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Cabot Concludes Divestment of Specialty Fluids Business

Zacks Equity Research

Cabot Corporation CBT successfully closed the earlier-announced transaction for the divestiture of Specialty Fluids business to Sinomine (Hong Kong) Rare Metals Resources Co. Limited — a fully-owned subsidiary of Sinomine Resource Group Co., Ltd.  

Cabot stated that it received $135 million at closure of the deal along with additional cash considerations. This included royalties of up to $5 million for lithium products, which is payable over a 10-year period. Moreover, the company does not expect any material cash tax impact related to the proceeds from the transaction.

Notably, Cabot’s EBITDA for the Specialty Fluids segment in fiscal 2018 was $10 million. The transaction enables the company to focus efforts on growth opportunities in core businesses and execute the ‘Advancing the Core’ strategy.

Shares of Cabot have lost 22.5% in the past year compared with the industry’s 33% decline.


 

In May 2019, the company stated that it is witnessing improvement in the business environment. However, the pace is slower than what it had originally expected. The company expects adjusted earnings in the range of $4.05-$4.30 per share for fiscal 2019, down from the previous projection of $4.20-$4.60. The company will continue to focus on managing costs.

Cabot sees results in Reinforcement Materials and Performance Chemicals to improve sequentially in the fiscal third quarter, driven by recovery in volume and margin. The company expects the unfavorable impact from the timing of raw material flow-through to discontinue in the third quarter. Moreover, it envisions improvement in Reinforcement Materials and Performance Chemicals to be offset by the impact of the divestiture of the Specialty Fluids segment in the third quarter.

Zacks Rank & Key Picks

Cabot currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the basic materials space are Materion Corporation MTRN, Flexible Solutions International Inc. FSI and Fortescue Metals Group Ltd. FSUGY. These stocks currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Materion has an expected earnings growth rate of 27.3% for 2019. The company’s shares have gained 22.5% in the past year.

Flexible Solutions has projected earnings growth rate of 342.9% for the current year. The company’s shares have surged 170.7% in a year’s time.

Fortescue Metals has an estimated earnings growth rate of 230.4% for the current year. Its shares have rallied 98.4% in the past year.

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