Cabot (CBT) Q1 2022 Earnings Call Transcript

Cabot (CBT 0.84%)
Q1 2022 Earnings Call
Feb 01, 2022, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the fourth quarter -- I'm sorry. Good day, and welcome to the first quarter 2022 Cabot earnings conference call. [Operator instructions] As a reminder, this call is being recorded. I would now like to turn the call over to Steven Delahunt, vice president, investor relations.

You may begin.

Steven Delahunt -- Vice President, Investor Relations

Thanks, Michelle, and good morning. I would like to welcome you to the Cabot Corporation earnings teleconference. With me today are Sean Keohane, CEO and president, and Erica McLaughlin, senior vice president and CFO. Last night, we released results for our first quarter fiscal year 2022, copies of which are posted in the investor relations section of our website.

The slide deck that accompanies this call is also available on the investor relations portion of our website and will be available in conjunction with the replay of the call. During this conference call, we will make forward-looking statements about our expected future operational and financial performance. Each forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Additional information regarding these factors appears in the press release we issued last night and in our 10-K for the fiscal year ended September 30, 2021 and in subsequent filings we made with the SEC.

All of which are available on the company's website. In order to provide greater transparency regarding our operating performance, we refer to certain non-GAAP financial measures that involve adjustments to GAAP results. Any non-GAAP financial measures referenced on this call is reconciled to the most directly comparable GAAP financial measure in a table at the end of our earnings release issued last night and available in the Investors section of our website. I will now turn the call over to Sean, who will discuss the first quarter highlights, provide an update on our strategy, and then discuss our progress in the areas of battery materials and ESG.

Erica will review the company and business segment results, along with some corporate financial details. Following this, Sean will provide closing comments and open the floor to questions. Sean? 

Sean Keohane -- President and Chief Executive Officer

Thank you, Steve. Good morning, ladies and gentlemen, and welcome to our call today. I'm very pleased with results in the first quarter as we delivered adjusted earnings per share of $1.29, which is up 9% compared to the same quarter last year. Performance across our businesses was strong.

And I'm very proud of our execution discipline across all facets of the company. Additionally, our discretionary free cash flow during the quarter was robust and has supported the repurchase of shares and an increase to the dividend of 6%. Our team executed exceptionally well in the quarter. And this made the difference in successfully navigating a dynamic macro environment.

The quarter was marked by strong progress against our key strategic objectives, and I would like to highlight a few noteworthy accomplishments. We recently concluded our calendar year 2022 Reinforcement Materials customer agreements and are very pleased with the outcomes, having achieved substantial price increases in all regions. As we shared during Investor Day, the market environment remains supportive and Cabot's value proposition of supplier liability, quality, and global reach continues to resonate with customers. This is especially true in this period, where supply chains are stressed and customers are increasingly looking to derisk their operations through regionalization of the supply base.

This plays very well to our strength as a company as we can support our global customers with local supply in all regions. During the quarter, we also continued to build momentum in battery material, and we advanced a number of ESG priorities. I will elaborate on both of these fronts, but before I do, I think it's important to connect our priorities to our strategy. During our recent investor day, we launched our new Creating for Tomorrow strategy.

This strategy is inspired by our purpose to create materials that improve daily life and enable a more sustainable future. As we execute our strategy, we will leverage our strengths to lead in performance and sustainability today and into the future. And we will deliver on this strategy by advancing three key pillars: driving advantaged growth, delivering innovative chemistry to enable a better future, and relentlessly pursuing continuous improvement in everything that we do. By pursuing our Creating For Tomorrow's strategy, we will grow, transform, and reshape the valuation potential of the company.

Our strategic outlook is underpinned by an expectation of a supportive market environment and the clear connection of our products to compelling macro trends. As a result, our targets call for strong growth of adjusted earnings per share and robust discretionary free cash flow to fund growth and return capital to shareholders. Of our many compelling growth options, we are particularly excited about the momentum we are building in battery materials. And so I'd like to transition now to give you an update on our progress in this critical growth vector.

As one of our key growth vectors along with Inkjet and E2C, battery materials is a key part of our Creating for Tomorrow strategy and is expected to be a major driver of our growth in reshaping the valuation of the company. The market size for conductive carbon additives and lithium-ion batteries is expected to be approximately $2 billion by 2025, with 30%-plus growth expected through 2030. Cabot is very well positioned given the breadth of our Conductive Carbon Additive portfolio, our global footprint of assets, and our strong local commercial and technical support. The Cabot value proposition is resonating strongly with leading customers, as evidenced by our success in selling to six of the top eight battery producers, which represent approximately 90% of the market.

During the first quarter, volumes increased 58% year over year, and we were recently qualified in a new EV platform with a top five battery manufacturer with sales expected to start in fiscal Q3. Given the strong demand outlook, we advanced important capacity projects in the quarter, including the announced acquisition of a plant in Tianjin, China. We expect to close this deal in the second quarter of this year when we will start our upgrade and conversion of equipment to produce battery material products. Also, we are on schedule to start up our new specialty carbons plant in Xuzhou, China, which is expected to free up additional battery material capacity in other parts of our network.

Given this strong momentum, we expect our fiscal year 2022 full year EBITDA to be in the range of $25 million to $35 million. The lithium-ion battery application holds great promise for Cabot, and we are both capable and determined to realize its full potential. Sustainability is integrated into everything we do with Cabot, and we advanced a number of important ESG priorities in the quarter. We are committed to reducing our environmental impact, while supporting our customers with innovative materials to help them achieve their sustainability goals.

We recently announced that we are joining other leading companies to align our sustainability agenda with the Paris Climate Agreement to achieve net zero carbon dioxide emissions by 2050. For many years, we have focused on reducing our environmental impact and our net zero ambition is a natural progression in our sustainability journey. Aligned with this ambition, we recently completed an assessment according to the Task Force on Climate-related Financial Disclosure, or TCFD, and published our risk and opportunity matrix. This matrix is posted on our website.

Our continued leadership in ESG was also further recognized with two notable achievements. First, we were recognized by Newsweek as one of America's most responsible companies. This is the third consecutive year that we have been included on Newsweek's list, and we are very proud of this recognition. And second, we were named by Investor's Business Daily as one of their 100 best ESG companies in 2021.

Bringing the power of innovative chemistry to solve our customers' sustainability challenges and reduce our impact is what motivates us and is essential to our purpose. I look forward to updating you on further developments as we progress on our journey. I'll now turn the call over to Erica to discuss the financial results of the quarter in more detail. Erica?

Erica McLaughlin -- Chief Financial Officer

Thanks, John. I'll start with discussing results for the company and then review the segment results. We reported another strong quarter with adjusted EPS first quarter of $1.29, up 9% compared to the first quarter of fiscal 2021 and up 16% sequentially, with better-than-expected results in both the Reinforcement Materials and Performance Chemicals segments. Discretionary free cash flow in the quarter was $72 million, driven by strong EBITDA, and we ended the quarter with $179 million of cash.

Capex during the quarter was $30 million. And we expect full year capex to be in the range of $250 million to $275 million. This is an increase from our range last quarter, largely due to higher growth investments expected for battery materials in relation to the acquisition and conversion of the new plant in Tianjin, China. The balance sheet remains strong with total liquidity of $1.2 billion and net debt-to-EBITDA of 1.8 times as of December 31.

Our operating tax rate was 27% for the quarter, and we anticipate the fiscal year rate will be between 27% and 28%. Now moving to Reinforcement Materials. During the first quarter, EBIT for Reinforcement Materials decreased by $3 million as compared to same period in the prior year. The decrease was principally due to higher cost associated with utilities and maintenance, largely offset by higher volumes and margins.

Globally, volumes were up 4% in the first quarter as compared to the same period of the prior year due to 13% growth in Asia, flat volumes in the Americas and a 10% decrease in Europe. Higher volumes in Asia were driven by strong demand for replacement and off-the-road tires. Higher margins are driven by the benefit of higher energy prices on our energy center and yield investments. Looking to the second quarter of fiscal 2022, we expect the reinforcement materials EBIT to improve due to the outcome of our calendar year 2022 customer agreement.

We expect volumes will remain solid, with sequential improvement expected in Europe and the Americas and the normal seasonal pattern in China related to the Lunar New Year. Now turning to Performance Chemicals. EBIT decreased by $2 million in the first fiscal quarter as compared to the same period in fiscal 2021, primarily due to lower volumes. Year-over-year volumes in the first fiscal quarter decreased by 3% in Performance Additives, due to plant downtime of a fence-line partner in our fumed metal oxides product line and 20% in formulated solutions due to the continued plant outage at our Belgium specialty compound site.

While overall segment volume declined, we delivered impressive volume growth of 58%, as Sean noted, in products sold to battery materials applications as we continue to see growth driven by higher EV demand. Partially offsetting impact, we delivered higher unit margins from favorable product mix in both our specialty carbons and fumed metal oxide product lines and strong pricing in our fumed metal oxides product line. Looking ahead to the second quarter of fiscal 2022, we expect a step up in sequential volume as our specialty compounds and fumed metal oxide plants come back online. And as we achieve continued momentum in our battery materials and Inkjet road sectors.

We expect to continue to successfully implement price increases to offset rising input and operating costs across the segment. Moving to the next slide. As we talked about at investor day in December, we are making capital allocation decisions that align with and support our Creating for Tomorrow strategy. The capital investments and the acquisition announced this quarter are to support our growth agenda.

In addition to these growth investments, we are also focused on providing an attractive return of cash to shareholders. During the quarter, we increased our dividend 6% and returned $40 million to shareholders through dividends and share repurchases. We are able to make these growth investments and return cash to shareholders while maintaining a healthy balance sheet with $1.2 billion in liquidity and net debt-to-EBITDA of 1.8 times. We were able to do it all, while retaining an investment-grade credit rate.

I will now turn the call back over to Sean.

Sean Keohane -- President and Chief Executive Officer

Thank you, Erica. I'll close out my prepared comments today by talking about our outlook for the remainder of the year. We are very pleased with the momentum coming out of the first quarter and we feel very good about how the rest of the year is shaping up. Based on our first quarter results and the outlook across our businesses, we are raising our guidance for adjusted earnings per share to be in the range of $5.50 to $5.90 for the fiscal year.

We expect demand to remain strong due to the resilience of the replacement tire market and our diversified application portfolio in Performance Chemicals. As I mentioned earlier, we are very pleased with the outcome of our calendar year 2022 Reinforcement Materials customer agreements and expect to see a corresponding step-up in earnings starting in the second quarter. We are also seeing strength across our Performance Chemicals segment, with strong volumes, robust margins and product mix and disciplined pricing execution. The second quarter results are expected to improve on a sequential and year-over-year basis, with adjusted EPS increasing as we move through the year.

This profile is expected as we continue to build momentum in battery material and as demand increases in inkjet for packaging applications. Additionally, our new specialty carbons plant is expected to come online in the second half of fiscal 2022. Overall, I'm very excited about where we are as a company and where we are going. The long-term fundamentals of our businesses are strong.

Our end markets remain robust, and we continue to execute at a high level. Looking ahead, we believe we have a winning formula, a talented team, an excellent portfolio of businesses set for growth, and a strong balance sheet. All of which position us to deliver on our strategic objectives and continue to grow and lead in our industry. Thank you very much for joining us today.

And I will now turn the call back over for a question-and-answer session.

Questions & Answers:

Operator

Our first question comes from David Begleiter with Deutsche Bank. Your line is open.

David Huang -- Deutsche Bank -- Analyst

This is David Huang here for Dave. I guess, first, can you quantify the benefit from higher unit margins? Did you have higher energy prices? And I guess what's the new oil price assumption that you baked in your new guidance? And is there kind of sensitivity you can provide on your prices in your energy center and your investment earnings?

Sean Keohane -- President and Chief Executive Officer

Sure. Let me turn it over to Erica to try to provide a little color on that question.

Erica McLaughlin -- Chief Financial Officer

Sure. So in terms of Reinforcement Materials, I think you were asking about higher margins and the classification. The increase in margins was $5 million year over year in the quarter. And as we do each quarter, when we forecast, we used the forward curve of oil so we would have used the latest forward curve just recently in terms of what the oil price impact would be for the remaining of the year. 

David Huang -- Deutsche Bank -- Analyst

Thank you. And then just on demand. Can you talk about your visibility for demand? Also, I guess for your end markets, where are you seeing any restocking happening? And are you seeing any destocking at your auto OEM customers?

Erica McLaughlin -- Chief Financial Officer

So the demand profile remains pretty robust. So across Reinforcement Materials, given the resilience of the replacement tire market as well as some real strength in the OTR off-the-road market, that is definitely providing good demand support in the business in. Somewhere in the 75% to 80% of the tire market is replacement, and that tends to be more resilient, more stable, more durable. In Performance Chemicals, it's a more diverse portfolio of applications.

But there's real strength across these applications due to a combination of factors. Infrastructure-related applications continue to grow very nicely. And emerging applications like batteries given the growth in EVs continues to be quite strong. In terms of restocking, I think, in general, inventory levels remain pretty tight across most value chains.

So we're not really seeing any level of restocking. In fact, I would say that probably inventory levels for most customers in the various value chains reserve are thinner than they would like them to be. So that's sort of a general comment, but on a restocking point.

David Huang -- Deutsche Bank -- Analyst

Thank you.

Operator

Our next question comes from Mike Leithead with Barclays. Your line is open.

Mike Leithead -- Barclays -- Analyst

Great. Thanks. Good morning, guys. First question for Sean.

I was hoping you could flesh out a bit more what's driving the higher EPS outlook. Obviously, first quarter was ahead, but it looks like the remaining three quarters are now expected to be incrementally better than you thought a few months ago. So I was hoping you could just unpack a bit more what's driving that better outlook.

Sean Keohane -- President and Chief Executive Officer

Yes. So demand remains quite robust, Mike. But overall, it's really strong execution on pricing. And so let me try to give you a bit of color there.

So in Reinforcement Materials, we realized better than expected outcomes for the 2022 entire customer agreements. And so that definitely contributed to the raise and outlook for that business. And then in Performance Chemicals, while input factors are rising pretty much everywhere and the chemical industry is having to address that like everyone else. Our efforts to recover those rising input costs through pricing actions has been -- it's been very successful and the execution of our teams has exceeded our previous outlook.

You'll remember in Performance Chemicals, it tends to be more spot oriented rather than contractual. And so sometimes, in a period of rising inputs, we may be chasing it a little bit, but the team has really done a fantastic job in executing really well. And so that strength and timeliness of pricing action is contributing. And then finally, I'd say, continued confidence in how the businesses are performing in terms of our growth vectors, in particular, battery materials.

But across a number of the growth areas that we spent some time on during investor day. So continued confidence building in those is also a factor here. So those would be the primary drivers, Mike. 

Mike Leithead -- Barclays -- Analyst

Great. That's super helpful. And then second question for Erica. Maybe two quick things on cash flow this quarter.

First, working capital was $143 million use of cash. So is that a function of higher oil? Or is there something else lumpy in there? And second, I think if I look at the press release, the change in other assets line was a $36 million use of operating cash and other financing line was a $27 million use of cash. So is there any lumpy items in there that you flag as well?

Erica McLaughlin -- Chief Financial Officer

Sure. So the first question, which is the working capital, it is mainly the higher oil prices. So the increase you can see is driven by higher inventory and receivable balances. The inventory balance is largely driven by the oil flow through within those balances and some planned inventory build heading into Q2.

The higher receivables is driven by the higher sales price, largely from the pricing we've passed on to recover the higher input cost. So I would not say there's anything unusual in the working capital. The view going forward obviously depends on oil prices. We assume that the global feedstock prices remain in line with current levels, and we would expect to level off of the use of cash for working capital.

We will see higher receivables balances at the higher pricing and the reinforcement materials contract flows through in Q2. But then the oil impact should start to moderate, assuming we have flattish oil going forward. And then in terms of the cash flow in terms of those other operating items, I'd say the only I'd say notable items flowing through there are impacts from as we're restoring our plant in Belgium. There are impacts in there in terms of repairing the site and then the insurance proceeds that come through that are should pretty much offset that over time.

But it is a bit lumpy in terms of what we received in a given quarter from what we're spending versus what insurance is coming back. 

Mike Leithead -- Barclays -- Analyst

Great. Thank you.

Operator

Our next question comes from Josh Spector with UBS. Your line is open.

Josh Spector -- UBS -- Analyst

Hi. Thanks for taking my question and congrats on a really strong quarter and outlook. Just want to ask broadly on China. Given you guys have a leading position there, there's definitely increased focus around what's going on in China demand and COVID impacts, etc.

Curious if you could share what you saw in the quarter. And how Cabot's operations and your customers' operations ran? And if you have any thoughts about, if China shifts their COVID policy management to kind of -- from a tight control to perhaps more of managing an endemic-type situation, does that provide -- create any risk to your outlook at all? And I'd say generally, your comments seem to be kind of business as usual. So just making sure that we're thinking about that right. Thanks.

Sean Keohane -- President and Chief Executive Officer

Yes. Sure. So thanks, Josh, for the comments and the question. We're certainly very pleased with the performance and the outlook.

So first, in terms of China, what we saw in the quarter was quite strong performance. And so in reinforcement materials across Asia-Pac, volumes were up strongly and our -- and China is a big piece of that. Our performance in China continues to go quite well in the quarter. So as we elaborated during the recent investor day, we really consider ourselves a great operator in China.

And I think that continued to show through in the quarter where plants ran well. And while the situation is at times dynamic, we're well able to manage that. Now as we go forward here, our expectation is for a fairly stable economic environment in China through the balance of 2022. I think the government there has recently adopted some new policies related to this power shortage issue that was well discussed in the early fall autumn period.

They're now allowing electricity prices to float up, which has been stimulating power producers to produce more energy. So there were some issues related to policies there that I think have improved the situation, and so we don't expect any material disruption going forward. And the government is also in an effort to balance economic growth along with their other priorities has been looking to stimulate the economy in certain ways, reducing interest rates and accelerating some spending and infrastructure in some of these areas that are helpful. So I think they're sort of keenly focused on trying to balance this.

Now on the COVID front, they've definitely managed in terms of at least reported cases to a much lower level than anywhere else in the world and have had this Zero COVID policy. I think ultimately, sustaining that policy will probably prove to be challenging. But on balance, I actually consider it to be a positive as it relates to our businesses because when there are COVID-outbreaks that tend to take fairly draconian actions which can cause disruptions. And I think if it over time transitions to more of management -- managing COVID approach, then there probably will be a little more stability and that will, on balance, be I think, a good thing.

So I -- that's how I see it, but I think that they probably will have to make a transition at some point here from what has been a very tight COVID policy.

Josh Spector -- UBS -- Analyst

And I appreciate those thoughts. And just quickly on performance volumes. I mean you're talking about a lot of things kind of flowing through perhaps later this year. And obviously, I think you get past some of the plant shutdowns.

Curious just how high volumes could be year over year in the second half in performance? Thanks.

Sean Keohane -- President and Chief Executive Officer

Yes. So we definitely have been impacted in the first quarter with some plant-related impacts. We're pleased that -- this quarter, the Belgian master batch plant will be coming back online. So that's positive and some of the impacts from our FMO fence-line partners disruptions should work themselves out here as well.

So I think we'll see a more normal volume profile as we move forward. I think the best way to think about first of all, it's a diverse portfolio across performance chemicals of applications. But on balance, these grow at somewhere 1.5 times to 2 times GDP, with, of course, differences by application. And so I think that's still the best way to think about it.

So pretty solid growth. Now there are some areas where we are outperforming and expect to continue to outperform and go well above those numbers. The best example there of course, there are efforts in batteries where we're expecting to grow at a very high rate, above the market growth rate for that business. So we feel pretty good about the volume outlook in this business.

And as we bring on some new capacity later in the year, particularly around specialty carbons, that will continue to support the volume growth both for our sort of legacy specialty carbons applications, but also we'll have some capacity support for batteries.

Josh Spector -- UBS -- Analyst

OK. Thanks. Congrats again. 

Sean Keohane -- President and Chief Executive Officer

Thanks, Josh. 

Operator

Our next question comes from Laurence Alexander with Jefferies. Your line is open.

Dan Rizzo -- Jefferies -- Analyst

Good morning, everyone. It's Dan Rizzo on for Laurence. So I think you mentioned that the battery market is going to grow 30% a year starting in 2025. And that you, I think, just said you're going to outpace that.

I was wondering what kind of capacity expansions are going to be to kind of keep up with that growth, not necessarily over the next two years, but say, over the next, I don't know, eight to 10 years? 

Sean Keohane -- President and Chief Executive Officer

Yes, yes. So the market, just to recap, Dan. So the market for lithium-ion batteries is growing at 30%-ish, 30-plus percent based on a number of reported market studies. So that's something that's happening right now, and we project that to go for out through the end of the decade through 2030.

Now as we had shared during our investor day, we have expectations to outpace that. And so over the next three years, we're expecting to grow this business at 50-plus percent. And I think that's purely a function of the Cabot value proposition here in terms of the breadth of our Conductive Carbon Additive portfolio our global footprint of assets and the fact that we've got application technology labs and technical and commercial teams all over the world, this is really, I think, a real strength of Cabot, and I think that resonates with customers. Now on the capacity front, sure, there will be capacity adds that are required here.

A number of them have been underway over the last couple of years to meet the growth that we're already putting up in this business. And then there will be further as it will be required here as our plant in Xuzhou, China comes on for specialty carbons that will unlock some capacity elsewhere in our network to support batteries. And then the Tianjin announcement that we just made, we will convert and upgrade that facility, we'll provide then further runway for these high-value conductive carbons. On carbon Nanotube front, we also have capacity expansions underway there.

So if you think about over the next three years, there's somewhere in the order of $100 million of capex that we'll be spending across the conductive carbon whack and carbon nanotube footprint to build capacity to keep fueling this growth here. So we've got a good line of sight on it. We're building great momentum, and we're putting the plants in place to continue to have the capacity to meet the needs of this market. Again, there I think it holds great promise, and we're certainly determined in our efforts here. 

Dan Rizzo -- Jefferies -- Analyst

OK. Thank you for the color on that. And then I think you said that dual control in China is easing. But I was wondering, has it affected you guys or your customers that much at all? It doesn't seem like it's been a headwind as highlighted by others within the chemical world.

Sean Keohane -- President and Chief Executive Officer

Yes. So it hasn't had a material impact on us. And as I said, I think there were some actions taken by China a few months ago that have eased some of the power shortages there. So I think that's good in the short term and China will obviously have to continue to balance how it supports economic growth and how it transitions to continue to reduce the environmental impact.

But in terms of Cabot's operations, we've not had any material impact. We've been operating really well. I'm very pleased with that. And I think it -- again, it's a function of all of the things that was built over the years and why we're a great operator.

There's certainly a lot of experience in our 30-plus years, really strong joint venture partners where together, we can manage through these things. And our -- the way we operate, run our plants, the level of environmental performance that we deliver, I think, is appreciated by the Chinese Regulatory Authorities. And so we're able to manage it but it's always a fairly dynamic situation in China, but again, it comes down to good management I think. 

Dan Rizzo -- Jefferies -- Analyst

All right. Thank you very much. 

Operator

Our next question comes from Chris Kapsch with Loop Capital. Your line is open.

Chris Kapsch -- Loop Capital Markets -- Analyst

Hi. Good morning. So one question I had was in the context of your revised guidance. You characterized the better than expected pricing realization from the contract negotiations are the key or maybe the key driver.

Just wondering if there's any way you could quantify that benefit either in terms of carbon black prices on a year-over-year basis or perhaps in terms of gross profit metrics for the segment, all else equal.

Sean Keohane -- President and Chief Executive Officer

Yes. Sure. So Chris, just as a recap, I think a few things driving the upward revision of guidance. Certainly, the outcomes from the prior customer agreement, and I'll comment on that a bit more.

But also, I think, really strong execution on pricing and Performance Chemicals and really real timely pass-through there. And then third, the continued momentum in these growth vectors of battery materials, but also Inkjet. So those are really the three drivers. On the agreements, the tire customer agreements, we're definitely overall very pleased with the outcome.

I think the supply chain situation impacting the world really placed a lot of value on Cabot as a reliable global supplier. And so we're pleased with that. And resulted in some fairly substantial price increases, but also volumes that we expect to be in line with the regional demand. So again, overall, pretty strong results.

Now the net impact of all of this, probably the best way to think about it is maybe somewhere in the order of $15 million per quarter, net of rising costs around the world. So these contract outcomes included factors like cost-based prices, but also factors to recover rising costs like higher natural gas costs or in certain parts of the world, if there is CO2 costs. We've been able to negotiate the recovery of those. So important to understand that point.

But net of those rising costs which we've recovered, the net impact is somewhere in that $15 million per quarter range. It's probably the best way to think about it. 

Chris Kapsch -- Loop Capital Markets -- Analyst

That's helpful. And then you alluded to the follow-up, but just the spike in gas and energy prices in Europe, were you simply able to mitigate that through DTAs or other actions? Or was there converse, I guess, any benefit from your energy center operation from what's going on over there?

Sean Keohane -- President and Chief Executive Officer

Yes. So certainly, as energy prices are higher, then that benefits in terms of the energy center contributions for sure. And then as energy prices are higher than some of the technology and yield work that we do is more valuable. So that's been -- long been the case, and that's -- that is the case now.

With respect to higher natural gas costs, certainly, they've shot up in Europe. But we've been able to largely offset that through a combination of DCA adjustment flow-throughs and on the more spot side of the business, whether it's in reinforcement or in specialty carbons through spot market action. So certainly a dynamic situation, but pleased with the way the team has been able to manage it.

Chris Kapsch -- Loop Capital Markets -- Analyst

Great. Thank you. And I could just sneak in one more. So in the Battery Materials business, you've talked about that market growing, and I get it 30%, 35% a year through the decade, and you guys outperforming that.

So how do you gauge that outperformance? Is it on a -- are you -- do you have visibility on a customer-by-customer basis from the specifications where you get qualified that you're sort of getting an outsized benefit from relative to the market growth? Or any way to just comment on how you're validating that outperformance relative to the market? Thank you.

Sean Keohane -- President and Chief Executive Officer

Yes. Thanks, Chris. So I think a couple of ways. So one is certainly our volume growth, and that's a backward-looking indicator that in the quarter, our volumes business grew at 58%.

So certainly, that's well above the market growth and an indicator of our strong performance here. But again, that's a bit more of a backward-looking one. In terms of forward-looking, we do have pretty good visibility. So the market is fairly concentrated.

I think I've commented in the past that the top eight producers represent about 90% of the market. And that can move around a little bit. And certainly, there's a long tail after the top eight. But it's a fairly concentrated group of big battery producers.

And so we certainly know how we're connected into various programs and how our qualification efforts are progressing. So that gives a certain measure of visibility. What is difficult to project is exactly who will win and at what rate. And so that's something that is always a little bit of a moving target.

But our participation is pretty broad here. We're currently serving six of those top eight with development programs with the others in process here. So the winners and -- the ultimate winners and losers, if I could say it that way, is somewhat less of an issue because we're able to participate broadly here. But hopefully, that gives you a little bit of color on how we try to look at things both from a backward looking, are we achieving our objectives and then the forward look.

Chris Kapsch -- Loop Capital Markets -- Analyst

Thanks for the call. Appreciate it.

Operator

There are no further questions. I'd like to turn the call back over to Sean Keohane.

Sean Keohane -- President and Chief Executive Officer

Great. Thank you very much, Joe. And thank you all for joining today, and we look forward to engaging with you again next quarter. And thank you for your support, Kevin.

Have a great day.

Operator

[Operator signoff]

Duration: 45 minutes

Call participants:

Steven Delahunt -- Vice President, Investor Relations

Sean Keohane -- President and Chief Executive Officer

Erica McLaughlin -- Chief Financial Officer

David Huang -- Deutsche Bank -- Analyst

Mike Leithead -- Barclays -- Analyst

Josh Spector -- UBS -- Analyst

Dan Rizzo -- Jefferies -- Analyst

Chris Kapsch -- Loop Capital Markets -- Analyst

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