The Company has foreign currency exposure arising from its net investments in foreign operations. The Company uses cross-currency swaps to partially mitigate the impact of the Euro currency rate changes on the Company’s Euro denominated net investments. The Company’s cross-currency swaps are designated as net investment hedges.

The Company also has foreign currency exposure arising from the denomination of monetary assets and liabilities in foreign currencies other than the functional currency of a given subsidiary as well as the risk that currency fluctuations could affect the dollar value of future cash flows generated in foreign currencies. The Company uses short-term forward contracts to minimize the exposure to foreign currency risk.

The Company had no significant concentration of credit risk at September 30, 2023 and 2022.

The following table provides details of the derivatives held as of September 30, 2023 and 2022 to manage foreign currency risk.


		Notional Amount
Description	Borrowing	September 30, 2023	September 30, 2022	Hedge Designation
Cross Currency Swaps	3.4% Notes	USD 250 million swapped to EUR 223 million	USD 250 million swapped to EUR 223 million	Net investment
Forward Foreign Currency Contracts(1)	N/A	USD 82 million	USD 42 million	No designation

(1)

At September 30, 2023, the Company’s forward foreign exchange contracts were denominated in Indonesian rupiah, Czech koruna, and Colombian peso. At September 30, 2022, the Company’s forward foreign exchange contracts were denominated in Indonesian rupiah and Czech koruna.

For net investment hedges, changes in the fair value of the effective portion of the derivatives’ gains or losses are reported as CTA in AOCI while changes in the ineffective portion are reported in earnings. Effectiveness is assessed based on the hypothetical derivative method. The gains or losses on derivative instruments reported in AOCI are reclassified to earnings in the period in which earnings are affected by the underlying item, such as a disposal or substantial liquidations of the entities being hedged.

Cash settlements related to the net investment hedge occur semi-annually on March 15th and September 15th for fixed rate interest payments and a cash exchange of the notional currency amount will occur at the end of the term in 2026. During fiscal 2023, 2022 and 2021 the Company received net cash interest of $4 million, $4 million and $3 million, respectively. As of September 30, 2023 and 2022, the fair value of these swaps was an asset of $12 million and $29 million, respectively, was included in Prepaid expenses and other current assets and Other assets, and the cumulative unrealized gain of $15 million and $32 million, respectively, was included in AOCI on the Consolidated Balance Sheets.


	Years Ended September 30
	2023			2022		2021		2023			2022			2021			2023		2022		2021
Description	Gain/(Loss) Recognized in AOCI							(Gain)/Loss Reclassified from AOCI into Interest Expense in the Consolidated Statements of Operations									(Gain)/Loss Recognized in Interest Expense in the Consolidated Statements of Operations (Amount Excluded from Effectiveness Testing)
	(In millions)
Cross-currency swaps	$	(13	)	$	30	$	7	$	(6	)	$	(6	)	$	(5	)	$	2	$	2	$	2

At both September 30, 2023 and 2022, the Company had foreign currency forward contracts that were not designated as hedges for accounting purposes. Although these derivatives do not qualify for hedge accounting, Cabot believes that such instruments are closely correlated with the underlying exposure, thus managing the associated risk. The gains or losses from changes in the fair value of derivative instruments that are not accounted for as hedges are recognized in current period earnings.

At both September 30, 2023 and 2022, the fair value of derivative instruments not designated as hedges was less than $1 million and was presented in Accounts payable and accrued liabilities on the Consolidated Balance Sheets.