Cabot (CBT), Flowers Foods (FLO): Contract Length Sets Oil Cost Recovery

In August 2026, Cabot (CBT), LSI Industries (LYTS) and Flowers Foods (FLO) each told a quarterly earnings call that the same run-up in crude had raised their input costs. How fast each one turned that cost into a higher selling price differed by several quarters, and what decided it was how long its own price had been fixed before the material was bought.

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What these three companies buy, and why crude reaches all of them

Cabot makes carbon black, a powder produced from refinery heavy oil that reinforces tires and colors coatings. LSI Industries makes commercial lighting and retail signage, whose housings and lenses depend on plastics and polymers. Flowers Foods bakes bread, where the crude-linked costs are packaging resin and diesel for delivery trucks. The materials look nothing alike, but their prices trace back to the same barrel: Brent closed June 2026 at $72.95 and July at $87.93 [1].

What separates the three is contract language. When the selling price is struck at or after the moment the material is bought — a formula written into the contract, or a quote given the day the order arrives — a cost increase moves straight into price. When the price was fixed before the material was bought, the seller carries the cost for as long as the commitment runs, and fixed-price project quotes, multi-year supply contracts and commodity hedges that run to year end all work that way. At the far end there is no contract at all: a shelf price can only rise if competitors raise theirs too.

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The same oil, three different outcomes

Cabot sits at the fast end. On its May call the company explained that the pricing formulas in its tire-customer contracts were rebuilt years ago to track the actual flow of raw material, leaving no lag [2]. By the 4 August third-quarter call, pricing in its performance chemicals segment had moved ahead of the raw-material increase: segment EBIT rose $11 million year over year to $68 million, up 19%. Management also flagged that fourth-quarter gross profit per ton should normalize as raw material costs catch up [3].

LSI Industries is one step slower. On its 20 August call the CEO said the plastics and polymers used in signage move directly with crude and that the swing was faster than anyone could react to. The CFO located the gap in an acquired signage business, where project quotes had fallen out of line with current material costs, and put the effect at 50 to 100 basis points of margin over the next quarter or two [4].

Flowers Foods is the end that does not recover it. It raised list price in late 2025 expecting the category to follow, and two quarters later promotional intensity had not eased. On its 21 August call the company said fresh bread volume fell 9.5% in the second quarter and that its pricing and promotional strategy is under review, and the CFO said price probably will not be the only lever to overcome the inflation, naming roughly $20 million of 2027 productivity savings and price-pack changes instead [5]. Grupo Bimbo (BMBOY), the category's largest player, attributed its US share gains on its 23 July call to commercial execution and its own pricing and promotion discipline, and said it intends to keep doing so [6] — which is why the increase went unmatched.

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Where the cost stops depends on whether the buyer can refuse

Taken together, the size of a company's crude exposure says little about who gets hurt in this cycle. What matters is how long the price was fixed and whether the buyer can simply decline. Where a formula governs, the increase comes back as revenue. Where the price was committed, the cost sits in the gross margin of later quarters. At the shelf, whatever cannot be priced is paid for in volume [5].

One caveat belongs here. LSI attributes its own gap to a recently acquired business and expects it to fade [4], so part of this timing spread may be integration rather than an industry rule. The next checkpoint is clear enough: Flowers Foods has hedged its 2026 commodity costs through year end, which puts the real test in its fiscal 2027 guidance [5].

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Companies exposed to this change

• Koppers (KOP): sells crossties and utility poles to railroads and utilities under multi-year supply contracts, so its price is fixed well in advance while diesel and wood fiber are bought at current prices — the long-commitment end described above.
• Construction Partners (ROAD): bids paving work months ahead at fixed prices, and its main material, liquid asphalt, comes straight out of crude; the fiscal quarter covering July through September has not been reported.
• Ingredion (INGR): sells proteins, fibers and texturizing ingredients. When a baker gives up on raising shelf prices and turns to high-protein and sourdough products to close the gap, these are the ingredients it buys, so order flow follows that substitution.

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Sources

[1] Drillr · Brent crude (BZUSD) monthly closes · 2026-07-31 · price data

[2] Drillr · Cabot Corporation · 2026-05-06 · earnings call

"You might recall that we have adjusted these formula mechanisms a number of years ago so that the pass-through matches the actual flow of the raw material. So there is no lag in our contract mechanisms."

[3] Drillr · Cabot Corporation · 2026-08-04 · earnings call

[4] Drillr · LSI Industries · 2026-08-20 · earnings call

[5] Drillr · Flowers Foods · 2026-08-21 · earnings call

[6] Drillr · Grupo Bimbo · 2026-07-23 · earnings call

This is only here to help you spot industry changes and companies you may have missed - it is not a stock recommendation.