Good day ladies and gentleman and welcome to the Q4 2008 Cabot earning conference call. My name is Kim and I will be your coordinator for today. (Operator Instructions). I would now like to turn the presentation over to your host for today’s conference Ms. Susannah Robinson, Director of Investor relations.

I would like to welcome you to the Cabot Corporation fourth quarter and full year 2008 earnings teleconference. Here this afternoon are Patrick Prevost Cabot’s President and CEO, Jonathan Mason Chief Financial Officer, Bill Brady General Manager of the Core Segment, Shawn Cohane General Manger of the Performance Segment, Fred von Gottberg General Manager of the New Business Segment, Robby Plainfield General Manger of the Specialty Fluid Segment, Eddy Cordeiro Head of our Corporate Strategy Group, Jim Kelly Corporate controller, and Brian Berube General Counsel. Last night we released results for the fourth quarter and full fiscal year of 2008, copies of which are posted in the Investor Relations section of our website. For those on our mailing list you received the press release either by e-mail or fax. If you are not on our mailing list and are interested in receiving this information in the future please contact Investor Relations. The slide deck that accompanies this call is also available in the Investor Relations portion of our website and will be available for two weeks following the earnings conference in conjunction with the replay of the call. I will remind you that our conversation today will include forward-looking statements. Forward-looking statements are subject to risks and uncertainties and Cabot’s actual results might differ materially from those expressed in the forward-looking statements. A list of factors that could affect Cabot’s actual results can be found in the press release we issued last night as well as in our 2007 Form 10K and subsequent filings with the Securities and Exchange Commission, copies of which are available on our website. I will now turn the call over to Patrick Prevost Cabot's President and CEO who will discuss the key highlights pertaining to the company’s performance for the quarter. In addition Patrick will discuss in some detail the drivers of demand and Cabot’s strengths in the key industrial sectors that we serve. He will then provide our outlook for the future and turn the call over to Jonathan Mason Cabot's Chief Financial Officer who will provide the specific segment and corporate financial details. We will then open the floor for a question and answer period. Patrick.

It is a pleasure to be with you today to talk about our fourth quarter results as well as our full fiscal year. As we mentioned in our press release last night, although I’m not pleased with our operating results this quarter I am confident in the underlying strengths of our business. As I touch on some of the specific highlights for the quarter, it is important to note that our total segment profit improved in the fourth quarter by $3 million compared to the same period of 2007. The improvement was primarily driven by stronger results in rubber blacks where solid margin in cost management more than upset unprecedented $36 million of unfavorable contract lag during the quarter. Volumes across most of our businesses were weaker than the seasonal norm due principally to slowing global demands particularly in the automotive and construction sectors. During the quarter we once again made progress in several of our new business development activities. First, we signed a final agreement with Michelin for the commercialization of our patented Cabot (inaudible) composite technology and product for use in tires. As we know the last quarter we received cash made payment related to the agreement during fiscal 2008. However, due to the nature of the agreement and the associated revenue recognition rules no revenue was recorded in our financial results. Because of the confidential nature of the agreements I remain somewhat limited in the details I can share with you but what I can tell you is that this is an agreement covering both technology and manufacturing with a leader, a global leader in tire technology. We anticipate this to be a long-term agreement, although there will be a series of stage gate decisions along the way. Once proven out the partnership should be very valuable…

In the core segment, as Patrick mentioned earlier, rubber blacks improved profitability during the fourth quarter when compared to the fourth quarter of 2007 by $13 million. Increased unit margin, lower fixed manufacturing costs from the closure of our Ohio River plant, the contribution of energy centers and our operations excellence program drove this performance. We have three additional energy centers that will be commissioned in fiscal year 2009. As Patrick noted, the unfavorable contract lag was $36 million during the quarter with a record high feed stock cost of the summer hitting our P&L during August and September. In line with the recent announcements from tire manufacturers to reduce production driven by slowing demand, we saw global volume weakness of 7% overall. Unlike in prior quarters where volume growth in emerging markets compensated for slowdowns in developed markets, the volume weakness we saw this quarter was broad-based. The only exception was in Asia Pacific excluding China where volumes increased by 3%. We believe the decrease in China was partially due to the affect to the Olympics compounded by the global slowdown. For the full fiscal year 2008, operating profit increased compared to fiscal 2007 despite a $66 million contract lag and flat volumes. This performance is attributable to solid merchant management, a strict control on manufacturing spending and the benefit of foreign currency translation. In the core segment supermetals, results in the supermetals business continue to be weak during the fourth quarter. Although volumes increased from the third quarter, they were still below the fourth quarter of 2007 and the business continued to experience higher average ore costs. For the full fiscal year 2008 profitability was significantly below last year. This performance was driven principally by the expiration of favorable supply contracts in the first fiscal quarter of 2007,…

In conclusion, I wanted to reiterate that we remain confident in the underlying strengths of our company. We're on a solid financial position which will allow us to manage the company to through near-term uncertainty while keeping in mind our long-term strategy and performance commitments. Our competitor's advantages of leading business franchises, broad global scale, strong customer relationships, long-term supply agreements and superior technical capabilities will serve us well. We will continue to leverage these strengths through our four strategic levers. We will remain keenly focused on margin improvements, capacity in emerging market expansion and new product developments and we will also prudently examine opportunities to actively manage our portfolio to strengthen our long-term position. So, with that I'd like to thank you very much for joining us today and I will now turn the call back over for your questions and answers and we will give you answers.

(Operator Instructions) Your first question comes from Jeff Zekauskas – J.P. Morgan. Jeff Zekauskas – J.P. Morgan: I wanted to start off with the lovely chart you gave us on rubber blacks profit before tax and I apologize if I'm asking just such a primitive question. If you add up the rubber black's business profit before tax excluding lags and LIFO for 2007 you get $104 million, and if you add up the numbers for 2008 excluding the lags you get $176, so why does it go from $104 to $176?

I believe that the answer was partially embedded in the text of our press release, but I believe that we've been focusing very much on margin management over the last two years and we've also been very active at reducing our costs and what I'm going to do is I'm going to turn this now over to Bill Brady who will give you some more details on that.

I think Patrick really hit the two key points. One is that we have focused very much on the margin management both in the contracted portion of our business and in the spot portion, and so I think our commercial team has made some excellent tradeoffs and has managed very well maximizing the margins, that’s one, and then on the other hand we have done both structural cost reductions, that is plant closures such as Ohio River, and remember we have added energy centers to our plants as well which has helped out structural costs. In addition to that we have a strong operations excellence program which year-after-year continually takes costs out of the system and when you add all that up as you know there’s a lot of leverage in the business because of the volume and when you add all that up, it adds up to the numbers that you articulated. Jeff Zekauskas – J.P. Morgan: So what this chart really shows is much of the internal progress that the company has made in I guess in making its operations more efficient. So if we what we do is we go to 2009, if the base business is earning at roughly $176 million, and you’re going to probably have some kind of positive effects from contract lags and LIFO, I guess to begin with the profits for this year should be, I don’t know order of magnitude above $200 million?

Well I think projecting 2009 is tricky business at this point in time. Jeff Zekauskas – J.P. Morgan: Well if say volumes were zero, just in theory in looking at the architecture of your financial statements and it turns out you have oil prices down on average, I don’t know $30 a barrel, would that produce operating income above $200 million or wouldn’t it?

If you look at what happened in oil prices we will certainly get a benefit in the first quarter from the drop and then if everything stayed static from that point out, we would of course capture that benefit and move forward from there, but as I said, Jeff, there’s a lot of different variables going into 2009 that could change that.

I think maybe if I may add, Bill, I think what we’re seeing here is a congruence of factors and the fact that Cabot has been playing its cards very well in this business, we’re the largest global player in carbon black, we have very strong customer relationships that have been long term that have been building up, and in addition to that, I look at us having very high quality products, we are differentiating our products, but we also have quality that is equal to none and we have, and this is very important considering the highly concentrated nature of the industry, we have a high reliability which is critical also in the current environment to ensure that our customers are able to operate on a concentrated and stable basis. So I think what we’re seeing here notwithstanding the fluctuations of raw materials is the power of this business and we believe that this is a business that will serve us well in the long term. Jeff Zekauskas – J.P. Morgan: Well then if I may just clarify so if it turned out that there were no lags and no LIFO charges and your volumes didn’t increase in 2009, order of magnitude you would report operating earnings of $176 million, is that the meaning of this chart?

I think, Jeff, you could be drawing that conclusion. We wouldn’t want to go as far as that because we do believe that there is a lot of uncertainty in terms of trying to forecast what will happen in the next fiscal year. I think you’re drawing a certain conclusion and I would say that you can take that and consider that maybe fluctuations that will occur and as we mentioned volume is a significant factor that will affect the business in 2009. Jeff Zekauskas – J.P. Morgan: It’s sort of funny because your volumes I guess were down something like if I have it right, something like 7% in the quarter for rubber blacks and one would have thought that your customers would want to buy in advance of price increases. I guess intuitively I would have thought that this would have been a very good volume quarter ad that the bad volume quarters would be to come?

Well I think, Jeff, going back to the comment I made earlier, we have customers that are fairly large mostly and that are managing their working capital very tightly, meaning that the chain at least the chain between us and the tire producers is a very tight chain. Meaning that’s there’s very little volume and ability to store carbon black in those two steps in the chain, which means that the ability for our customers to buy in advance is limited and is capped by their intent to be careful about their working capital.

Your next question comes from Saul Ludwig – Keybanc Capital. Saul Ludwig – Keybanc Capital: I have a question about the tire volume in the fourth quarter. I don’t know whether Patrick or Bill can handle it, but yesterday on Michelin’s conference call they talked about what the tire market was like in the September quarter in each of the geographies that they operate, and what they said about North America and Europe pretty much paralleled what your volume changes were and there seems to be no disconnect. On the other hand, they commented that the market for tires in South America was up 12% in the third calendar quarter and your volume was down 15% and in Asia Pacific they talked about the volume being up 10% for tires and yet your volume was down very substantially. I’m curious as to why there may have been such a big disconnect between your volume and what Michelin talked about the market in the Asia Pacific and Latin American regions while being fairly consistent in Europe and North America.

Let me try to shed a little bit of light on that. In South America, you might remember from last quarter we made some pretty solid choices of managing marginal over volume in South America, and I think, although I don’t have the exact numbers in front of me, but I think that would probably account for the difference in South America. Saul Ludwig – Keybanc Capital: Your volume was up 2% in the third quarter and was down 10% in the preceding quarter.

With regard to Asia Pacific, remember our non-China Asia Pacific volume was up. Our China volume was down and just thinking off the top of my head, the Michelin volume in Asia I think is probably a lot less dependent on China than ours, which might account for that difference. Saul Ludwig – Keybanc Capital: I’m concerned about how much when [JinJiang] comes on in January how much does that increase your Chinese capacity?

Well it increases it a fair amount, there is about 150,000 tons planned to come on in [JinJiang]. Saul Ludwig – Keybanc Capital: On a base of how much?

On a basis of about 300. Saul Ludwig – Keybanc Capital: So that’s a 50% increase?

Approximately. Saul Ludwig – Keybanc Capital: But with the market down 16% this quarter and you're about to bring on 50% more capacity is that, do we have something to worry about?

Let me say a few words about the [JinJiang] investment. First of all remember this is part of a global network and so we’ll evaluate that capacity and what we can do with it in the context of our global network. Second, this capacity is going to be some of the most competitive capacity in the world. It’s fairly low cost and it has our latest technology. Now having said that, we have mechanical completion of that due to finish up in the January timeframe which we’ll do, and between now and then we will watch October, November, December volumes both in China and elsewhere and we’ll make a decision in that period whether we bring that capacity up right away or we have a slight delay in it or any delay at all. Saul Ludwig – Keybanc Capital: Do you incur the fixed costs of this plant starting in January?

Let me re-emphasize that this capacity, while it may be a bit mistimed with the market, will be very powerful capacity, very advantage capacity and will strengthen our China position over the long-term considerably. So, there might be a little bit of short-term pain associated with the timing of this capacity, but we'll manage it well and over time it's going to be very advanced and very important.

Perhaps if I may, Saul, what needs to be remembered here as well is that this is capacity that is incremental to an existing site. So, its impact in terms of fixed cost is going to be very much manageable in terms of cash fixed costs, and, again I think the point Bill was making is important. It is an expansion of our global network and we will and are continuing currently to optimize that global network to make sure that the cheapest possible ton gets delivered to the appropriate customer, and that is an advantage we have and that's a flexibility that gives us the opportunity to maximize the bottom line and certainly do better than all of our competitors. Saul Ludwig – Keybanc Capital: Carbon black isn't shipped very far is it? It's pretty much a local business, so, I don't understand the global reach. How far can you ship this stuff?

You can ship carbon black around the world and we actually do ship across regions when it is economical to do so. I think that you're right in general that carbon black does not get transported over long distances, but, in times like today's times there may actually be opportunities to optimize the system beyond what we've down in the past and this product can be shipped over long distances. Saul Ludwig – Keybanc Capital: I have a financial question. You talked about the good liquidity and all, but you did in the course of the year actually consume about $157 million worth of cash and your debt increased by $130 million and the cash came down by $26 million. What do you expect to happen in the current fiscal year with regard to cash generation? Does your net debt go up, go down again, but you did consume a lot of cash last year and I'm wondering if that is what was planned, even though the explanation was working capital.

Right, Saul, I'm going to turn it over to Jonathan, but, first I just wanted to remind us that a lot of the cash consumed last fiscal year was actually consumed for working capital purposes as you just mentioned, and that was to the tune of in excess of $130 million. So, that was I would say the main driver of our cash shifts last year, but, Jonathan would you like to expand on that.

That's the big issue we mentioned CapEx and will be $25 million, we think, on CapEx year-on-year $25 million improvement there, but to put some context around the working capital when we started the year oil I'm going to say was $65 to $70 a barrel and now ending the year in September, because of the way our supply chain works, we still pretty much have that $120, $130 barrel oil in our balance sheet. So, I think both Patrick and I referred to the expectation of a pretty good reversal on working capital should feed stock costs remain where they are today. Saul Ludwig – Keybanc Capital: This should be a cash generator.

Absolutely. Saul Ludwig – Keybanc Capital: Just a final question with your inter company loan to Brazil you marked to the market at the end of September the real has continued to tumble, dramatically here in the last four weeks. Is there going to be another similar type of expense taken in the first quarter assuming that today's real level stays in effect until the end of December.

Actually, the real has been very volatile, but today versus the quarter end it's kinder than the month of September when we took the $8 to $9 million hit. It is likely, though at today's rate we would take another more minor hit in the December quarter. Saul Ludwig – Keybanc Capital: Any reason why you don't want to hedge this out so this problem goes away in the future?

We are working on ways to reduce the accounting exposure. This gets back into the philosophy on with Brazil. It's very expensive to hedge there. Interest rates are very, very high compared to the inflation rate in Brazil. So, do we go pay a third party to hedge something that's in our company to give us a better accounting result? This is back to, you and I have had a talk about this before, but challenges in accounting versus economics.

I think the point here is that this is a non-cash accounting affect and that any activity for us to correct that may actually result in us spending cash, which would not be prudent. Therefore we're dealing here with accounting rules which we believe not to be appropriate in this case, which we have to comply with and we have to recognize this hit to our P&L, although we believe that this is an inter company Cabot to Cabot obligation which should not result in a negative P&L impact. So, here we're going to be looking at are how we can mitigate that, but certainly I could not support us spending any cash to offset an accounting issue.

Your next question comes from John Roberts - Buckingham Research.

I apologize if this is a stupid question related to that, why isn't there and offsetting mark-to-market by your Brazilian subsidiary for the reduced liability.

There is for consolidation accounting it goes directly to the balance sheet and I really can't defend that treatment.

There actually were two offsetting then mark-to-markets only one went through the income statement, the other one was incomprehensive income.

Correct.

Patrick, at the investor meeting back in Boston you were going to try to shorten the price lag with carbon black costs as contracts renewed I think. Have any contracts come up for negotiations since that investor day?

We are absolutely committed to eliminating or reducing the lag that has been affecting the company and that has actually brought us to report in the way we are reporting and considering the volatility of the feed stock markets, we believe that this lag has no reason to continue to exist and we're going to, as I mentioned in the investor meeting in May, we're looking at eliminating it over a period of 18 to 24 months as the contracts come up for renegotiation. Some of the shorter term contracts that we've renegotiated have actually been adjusted to eliminate the lag and we're going to have some longer term contracts coming up for renewal at different points over the next 18 months or so and that will be a significant part of the negotiation and clearly we believe that as Cabot we cannot play the bank for our customers and, we'd rather focus on the things in where we really can add value like the quality of the products and the ability to provide reliable service and products. So, I guess the answer to your question is that we're committed to continue on this track.

Secondly, how important are the big mining tires? The commodity declined that we've had out there in a lot of metals and things like that you would think that the equipment that’s used would chose really large volume tires, even though not large numbers of tires might flow abruptly out there. Is that a meaningful issue out there for the business?

I'm going to ask Bill to answer that question, Bill.

It's an issue you asked if it's a meaningful issue. It's an issue. I don’t have their numbers in front of me, but, I think the mining and the earth moving tires might be kind of 20%ish of our volume, something like that. As you point out they are likely to slow for the reasons you sited, but we'll watch it closely and we'll manage that sector just like we do the truck sector and the passenger sector as well.

Your next question comes from Laurence Alexander – Jefferies.

First question just on North American volumes for rubber black they were down about 7%. What's the utilization rate roughly in your business and are you rethinking the decision to keep your plants open and wait for one of your competitors to shut capacity.

Laurence, as you may expect providing utilization rates on our units, especially by regions, is a significant issue with regard to providing information to our competitors. So, we're clearly not comfortable providing that information, but what we can say is that as you imagined with the volume shift we've seen recently that there has been some effect on the utilization of the plants and what we're doing is looking at each of the units in terms of their cost position, their geographic position, and the ease of turning them up and down to optimize our global system like we mentioned. What I'll do is I'll pass it on to Bill Brady to perhaps give you a little more granularity in terms of how we're managing this on a daily basis.

Laurence, I think Patrick hit this right when he said it’s a pretty fluid situation and, we're watching it very closely. I just wanted to point out two other important things though. One, remember these are very permanent decisions, so should we decide to close plants anywhere, we've got to make sure we're not reacting to short-term conditions and that the demand is not going to come back. The second thing I wanted to add is after the closure of our West Virginia plant we have put ourselves in a very strong position relative to the competitor plants in North America, in my view. So I will watch it closely. It's a fluid situation, but I think were dealing from a position of strength as we look at this going forward.

Just to follow up on that you've expressed several times concerns about or highlighted risks for volume in 2009. How do you see that playing out? Is your concern really focused on the first half of the year or are you seeing it as a smooth sail to cross the year, do you see lumpiness. Obviously it’s a very fluid situation but what's your read as of this moment.

Well, I wish I had a crystal ball to know exactly what was going to happen with volume. So, maybe the best way I can answer that is just tell you what we do know and then give you a little bit of color on what we're doing to deal with any scenario that might come our way. We have certainly seen a reduction a slowdown in our volume in the past two or three months driven by slower tire production, and I think that's out right demand but it’s also people managing their yearend inventory, so we are certainly seeing that. Going forward, we're close to the customers, we talk to them all the time and we'll deal with it as they forecast Maybe I'll take a second. I'll just give you a feel for four or five things we are doing to deal with any scenario that comes our way. The first as Patrick and Jonathan mentioned is we're very focused on working capital and cash, and so based on the every changing customer forecast in the volatile times we are preparing our units as appropriate to deal with cash. We're also watching very closely our customer mix and managing our receivable as well. We've done a couple of things proactively on structural costs. We've closed Ohio River, the West Virginia plant in August and we have three new energy centers coming on throughout 2009 which will help our cost position. On the commercial side I will point out in the down market the contracts are real assets for u because they keep both the volume and the margins pretty steady. So, the contracts we have are quite good in these times, and finally we are managing our CapEx quite closely. While we are not giving up on our key expansion projects, although we're watching the timing, and we're not giving up on our energy centers we are squeezing our base cash to be rather conservative in these times. So, I'm not sure what's going to happen exactly with volume in 2009, but I think we have a lot in place to deal with whatever comes our way.

Lastly, this might be a red herring, but it looks as if looking at your slides, the slide on the rubber black segment that the profits before tax for the rubber black's business has moved up by about 10% for both Q2 and Q3 compared with the last conference call. Was there a change in the business or is this just an accounting issue?

Laurence, this is Jim Kelly. That was a reclassification that we made between rubber blacks and performance products related to manufacturing variances and how the variances in the shared facilities are allocated across the two. If you go back to last quarter we did note on the financial statements that we continued to evaluate the allocation of cots across the businesses and we have now pretty much completed that and think we're in a pretty solid position on those allocations now.

There are no further questions in the queue. I would now like to turn the call back over to Mr. Patrick Prevost for closing remarks.

I just wanted to say a few words on closing. First of all I wanted to thank you for participating in our call, but I also wanted to close on saying that in this uncertain environment clearly there's a few things we need to keep in mind and I think these messages are that we have a sound corporate strategy and long-term financial goals. We've got leading global franchises and we're prudent in terms of managing our financial position and watching our liquidity. I also believe that our businesses know where they are going and that we've put actions in place to deal with a slowdown and finally we have an experienced team that has gone through these times or times like these, although we certainly don't know if they will turn out the same way as in the past, but I believe we're confident. We can weather this storm and that we will continue to balance the short and long-term objectives of this company to come out stronger for our shareholders and our customers. So, with that I wanted to thank you and we will speak again next quarter.

This concludes the presentation.