Cabot Corporation announced yesterday that it will close its carbon black manufacturing facility in Merak, Indonesia. Cabot anticipates that manufacturing operations will cease by the end of January 2016. This will leave Cabot with one carbon black plant in Indonesia, located in Cilegon.
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 utilization rates, according to Cabot. 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, Cabot will consolidate production in Asia by ceasing production at our 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, according to the company. Its tire manufacturing industry supplies growing local and global demand. Cabot is committed to engaging with customers currently served from the Merak plant to determine how best to meet their needs during and after the shutdown of production. 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.