Ashland Inc. (NYSE: ASH) today announced financial results1 for the
first quarter of fiscal year 2024, which ended December 31, 2023,
and issued its outlook for second quarter and full-year fiscal
2024. The global additives and specialty ingredients company holds
leadership positions in high-quality, consumer-focused markets
including pharmaceuticals, personal care and architectural
coatings.
Sales in the first quarter were $473 million,
down 10 percent versus the prior-year quarter. Results during the
quarter reflect market-demand dynamics and underlying business
performance that were generally consistent with previously
communicated expectations. Year-over-year volume declines during
the quarter started to diminish as demand trends appear to have
stabilized across most end markets. Pricing also remained favorable
within the Life Sciences and Personal Care segments. Foreign
currency favorably impacted sales by approximately one percent.
Net income was $26 million, down from $40
million in the prior-year quarter. Income from continuing
operations was $28 million, down from $42 million in the prior-year
quarter, or income of $0.54 per diluted share, down from $0.76.
Adjusted income from continuing operations excluding intangibles
amortization expense was $23 million, down from $54 million in the
prior-year quarter, or $0.45 per diluted share, down from $0.97.
Adjusted EBITDA was $70 million, down 35 percent from $108 million
in the prior-year quarter, driven primarily by lower production
volumes and the associated unfavorable absorption impact compared
to the year-ago quarter when production exceeded customer
demand.
Average diluted shares outstanding totaled 51
million in the first quarter, down from 55 million in the
prior-year quarter, following the company’s share repurchase
activities over the past 12 months. Ashland repurchased 1.2 million
shares during the first quarter and now has $900 million remaining
under the existing evergreen share repurchase authorization.
Cash flows provided by operating activities
totaled $201 million, up from cash flows used by operating
activities of $29 million in the prior-year quarter. The first
quarter of fiscal year 2024 cash flows provided by operating
activities includes the favorable impact of the new Foreign
Accounts Receivable Sales Program. Ongoing free cash flow2, which
is not impacted by the Foreign Accounts Receivable Sales Program,
totaled $66 million compared to negative $21 million in the
prior-year quarter, reflecting the company’s focused reduction in
inventory balances as well as a reduced incentive compensation
payout.
“Financial results in the December quarter
yielded adjusted EBITDA above the outlook range we issued on
November 8, 2023,” said Guillermo Novo, chair and chief executive
officer, Ashland. “Customer demand was generally consistent with
our expectations in the first quarter. While we are cautiously
optimistic about the improving demand trends we experienced in
January with follow-through order build into February, we continue
to prudently manage inventory levels and drive cash generation.
With generally reduced stress on supply chains, customer ordering
lead time has normalized to pre-COVID levels. Ashland will remain
disciplined in its production levels, targeting to produce to
near-term demand.”
“The Ashland team continues to focus on what we
can control to build resilience and improve performance of our core
businesses,” continued Novo. “Disciplined pricing coupled with
moderately deflationary raw material costs and prudent operating
expense management was overshadowed by the lower sales volume and
production absorption impacts during the quarter. We also continue
to progress our strategic priorities to execute, globalize,
innovate, and acquire, which drive our actions, investments, and
profitable growth expectations. Within our strategy to execute,
portfolio optimization activities are underway which will improve
our margin profile and reduce earnings volatility in the future,
and we are advancing our globalize and innovate strategies to
deliver long-term profitable growth.”
“Furthermore, as a part of our disciplined
capital allocation approach and our commitment to return capital to
shareholders, we continue to believe Ashland’s stock is an
attractive use of capital, as demonstrated by our repurchase of an
additional $100 million of Ashland shares during the quarter,”
concluded Novo.
Reportable Segment
PerformanceTo aid in the understanding of Ashland’s
ongoing business performance, the results of Ashland’s reportable
segments are described below on an adjusted basis. In addition,
EBITDA and adjusted EBITDA are reconciled to operating income in
Table 4. Free cash flow, ongoing free cash flow and adjusted
operating income are reconciled in Table 6 and adjusted income from
continuing operations, adjusted diluted earnings per share and
adjusted diluted earnings per share excluding intangible
amortization expense are reconciled in Table 7 of this news
release. These adjusted results are considered non-GAAP financial
measures. For a full description of the non-GAAP financial
measures used, see the “Use of Non-GAAP Measures” section that
further describes these adjustments below.
Life SciencesSales were $200
million, down three percent from the prior-year quarter. Sustained
pricing was more than offset by normalized supply of
Polyvinylpyrrolidone (PVP) in the pharmaceutical market as demand
declined compared to a strong prior-year period. Volumes to the
nutrition end-market continued to be challenged due to lower
demand. Sales of nutraceuticals products continue to demonstrate a
strong recovery compared to a weak prior-year period. Foreign
currency favorably impacted sales by $2 million, or one
percent.
Adjusted operating income was $32 million
compared to $35 million in the prior-year quarter. Adjusted EBITDA
was $48 million compared to $52 million in the prior-year quarter,
primarily reflecting the impact of favorable pricing and raw
material dynamics, lower volumes and unfavorable product mix.
Foreign currency favorably impacted Adjusted EBITDA by $2 million,
or four percent.
Personal CareSales were $129
million, down seven percent from the prior-year quarter. Lower
volumes in skin-care and oral-care, partially offset by higher
volumes in hair-care, more than offset sustained pricing. Foreign
currency favorably impacted sales by $2 million or one percent.
Adjusted operating income was $2 million
compared to $11 million in the prior-year quarter. Adjusted EBITDA
was $22 million compared to $32 million in the prior-year quarter,
primarily reflecting the impact of lower sales, production volumes
and a challenged Avoca business. Foreign currency had a negligible
impact on Adjusted EBITDA when compared to the prior-year
quarter.
Specialty AdditivesSales were
$122 million, down 15 percent from the prior-year quarter,
primarily reflecting the carryover impacts of lower volumes
experienced during fiscal 2023 and lower pricing in architectural
coatings. Foreign currency favorably impacted sales by two million
or one percent.
Adjusted operating loss was $11 million,
compared to income of $5 million in the prior-year quarter.
Adjusted EBITDA was $6 million compared to $23 million in the
prior-year quarter, primarily reflecting the impact of lower sales
and production. Foreign currency negatively impacted Adjusted
EBITDA by $1 million, or four percent.
IntermediatesSales were $33
million down 39 percent from the prior-year quarter, driven by
lower pricing and volumes for both merchant and captive sales.
Captive internal butanediol (BDO) sales are recognized at
market-based pricing which was down compared to the prior-year
quarter.
Adjusted operating income was $7 million
compared to $20 million in the prior-year quarter. Adjusted EBITDA
was $10 million compared to $23 million in the prior-year quarter,
primarily reflecting the impact of lower pricing. Foreign currency
had a negligible impact on Adjusted EBITDA when compared to the
prior-year quarter.
Unallocated &
OtherUnallocated and other expense was $27 million
compared to $29 million in the prior-year quarter. Adjusted
unallocated and other expense EBITDA was $16 million compared to
$22 million in the prior-year quarter, primarily reflecting lower
variable compensation expenses.
Financial OutlookThere is
growing evidence of a convergence between Ashland’s sales volume
and customer end-market demand. While traditionally a seasonally
slower period, demand in January demonstrated sequential
improvement with similar trends into February order
build.
Current demand patterns suggest a potential
recovery with continued momentum into the second half of the fiscal
year. Demand evolution in the subsequent months will further narrow
the range of recovery scenarios.
Ashland’s portfolio optimization actions
continue to make progress and include the consolidation of
Ashland’s carboxymethylcellulose (CMC) production capacity into
Alizay, France resulting in a closure of CMC production capacity in
Hopewell, Virginia during the fiscal second quarter of 2024. Other
actions to improve Ashland’s industrial methylcellulose (MC) and
hydroxyethycellulose (HEC) businesses continue to be assessed.
Ashland expects to realize a partial return to
more typical margins during the second quarter, primarily a result
of a forecasted increase in sales and production volumes, with
continued improvement throughout the fiscal year. Overall, for the
fiscal-second quarter the company expects sales in the range of
$565 million to $585 million and adjusted EBITDA in the range of
$115 million to $125 million. For the full fiscal year, Ashland
expects sales in the range of $2.15 billion to $2.25 billion and
adjusted EBITDA in the range of $460 million to $500 million.
“We are encouraged by the improvement in recent
demand trends and will continue disciplined production and
inventory levels as we closely monitor the coming months. The
Ashland team is performing well and focused on implementing our
strategic priorities to execute, globalize, innovate and
acquire. The actions underway will maximize near-term
performance across multiple recovery scenarios and long-term
profitable growth. I look forward to discussing our fiscal first
quarter financial results and outlook as well as an update on our
strategic priorities during our earnings call and webcast tomorrow
morning,” said Guillermo Novo, chair and chief executive officer,
Ashland.
Conference Call WebcastThe
company’s live webcast with securities analysts will include an
executive summary and detailed remarks. The live webcast will take
place at 9 a.m. ET on Wednesday, January 31, 2024. Simultaneously,
the company will post a slide presentation in the Investor
Relations section of its website at
http://investor.ashland.com.
To access the call by phone, please go to this
registration link and you will be provided with dial in details. To
avoid delays, we encourage participants to dial into the conference
call fifteen minutes ahead of the scheduled start time.
Following the live event, an archived version of
the webcast and supporting materials will be available for 12
months on http://investor.ashland.com.
Use of Non-GAAP MeasuresAshland
believes that by removing the impact of depreciation and
amortization and excluding certain non-cash charges, amounts spent
on interest and taxes and certain other charges that are highly
variable from year to year, EBITDA, adjusted EBITDA, EBITDA margin
and adjusted EBITDA margin provide Ashland’s investors with
performance measures that reflect the impact to operations from
trends in changes in sales, margin and operating expenses,
providing a perspective not immediately apparent from net income,
operating income, net income margin and operating income margin.
The adjustments Ashland makes to derive the non-GAAP measures of
EBITDA, adjusted EBITDA, EBITDA margin and adjusted EBITDA margin
exclude items which may cause short-term fluctuations in net income
and operating income and which Ashland does not consider to be the
fundamental attributes or primary drivers of its business. EBITDA,
adjusted EBITDA, EBITDA margin and adjusted EBITDA margin provide
disclosure on the same basis as that used by Ashland’s management
to evaluate financial performance on a consolidated and reportable
segment basis and provide consistency in our financial reporting,
facilitate internal and external comparisons of Ashland’s
historical operating performance and its business units, and
provide continuity to investors for comparability purposes. EBITDA
margin and adjusted EBITDA margin are defined as EBITDA and
adjusted EBITDA divided by sales for the corresponding period.
Key items, which are set forth on Table 7 of
this release, are defined as financial effects from significant
transactions that, either by their nature or amount, have caused
short-term fluctuations in net income and/or operating income which
Ashland does not consider to reflect Ashland’s underlying business
performance and trends most accurately. Further, Ashland believes
that providing supplemental information that excludes the financial
effects of these items in the financial results will enhance the
investor’s ability to compare financial performance between
reporting periods.
Tax-specific key items, which are set forth on
Table 7 of this release, are defined as financial transactions, tax
law changes or other matters that fall within the definition of key
items as described above. These items relate solely to tax matters
and would only be recorded within the income tax caption of the
Statement of Consolidated Income. As with all key items, due to
their nature, Ashland does not consider the financial effects of
these tax-specific key items on net income to be the most accurate
reflection of Ashland’s underlying business performance and
trends.
The free cash flow metrics enable Ashland to
provide a better indication of the ongoing cash being generated
that is ultimately available for both debt and equity holders as
well as other investment opportunities. Unlike cash flow provided
by operating activities, free cash flow and ongoing free cash flow
include the impact of capital expenditures from continuing
operations and other significant items impacting free cash flow,
providing a more complete picture of current and future cash
generation. Free cash flow, ongoing free cash flow, and free cash
flow conversion are non-GAAP liquidity measures that Ashland
believes provide useful information to management and investors
about Ashland’s ability to convert Adjusted EBITDA to ongoing free
cash flow. These liquidity measures are used regularly by Ashland’s
stakeholders and industry peers to measure the efficiency at
providing cash from regular business activity. Free cash flow,
ongoing free cash flow, and free cash flow conversion have certain
limitations, including that they do not reflect adjustments for
certain non-discretionary cash flows such as mandatory debt
repayments. The amount of mandatory versus discretionary
expenditures can vary significantly between periods.
Adjusted diluted earnings per share is a
performance measure used by Ashland and is defined by Ashland as
earnings (loss) from continuing operations, adjusted for identified
key items and divided by the number of outstanding diluted shares
of common stock. Ashland believes this measure provides investors
additional insights into operational performance by providing
earnings and diluted earnings per share metrics that exclude the
effect of the identified key items and tax specific key items.
The adjusted diluted earnings per share,
excluding intangibles amortization expense metric enables Ashland
to demonstrate the impact of non-cash intangibles amortization
expense on earnings per share, in addition to key items previously
mentioned. Ashland’s management believes this presentation is
helpful to illustrate how previous acquisitions impact applicable
period results.
About Ashland
Ashland Inc. (NYSE: ASH) is a global additives and specialty
ingredients company with a conscious and proactive mindset for
environment, social and governance (ESG). The company serves
customers in a wide range of consumer and industrial markets,
including architectural coatings, construction, energy, food and
beverage, nutraceuticals, personal care and pharmaceutical.
Approximately 3,800 passionate, tenacious solvers – from renowned
scientists and research chemists to talented engineers and plant
operators – thrive on developing practical, innovative and elegant
solutions to complex problems for customers in more than 100
countries. Visit ashland.com and ashland.com/ESG to
learn more.
Forward-Looking Statements This
news release contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended and
Section 21E of the Securities Exchange Act of 1934, as amended.
Ashland has identified some of these forward-looking statements
with words such as “anticipates,” “believes,” “expects,”
“estimates,” “is likely,” “predicts,” “projects,” “forecasts,”
“objectives,” “may,” “will,” “should,” “plans” and “intends” and
the negative of these words or other comparable terminology.
Ashland may from time to time make forward-looking statements in
its annual reports, quarterly reports and other filings with the
SEC, news releases and other written and oral communications. These
forward-looking statements are based on Ashland’s expectations and
assumptions, as of the date such statements are made, regarding
Ashland’s future operating performance, financial, operating cash
flow and liquidity, as well as the economy and other future events
or circumstances. These statements include but may not be limited
to Ashland’s expectations regarding its ability to drive sales and
earnings growth and manage costs.
Ashland’s expectations and assumptions include,
without limitation, internal forecasts and analyses of current and
future market conditions and trends, management plans and
strategies, operating efficiencies and economic conditions (such as
prices, supply and demand, cost of raw materials, and the ability
to recover raw-material cost increases through price increases),
and risks and uncertainties associated with the following: the
impact of acquisitions and/or divestitures Ashland has made or may
make (including the possibility that Ashland may not realize the
anticipated benefits from such transactions); Ashland’s substantial
indebtedness (including the possibility that such indebtedness and
related restrictive covenants may adversely affect Ashland’s future
cash flows, results of operations, financial condition and its
ability to repay debt); severe weather, natural disasters, public
health crises, cyber events and legal proceedings and claims
(including product recalls, environmental and asbestos matters);
the effects of the ongoing Ukraine/Russia and Israel/Hamas
conflicts on the geographies in which we operate, the end markets
we serve and on our supply chain and customers, and without
limitation, risks and uncertainties affecting Ashland that are
described in Ashland’s most recent Form 10-K (including Item 1A
Risk Factors) filed with the SEC, which is available on Ashland’s
website at http://investor.ashland.com or on the SEC’s website at
http://www.sec.gov. Various risks and uncertainties may cause
actual results to differ materially from those stated, projected or
implied by any forward-looking statements. Ashland believes its
expectations and assumptions are reasonable, but there can be no
assurance that the expectations reflected herein will be achieved.
Unless legally required, Ashland undertakes no obligation to update
any forward-looking statements made in this news release whether as
a result of new information, future events or otherwise.
1Financial results are preliminary until
Ashland’s Form 10-Q is filed with the U.S. Securities and Exchange
Commission.
2The ongoing free cash flow metric excludes the
impact of inflows and outflows from U.S. and Foreign Accounts
Receivable Sales Program and payments related to restructuring and
environmental and litigation-related matters in both the
current-year and prior-year periods.
™ Trademark, Ashland or its subsidiaries,
registered in various countries.
FOR FURTHER INFORMATION:
Investor Relations: |
Media Relations: |
William C. Whitaker |
Carolmarie C. Brown |
+1 (614) 790-2095 |
+1 (302) 995-3158 |
wcwhitaker@ashland.com |
ccbrown@ashland.com |
- Ashland_Q1_ 2024_Earnings_
Release_with_Financial_Tables_FNL_20240130
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