Cabot posts lower 1Q profit, will slash jobs

BOSTON - Specialty chemicals maker Cabot Corp. said Wednesday its fiscal first-quarter profit fell 88 percent versus the prior year amid weaker sales.

The company also announced it would slash 500 jobs, or 12 percent of its work force as part of an aggressive restructuring plan.

For the quarter ended Dec. 31, Cabot reported net income of $4 million, or 6 cents per share. That compares with a profit of $36 million, or 56 cents per share, in the prior-year period.

Net sales fell to $652 million from $711 million.

Analysts surveyed by Thomson Reuters expected a profit of 10 cents per share on revenue of $551.7 million.

In a statement, Patrick Prevost, Cabot's president and chief executive, said the company's results were hurt by an unprecedented decline in demand by tire, automotive and construction companies.

"These declines are associated with aggressive customer de-stocking and lower underlying demand," Prevost added, noting the company continues to be focused on generating cash.

Citing a "significant reduction in global demand," the company announced it would restructure its operations, beginning by eliminating about 500 jobs, or 12 percent of its work force.

Furthermore, Cabot said it will close four manufacturing operations and one regional office, mothball certain assets, shorten the work hours for one facility and delay the startup of new operations in China, among other cost-cutting measures.

Cabot estimates the strategy will result in savings of more than $80 million annually in fiscal 2010.

The company expects to book an $80 million cash charge and noncash charges of about $70 million as a result of the plan, with the majority of the costs being incurred in fiscal 2009.

"These are difficult decisions affecting our valued employees worldwide ... However, these actions are necessary and allow us to respond to the current market conditions while building a more efficient and lower cost manufacturing network," Prevost said.

Looking ahead, the executive said he expects demand in the second quarter and beyond will be weak.

"We continue to be concerned about the automotive and construction end markets," he said, adding that the electronics industry has been very weak of late.

Shares of Cabot rose $1.10, or 7.6 percent, to close at $15.60 before the results were announced.

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