# A MESSAGE TO OUR SHAREHOLDERS

_Source: `DeepSeekOCR_Ardian_pruned_1k/basic-materials-specialty-chemicals/NYSE_CBT_2018/NYSE_CBT_2018.mmd` · pages 3-9_

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A MESSAGE TO OUR SHAREHOLDERS

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Fiscal 2018 was an exceptional year for Cabot Corporation, as we delivered record-setting performance and advanced strategic long-term advantaged growth investments. Our success is due to the remarkable efforts put forth by the entire Cabot team, who worked tirelessly to execute our "Advancing the Core" strategy.

Since the launch of our strategy in 2016, we have met or exceeded the financial targets we set forth and have invested our free cash flow in a balanced fashion to drive long-term growth and return capital to shareholders. Our strategy is built on three pillars:

☑ Investing for growth in our core businesses

☑ Driving application innovation with our customers

☑ Generating strong cash flows through efficiency and optimization

We are guided by our long-term strategy and Cabot is in a unique position to leverage long-term structural shifts in our core value chains to extend our leadership positions. Over the past 20 years, the tire industry has migrated to Asia Pacific, particularly China. Today, nearly 40% of the world's tires are produced in China. Our customers depend on us for our leading products and supply reliability, and our Reinforcement Materials segment is a recognized leader among global carbon black players in China in terms of scale, energy recovery, environmental controls and reputation. In our fumed silica business, we have witnessed a similar structural shift in which approximately 40% of the world's silicones are now produced in China. Cabot has developed unique and durable partnerships with key silicone players to establish the leading fumed silica franchise in China. Finally, our specialty compounds network of plants has been repositioned to leverage the growth in plastics converting in the low cost polymer producing regions of North America and the Middle East. Each of these value chains is critical for Cabot's long-term success and we are positioned for advantaged growth as we move forward.

Throughout 2018, we continued to invest for advantaged growth. We made strategic investments to increase our network capacity and optimize our assets to meet the growing demand for our products. The acquisition of Tech Blend, a leading North American producer of black masterbatches, expanded our global capabilities of our specialty compounds business, and the acquisition of a new carbon black plant in Pizhou, China is a highly capital efficient plant acquisition that we intend to convert and upgrade to support long-term growth in our specialty carbons product line. Additionally, we announced investments for additional capacity in our global carbon black network through capital efficient debottlenecks and an expansion at our facility in Cilegon, Indonesia.

Driving application innovation with our customers is a key pillar of our strategy and in 2018 we advanced strategic opportunities by bringing together the unique benefits of our upstream particle expertise and downstream formulation development. A great example of this effort is our success in batteries. There is no doubt that energy storage will become a large market for the materials industry and Cabot is well positioned to capitalize on this trend given the importance of conductive carbon additives in battery formulations. We are the technology leader for advanced lead-acid batteries and our LITX \( ^{®} \)  conductive additives are being adopted by major OEMs in next-generation lithium-ion

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batteries. To further our leadership in this area, we also acquired a unique technology for advanced carbon materials that will enable differentiated performance in conductive and reinforcing applications. Our application "know-how" and suite of technologies for batteries drove revenue growth of over 70% in our energy materials product line in 2018 and will enable significant growth in this application over the next five to ten years.

I am immensely proud of our achievements in sustainability. We recognize that responsible business practices are essential to our success, and throughout the past year we focused on further integrating sustainability in our product innovation, operations and business strategy. In 2018, we were recognized as one of the 100 Best Corporate Citizens by Corporate Responsibility Magazine. We also became the first chemical company in China to be RC14001 \( ^{®} \)  certified by auditors from the international registrar, BSI. For the third consecutive year, we achieved a gold rating from EcoVadis for our performance in sustainability. We have long believed that sustainability plays a crucial role in our long-term growth strategy, and our achievements underscore the need to continue our relentless pursuit of safety, health and environmental excellence, particularly as our customers and communities around the world continue to demand more of corporate citizens.

Our aim is to sustainably grow the earnings and cash flow of Cabot over the long-term so that we can invest in advantaged growth projects while returning capital to shareholders. I am very pleased with the Company's financial performance this year. In 2018, we delivered a record adjusted earnings per share (EPS) of \(4.03, an increase of 14% from the prior fiscal year. Additionally, we delivered on our commitment to return cash to our shareholders, as we generated discretionary free cash flow of \)253 million and returned $222 million to shareholders through dividends and share repurchases.

Our success is due to our dedicated and talented team whose diverse skills, passion and perspectives are driving our business forward. We recognize that sustainable growth won't come simply from working harder. It requires us to pursue our work with an external orientation in everything we do. On this front, we welcomed new colleagues to our executive committee and key leadership teams whose new ideas and perspectives are driving innovations across the organization.

As we look ahead, I am confident that our industry leadership and investments in our core businesses position us to deliver advantaged growth. We are a company that is driven to generate lasting value for our customers, shareholders, employees and the communities where we operate.

Thank you for your continued interest and support of Cabot. This is a great time to be at Cabot, and I am excited for the years ahead.

Thank you,

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Sean D. Keohane

President and Chief Executive Officer