Cabot’s expansion plans
On May 21, Cabot (CBT) announced that it will expand the global carbon black capacity by 300,000 metric tons. The capacity expansion will be achieved through operational improvements, debottlenecking projects, and plant expansion. Cabot will make an investment of $50 million on debottlenecking projects and operational improvements. The expansion will be done across 18 different plants that produce carbon black. The actions are expected to improve the carbon black production by 150,000 metric tons. The expansion plans are expected to be completed by 2021.
Cabot is also expanding its facility in Cilegon, Indonesia. Expanding the facility will increase the carbon black capacity by 160,000 metric tons. The expansion is expected to be completed by late 2020 or 2021. The expansion will cater to the rising demand in the region.
Sean Keohane, Cabot’s president and CEO, said, “Part of our corporate strategy is to invest for growth in our core businesses. These actions clearly showcase our commitment to be the partner of choice for our customers, not only for today, but into the future. Adding this new capital efficient capacity will provide a lever for growth for our Reinforcement Materials and Performance Chemicals segments and contribute to the execution of our corporate financial and strategic objectives.”
Cabot’s stock price declined 3.0% and closed at $58.78. As a result of the decline, the stock is traded 3.3% below the 100-day moving average price of $60.77, which indicates weakness in the stock. On a year-to-date basis, the stock has declined 4.6%, while Albemarle (ALB) and PPG Industries (PPG) have declined 25.9% and 2.3%, respectively. In contrast, Celanese (CE) has gained 6.9%. Analysts are bullish on the stock. Analysts have recommended a target price of $73.6, which implies a return potential of 25.1% from the closing price as of May 25.
Investors can hold Cabot indirectly by investing in the iShares Morningstar Small-Cap ETF (JKJ). JKJ has invested 0.6% of its portfolio in Cabot as of May 25.