timing of how that plays out is a little bit again, difficult to project.

In terms of the Brazil situation, so we do have, depending on how duties settle out between U.S. and Brazil. There are tire makers that do produce products there and ship into North America. So if the ultimate tariff regime in that case makes that less competitive, what we see is that our global customers then look to try to rebalance their tire production. And so many of the customers that produce there also have production assets in places like Mexico and other countries where they could more cost effectively land product into the U.S. So we'd expect a little bit of rebalancing naturally. But again, most of the major tire makers have a broad plant network.

[Operator Instructions] Our next question comes from the line of Laurence Alexander with Jefferies.

Just on the network optimization initiatives, can you give a bit of clarity on how -- what that means for your operating leverage if and when demand accelerates? Do you have to give some of that back? Or should this lead to a higher incremental margin than historically?

Yes. So a couple of comments here, Laurence, and then I'll ask Erica, if she wants to add anything to it. I think our network optimization efforts are very broad. So when we use that term, we're employing levers that do things to drive a more advantageous product mix. But also we look at our production circuit and try to marry up demand on the most competitive assets with the best delivered cost economics. And so that optimization is something that we're always pursuing. I would say, in addition to that, given the weak macro environment and all the uncertainty from the tariff discussions, we're working hard on the cost and procurement savings front. And all of that is showing through into what I think are quite strong results given the weak demand environment. So the network optimization efforts are really quite broad and part of our overall efforts around both commercial and operational excellence.

In terms of the operating leverage question, Erica, maybe I'd ask your comments there.

Sure. So Laurence, I think last quarter, we talked about fixed cost and procurement initiatives that we're doing that we had targeted about $30 million for the year. I'd say we're trending a bit ahead of that, as of now. And some of those are structural. I think we talked about this last quarter like restructuring actions we've taken. So those would continue. Some are more timing. So the timing of travel or third-party expenses, which could come back if we see the situation improve in terms of the macro. So I'd say it's a mix. But I don't think it would impact -- it would be favorable to operating leverage. It would not be a negative in any way.

We have a question from Jeff with JPMorgan.

I think through the 9 months, your unallocated corporate costs were $39 million versus $51 million, so they were $12 million better. How did you achieve that? And sort of how would you describe the $12 million improvement in that line?

So Jeff, it's Erica. I would say these are part of some of the cost reductions we're doing. So these would be a mix of items that would include head count related actions, it would include things like timing or lower third-party spend. And so that -- those are the actions we've been taking to reduce cost. So you're right, we have been trending about $13 million per quarter so far this year. We would expect September to go to more $16 million to $17 million, so a little bit more similar to last year. Again, this is just timing of certain corporate costs in the quarter. But these cost savings, like I said, are a mix where some are structural, they would continue and some if the environment improves, you would probably see some of those costs come back in.

And then for Sean, in the -- when you look at carbon black volumes over a multiyear period, I think in the Americas, they were negative 6% in 2023 and negative 6% in 2024, and they look like they're going to be negative 6% again. And that seems to be a weaker region for you than either EMEA or Asia. Can you talk about why the volume pattern over a multiyear period has been as weak as it's been and why it's weaker than the other geographies for Cabot?

Yes. I think the primary driver there, Jeff, is the more recent over the last couple of years, elevated level of tire imports. And so that has certainly impacted the region and had an effect of depressing the local production levels. So that's the primary driver there. I think the biggest -- that's the biggest driver for sure. So as we think about how things move forward here, I think it depends on the 2 key points. One is where ultimately do tariff levels and antidumping duty levels end up. They're certainly directionally supportive to make local production more competitive. So I think that's positive.

And then you do see efforts by some of the global majors that have shed some share at the expense of tire inputs you see them taking more concerted efforts to revitalize their Tier 2 brands and that simply a focus on the larger rim size, higher end part of the market is not sufficient that you have to really address the more base part of the business as well. And so I think that's positive. So the combination of those 2 factors, we would view as directionally favorable. Again, the timing and magnitude of how this all settles out is a bit hard to predict, but that's actually the story there.

So what we should infer from your commentary is that utilization rates in carbon black in the Americas have moved lower over a multiyear period.

Well, certainly, utilizations are a function of supply and demand. And so the supply side and the western mature markets, there's been no material adds. So nothing's changed there. And then on the demand front, it's certainly a volume impact from tire imports. But at this stage, we're starting to see that settle out and the expectation as we go forward and look at commentary from some of the tire majors is they expect that the tire import levels will begin to turn here. And so I think it's really a question of how ultimately the trade situation plays out in the coming months.

I'm showing no further questions at this time. I would now like to turn it back to Sean Keohane for closing remarks.

Great. Thank you very much for joining us today, and we look forward to speaking with you again next quarter, and thank you for your support of Cabot. Have a great day.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.