Cabot Corp. Reports Operating Results (10-Q)

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Feb 09, 2013
Cabot Corp. (CBT, Financial) filed Quarterly Report for the period ended 2012-12-31.

Cabot Corporation has a market cap of $2.38 billion; its shares were traded at around $37.4 with a P/E ratio of 13.2275 and P/S ratio of 0.728. The dividend yield of Cabot Corporation stocks is 2.08%. Cabot Corporation had an annual average earning growth of 7% over the past 10 years.

Highlight of Business Operations:

Inventories are stated at the lower of cost or market. The cost of all carbon black inventories in the U.S. is determined using the last-in, first-out (LIFO) method. Had we used the first-in, first-out (FIFO) method instead of the LIFO method for such inventories, the value of those inventories would have been $50 million and $52 million higher as of December 31, 2012 and September 30, 2012, respectively. The cost of Specialty Fluids inventories is determined using the average cost method. The cost of other U.S. and non-U.S. inventories is determined using the FIFO method. In periods of rapidly rising or declining raw material costs, the inventory method we employ can have a significant impact on our profitability. Under our current LIFO method, when raw material costs are rising, our most recent higher priced purchases are the first to be charged to cost of sales. If, however, we were using a FIFO method, our purchases from earlier periods, which were at lower prices, would instead be the first charged to cost of sales. The opposite result could occur during a period of rapid decline in raw material costs.

Gross profit increased by $4 million in the first quarter of fiscal 2013 when compared to the same period of fiscal 2012. The increase was principally driven by the addition of Purification Solutions and higher unit margins as higher prices and a favorable product mix more than offset higher raw material costs. This improvement was partially offset by lower volumes.

In the first quarter of fiscal 2013, costs from total other unallocated items increased by $8 million when compared to the same period of fiscal 2012. The increase was primarily driven by a $6 million increase in Interest expense due to a higher debt balance as a result of the financing of the Norit acquisition. Equity in net earnings of affiliated companies increased $2 million from the same period of fiscal 2012 as earnings of our affiliates improved.

In the first quarter of fiscal 2013, sales in Reinforcement Materials decreased by $14 million when compared to the first quarter of fiscal 2012. The decrease was principally driven by 3% lower volumes ($17 million) and the unfavorable impact of foreign currency translation ($9 million) partially offset by higher prices and a favorable product mix (combined $12 million).

In the first quarter of fiscal 2013, sales for Performance Materials decreased by $9 million when compared to the first quarter of fiscal 2012. The decrease was due to the impact of 13% lower Specialty Carbons and Compounds volumes ($20 million) and the unfavorable impact of foreign currency translation ($3 million). These items were partially offset by 25% higher Fumed Metal Oxides volumes ($13 million).

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