Cabot Corporation has decided to stop production at its carbon black manufacturing facility in Merak (Indonesia) by the end of January 2016. “To be successful over the long term, we must continue to focus on improving profitability through cost savings and increased operational efficiency while also producing the highest quality products that meet our customers’ needs. The decision to consolidate manufacturing across Asia Pacific is a critical step in our plan to ensure that we are operating as efficiently and effectively as possible to become more competitive in a challenging environment, and to accelerate future growth,” said Sean Keohane, president, Reinforcement Materials Segment, Cabot.
The decision, which will affect approximately 50 local employees, was driven by the Merak facility’s financial performance over the past few years. Despite efforts to be competitive, the facility has suffered from low utilisation rates. Asia is quickly becoming one regional market and this dynamic has created the need for Cabot’s facilities to be even more cost competitive. As such, the company will consolidate production in Asia by ceasing production at its Merak facility and using its Cilegon (Indonesia) as well as other Asian and global carbon black production sites to meet the regional demand.
Indonesia remains a strategic country for Cabot’s carbon black business. Its tyre manufacturing industry supplies growing local and global demand. Cabot will leverage its global manufacturing reach to continue to offer quality products and technical services to its customers in Indonesia as well as throughout Asia Pacific.
Cabot expects the closure plan will result in a pre-tax charge to earnings of approximately $33 million, of which approximately $8 million of this amount is cash and $25 million is a non-cash charge. Annual savings related to the closure are estimated to be approximately $8 million, of which approximately $5 million is cash.
