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Cabot (CBT) to Acquire Tokai Carbon Black Plant in China

Cabot Corporation CBT recently entered into a definitive agreement to take over Tokai Carbon (Tianjin) Co., Ltd from Tokai Carbon Group for $9 million. The transaction is expected to close in the second quarter of fiscal 2022. The purchase price is subject to customary closing adjustments.

The acquisition of the carbon black manufacturing facility, which was commissioned in 2006, is expected to boost growth of the company’s Battery Materials product line.

The upswing in electric vehicles has seen a rapid development in lithium-ion batteries, which, in turn, is leading to higher demand for conductive carbon black additives, one of the key materials. The Tokai site has a present annual capacity of 50,000 metric tons of carbon black and Cabot’s planned investment will add more steam to the capabilities of battery-grade production.

Per the terms and conditions, Cabot will operate the plant and plans to continue supplying to the current customers while upgrading the technology. The advancement in manufacturing and environmental equipment will empower the facility to produce carbon black for battery materials and meet all the necessary environmental standards.

Cabot noted that the buyout is synchronous with its strategy of executing growth opportunities in high-growth and high-performance markets such as battery materials. The investment will enable it to better meet the demand for lithium-ion batteries and run its operations responsibly such that they reduce the environmental impact.

In the fourth quarter of fiscal 2021, Cabot reported adjusted earnings of $1.11 per share, topping the Zacks Consensus Estimate of $1.02. The company’s revenues were $904 million in the quarter, which jumped 37.2% year over year but missed the Zacks Consensus Estimate of $924.5 million.

In its fourth-quarter earnings call, Cabot stated that it expects continued strong end-market demand and benefits from growth investments. It expects to benefit from higher volumes driven by strong forecasted levels of tire production and higher pricing in the Reinforcement Materials segment. In the Performance Chemicals segment, Cabot projects continued demand growth across its broad set of applications, with particular strength in battery materials and inkjet packaging.

The company also expects challenges such as rising input costs, global supply chain disruptions and the semiconductor chip shortage to moderate through the next fiscal year. The company expects adjusted EPS for fiscal 2022 in the range of $5.20-$5.60

Zacks Rank & Key Picks

Cabot currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Dow Inc. DOW, Univar Solutions Inc. UNVR, each flaunting a Zacks Rank #1 (Strong Buy), and Celanese Corporation CE, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Dow has an expected earnings growth rate of 447% for the current year. The Zacks Consensus Estimate for earnings for the current year has been revised 8.7% upward over the last 60 days.

Dow beat the Zacks Consensus Estimate for earnings in all the four trailing quarters. The company pulled off a trailing four-quarter earnings surprise of roughly 14.12%, on average. Its shares have also gained around 5.5% over a year.

Univar has an expected earnings growth rate of 55.2% for the current year. The Zacks Consensus Estimate for the current year has been revised around 9% upward over the last 60 days.

Univar beat the Zacks Consensus Estimate for earnings in all of the four trailing quarters. The company delivered a trailing four-quarter earnings surprise of roughly 24.1%, on average. Its shares have also rallied around 63% over a year.

Celanese has an expected earnings growth rate of 139.7% for the current year. The Zacks Consensus Estimate for the current year has been revised 9.1% upward over the last 60 days.

Celanese beat the Zacks Consensus Estimate for earnings in all of the four trailing quarters. The company pulled off a trailing four-quarter earnings surprise of roughly 12.7%, on average. Its shares have also rallied around 25.3% over a year.


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